ACCELERATE PROFITABILITY THROUGH TRANSFORMATIVE CUSTOMER SERVICE
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- Marjorie Stevens
- 5 years ago
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1 Download handouts (PDF) : or info@mdm.com ACCELERATE PROFITABILITY THROUGH TRANSFORMATIVE CUSTOMER SERVICE May 23, 2013 Produced by: Event Sponsor: 1
2 Download handouts (PDF) : or info@mdm.com Speaker: Jonathan L.S. Byrnes President Jonathan Byrnes & Co. Tom Gale Publisher Modern Distribution Management
3 Accelerate Your Profitability Through Transformational Customer Service Jonathan L.S. Byrnes PROFIT ISLE
4 Today s Menu Paradigm Change in Customer Service Islands of Profit in a Sea of Red Ink Nalco s Revolutionary Customer Service Product Flow Management Service Differentiation Partnering with Sales, Marketing, and Finance Transformational Leadership
5 Paradigm Change in Customer Service Optimization vs. Management Cost minimization vs. ROIC maximization Waterskiing behind the business vs. Driving the boat
6 Cost vs. ROIC Cost Supply chain expense vs. ROIC Net margin/asset productivity Revenues - Cost of goods sold Gross margin Revenues - Cost of goods sold Gross margin - Sales cost - Supply chain cost Inventory cost Activity cost Transportation cost Facility cost - Overheads cost Net margin - Sales cost - Supply chain cost Inventory cost Activity cost Transportation cost Facility cost - Overheads cost Net margin Key: = major impact
7 From Optimization to Management Optimize customer service Manage the factors that affect customer service Maximize revenues and strategic differentiation while minimizing cost by transforming customer service
8 Islands of Profit in a Sea of Red Ink Profitability high low 0 loss Accounts/Products/Orders
9 Three Eras of Markets Inchoate Markets Mass Markets Precision Markets
10 New View of Value Creation Our Company Our Customers Mass Markets Precision Markets
11 New Locus of Value Creation Mass Markets Watershed Precision Markets Locus of Value Creation Product Go-to-Market Process General Foods P&G Wal-Mart Alliance Baxter-Cardinal
12 s Revolutionary Customer Service Distributing chemicals Efficiency measures Aha! Major financial and strategic advantage
13 Nalco ROIC Revenues - Cost of goods sold Gross margin - Sales cost - Supply chain cost Inventory cost Activity cost Transportation cost Facility cost - Overheads cost Net margin ROIC Sales rose, customer profitability rose Production cost reduced, demand variance reduced More value, easier price increases Reduced demand variance Reduced orders Eliminated expedited deliveries More lead time Sales rose, inventory value dropped
14 Product Flow Management Product flow Reorganization Results ROIC
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27 The Solution A standing order system Major accounts major products Weekly orders Contingency backups Custom pack
28 Manageability of Task Product A - Region 1 Total hospitals 120 Major hospitals 23 Problem hospitals 12 Key problem hospitals 4
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33 Product A Channel Microeconomics Central facility Interwarehouse freight Customer facing warehousing Freight to customers 75% Cost reduction No change 25% Cost reduction No change Summary 50% Cost reduction
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35 Product B Channel Microeconomics Vendor costs Decreased (est. 30%) Freight to warehouse Customer facing warehousing Freight to customers Decreased - stable 20% Cost reduction No change Summary 25%+ Cost reduction
36 Additional Benefits No stockouts no backorders Capital program avoided Custom pack for hospitals Enhanced hospital materials management Head nurse relations Stable manufacturing Raw materials commitments Sales productivity market share increase
37 Roadblocks to Change Poorly-defined customer-product matrix Traditional narrow company view Inappropriate data Significant organizational changes needed
38 The Customer-Product Matrix Core Products Non- Core Non-Core Customers Core
39 Why Competitors Failed Lack of strategic discipline Unfocused systems Poor customer interfaces No organizational changes
40 Organizational Changes Business Alignment Regional operations management changed Warehouses reconfigured Materials management realigned Manufacturing reorganized New information systems
41 Product Flow Management ROIC Revenues - Cost of goods sold Gross margin - Sales cost - Supply chain cost Inventory cost Activity cost Transportation cost Facility cost - Overheads cost Net margin Sales rose, no stockouts Steady demand, reduced production cost No expediting, terrific service Greatly increased flow through Eliminated double handling Eliminated expediting Reduced facility size ROIC Net margins rose, inventory value reduced
42 Service Differentiation No more One size fits all Always keep your service promises, but... Different promises to different customers Matches supply chain assets and cost structure to account potential Good for customers can plan around a consistent level of service
43 Customer Service Matrix Order Cycle Time Core 3 days 1 day Products Non- Core 4 days 2 days Non-Core Customers Core
44 Service Differentiation ROIC Revenues - Cost of goods sold Gross margin Sales rose, incentive to become core account, lower customer inventory More predictable demand - Sales cost - Supply chain cost Inventory cost Activity cost Transportation cost Facility cost - Overheads cost Net margin Clear menu-driven value, less expediting Increased lead time Eliminated back orders Consolidated shipments Smaller footprint, eliminated facilities ROIC Net margins rose, inventory value dropped
45 Partnering with Sales, Marketing, and Finance Profit Mapping Customer Relationship Definition Market Mapping Account Management and Service Differentiation
46 Transformational Leadership Integrated Account Management Revenue focus Gross margin focus Which relationship? With whom? Functional Convergence Market mapping Building account relationships Managing change internal and external Supply Chain Management Cost efficiency ROIC effectiveness Strategic differentiation
47 Transformative Customer Service Optimization Management Cost Minimization ROIC Maximization Drive the Boat!
48 ACCELERATE PROFITABILITY THROUGH TRANSFORMATIVE CUSTOMER SERVICE Questions? Download handouts (PDF) : or contact info@mdm.com 48