Master Thesis. Managing resources to create customer service quality. University of Amsterdam. Johan Lenis,

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1 University of Amsterdam Managing resources to create customer service quality, (MSc. In Business Studies strategy Track) Supervisor: Prof. R.M. Singh 2014

2 Preface The research presented to you offers an understanding of the creation of customer service quality by the management of resources within one of the largest global steel producers. Customer service quality has my interest because of my background in customer services and the experience I have within the steel industry. As the creation of customer service quality is not something which can be done without the support of the organization, the realization of my thesis could also not have been completed without this support. Therefore I would like to thank everyone who helped me in making this thesis possible. Special thanks to the interviewees who provided their input and shared their knowledge. Finally, I would like to give specials thanks to my supervisor for giving me the right direction in order to complete this thesis. January,

3 Abstract Both management of resources and customer service quality have been described in the strategy literature, however the relationship between the management of resources and customer service quality has not yet been investigated. The available research on customer service quality is mainly focused on business-to-consumer organizations, which is opposite to business-to-business organizations. With this qualitative study an attempt is made to explore how resources are managed in a business-to-business organization to create customer service quality. The study combines the literature on resource management and customer service quality, and offers a conceptual framework based on the resources people, processes and technology and the different constructs which measure customer service quality reliability, attentiveness, responsiveness and perceptiveness. The findings first show that the organization needs to have capable people who are customer focused throughout the whole supply chain. Secondly, the cross-functional organizational processes need to be aligned between the departments. Finally, the findings show that the systems need to support the people and the processes to be reliable, attentive, responsive and perceptive in order to achieve high customer service quality. For future research it would be valuable to do research on this framework within other industries and sectors as well. Keywords: resources; management of resources; customer service quality. 3

4 Content PREFACE... 2 ABSTRACT INTRODUCTION LITERATURE REVIEW THEORETICAL FRAMEWORK DATA AND METHOD RESULTS DISCUSSION CONCLUSION REFERENCES APPENDICES

5 1. Introduction Customer interactions whether they are complaints, enquiries, or positive reviews are important for the long-term relationship with the customer. The essence of good customer service quality is when the customer perceives these interactions to have been handled well by the firm (Salomonson, 2012; Chao, 2008). Poor service quality is a key factor in customer dissatisfaction. Imagine that you have bought an item and you have a complaint about the product. When the customer service representative is not interested in your complaint, this will have a negative impact on your motivation to buy again from the same firm. However, when your complaint is acknowledged and the customer service representative is willing to help, the story changes. Because you have received good customer service, your willingness to buy again from the same firm will increase. Service quality is positively related to willingness to pay more (Alison et al., 2002), where customers set the quality of the service above the price or quality of the product. Overall, good customer service quality leads to customer satisfaction, customer loyalty and firm performance (Eklof 2008; Wouters 2004). But how is a customer service quality focused organization created? Many articles have been written about customer service quality and the effect on customer loyalty, value creation and firm performance (Chao, 2011; Chen, 2008; Salomonson, 2012; Yee, 2010). Further, the literature on strategy suggests that in order to have a customer service quality focused firm, the firm needs to be reliable, attentive, responsive and perceptive towards the customer (Chand, 2010; Salomonson, 2012; Martinez, 2009). In general, a firm needs to create this reliability, attentiveness, responsiveness and perceptiveness by managing the resources within the organization. The strategy literature on management of resources is mainly focused on firm performance (Sirmon and Hitt, 2008; Bakay, 2011; Lau, 2011; Lo, 2012) and less on the creation of a customer service quality focused firm. The available research on customer service quality is mainly focused on business-to-consumer organizations. However, this does 5

6 not imply that business-to-business organizations are not customer service quality focused. Business-to-business organizations have not been studied much with regard to customer service quality. Research within a business-to-business organization might lead to different insights compared to the business-to-consumer organizations. Thus, further research is essential. Therefore, I have chosen to do an in-depth case study within one of the largest global steel producers. This steel producer is one of the world s most geographically diversified steel firms, with operations in 26 countries and commercial offices in over 35 countries. In Europe, this organization is the second largest steel producer. Several markets are served, such as Aerospace, Automotive, Construction, Consumer Products, Defense & Security, Energy & Power, Lifting & Excavating, Packaging, Rail and Shipbuilding. The organization is doing well, but there seems to be mismanagement when looking closely to the customer service quality which is created within the organization. So there is reason to get an understanding of how resources are managed within this organization. This research will attempt to complete the gap which has been identified within the literature, by combining the management of resources and customer service quality. The management of resources will focus on the people, organizational (innovative) processes and technology within the organization. People refers in terms of the knowledge, skills and experience in which they contribute to customer service quality. The innovativeness in service quality is the degree of efficiency in organizational processes which are underpinned by the technology. Within customer service quality the focus will be on reliability, attentiveness, responsiveness and perceptiveness. In general, past research has found these four constructs to have an influence on customer service quality (Chand, 2010; Salomonson, 2012; Martinez, 2009). These four constructs are most important for customer service quality because an organization needs to be able to: 1) live up to the agreements which are made with the customer (reliability); 2) communicate on the desirable level with the customer (responsiveness); 3) 6

7 show commitment and focus towards the customer (attentiveness) and 4) understand the message of the customer (perceptiveness). Without capable people, alignment of organizational processes and lack of the support of technology within an organization, conflicts of interest might occur within the organization. People within manufacturing might focus on efficiency where the sales department is more customer focused. When these conflicts are avoided by the alignment of organizational processes, the organization can have a clear vision and distinguish itself from their competitors. The research question which I try to answer within this thesis is: How do firms manage their resources to create high customer service quality? In the next section, the literature on customer service quality and resource management is described. In chapter three I present the theoretical framework, followed by the research design in chapter four. In chapter five the results of the data are presented. Chapters six and seven contain respectively the discussion and conclusion. 7

8 2. Literature review Customer service quality has become an important subject in the strategy field in the past decade, and for good reason. Service quality is an essential criterion for customers in selecting and evaluating their providers (Chao, 2008). In general, customer service quality is a main indicator for firm performance, customer satisfaction and customer loyalty (Eklof 2008; Wouters 2004). Without the presence of good customer service, organizations are less capable of creating value for their customers (Salomonson, 2012). Customer service quality supports the creation of value by the attentiveness, perceptiveness and responsiveness of the customer service representatives. Being attentive, perceptive and responsive is needed to achieve organizational excellence and to make up for organizational mistakes which affect the customer. For organizational excellence, organizations work towards reliable processes by understanding and implementing daily management practices throughout the value chain. When an organization achieves operational excellence, it is able to act on a proactive basis towards their customers due to the reliability of their processes. The organization acts reactively when a customer complaint needs to be solved due to an organizational mistake. In both examples, providing customer service helps in creating the value for the customer. Overall, value creation is important to create a competitive advantage. 2.1 Concept of customer service quality Despite the fact that customer service quality is stated as an important factor within the strategy literature (Wouters 2004; Chao, 2008; Eklof 2008; Salomonson, 2012), there is no consensus about the definition of customer service quality. A few definitions of customer service quality in the strategy literature are: customers assessment of service quality is determined by comparing their expectations with their perceptions of actual performance (Chao, 2008); the consumer s judgment about a product s overall excellence or superiority 8

9 (Martinez, 2010); the consumer s overall impression of the relative inferiority/superiority of the organization and its services (Martinez, 2010). These three definitions combined describe that there is always a perception or expectation of the customer towards the organization, the product or the actual performance. To influence this perception, several scholars describe different attributes within customer service quality such as tangibility, reliability, responsiveness, assurance and empathy (Chand, 2010) and attentiveness, perceptiveness and responsiveness (Salomonson, 2012; Martinez, 2010). In each of the articles the concept exists of multiple attributes, but the content is not fixed. Martinez (2010) describes six conceptual models of service quality: Grönroos Model (GM), Rust and Oliver s Model (ROM), SERVQUAL, SERVPERF, RSQS and BCM. In these (multidimensional) models the problem might occur that a customer is satisfied with one attribute but dissatisfied with the other at the same time. Therefore, the dilemma with these models arise that it is difficult to measure the service quality properly. Within my thesis, I have chosen four attributes which I think have the maximum impact on customer service quality: reliability, attentiveness, responsiveness and perceptiveness. These four attributes combined are important to determine whether the expectation of the customer on the performance is met. Therefore I will use the definition of Chao (2008), which is closest to my research area: customers assessment of service quality is determined by comparing their expectations with their perceptions of actual performance. 2.2 Importance of customer service quality Although there is no consensus about the definition of customer service quality in the literature, there is consensus on the importance of customer service quality. The importance of customer service quality is based on the direct influence it has on customer satisfaction and customer loyalty, and its indirect influence on firm performance (Eklof 2008; Wouters 2004). Customer satisfaction has proven to be of influence to predict the long-term financial 9

10 performance of any company. Customer satisfaction is driven by the satisfaction of the employees within the service organization of a company (Eklof, 2008). The service organization within a firm is the customer service department which has direct customer interactions around order entry, order fulfillment and complaints management. This department of the organization is closest to the customer and is therefore able to translate the customer needs into the organization. Also, the customer service representatives within this department have a high contact level with the customer, and the loyalty of the employee to the organization is related to the service quality of the firm (Yee, 2010). This indicates that a valuable resource for a firm to determine customer service quality is the people within the organization. Because other departments within organizations (i.e. Supply Chain Planning and Manufacturing) are generally less close to the customer, the customer service department needs to be able to bridge the gap between the customer requirements and the other departments within the organization. Without the availability of a customer service department and the absence of customer focus within other departments of organizations it is highly unlikely that an organization can create high customer service quality. 2.3 Resource management Resources help a firm in creating value for their customers. In the resource-based theory Barney and Peteraf (2003) mention the importance of critical resources. Critical resources are valuable, rare, inimitable and non-substitutable resources (VRIN) which are necessary for an organization to create competitive advantage. The resource-based theory argues that firms differ in their resource position, and that such resource heterogeneity is a source of performance differences across firms (Ahuja and Katila, 2004). The resources within an organization refer to: an asset or input to production (tangible/intangible) that an organization owns, controls, or has access to on a semi-permanent basis (Helfat and Peteraf, 10

11 2010). In addition to this, an organization not only needs to own the resources, the organization must also manage these resources to realize a competitive advantage (Holcomb et al, 2008; Hollow et al, 2007; Sirmon and Hitt, 2003, 2008, 2009). Sirmon and Hitt (2008) describe resource management as the structuring of a firm s resource portfolio, bundling the resources to build capabilities and leveraging those capabilities to realize a competitive advantage. Creating a competitive advantage is necessary to increase firm performance. According to Bakay (2011), managing and allocating the resources needs to be done with a clear purpose to increase the performance of the firm. Focusing on the firm resources has an (indirect) effect on strategic orientations of the firm and also on the performance of the firm (Lau, 2011; Lo, 2012). In highly competitive markets, firms tend to deploy and utilize their best resources (people, organizational capital and management capabilities) to create a competitive advantage (Lahiri, 2013). Besides the importance of customer service quality and its effect on firm performance, the literature also shows that the management of resources has an effect on firm performance. To determine which resources are necessary for customer service quality it is important to mention the key processes within customer service: order entry, order fulfillment and complaint management. To create high service quality in these three processes, organizations need to be reliable, attentive, responsive and perceptive in these processes (Chand, 2010; Salomonson, 2012; Martinez, 2009). The resources which contribute to this are the people (knowledge, skills and experience) within the organization, the organizational (innovative) processes and the technology to underpin these processes People Knowledge, skills and experience are important contributors within human resource management (Kor and Leblebici, 2005). An organization s knowledge can be developed both by acquiring it from external sources and by developing it in house. When knowledge is 11

12 acquired, it might be valuable but often not rare. It is valuable when the acquired knowledge helps the organization in creating a competitive advantage. However, because it has been acquired, it is relatively easy for competitors to acquire the same knowledge which makes the gained competitive advantage less sustainable. When the knowledge is developed internally within the organization (tacit knowledge), competitors are not able to acquire the same knowledge. It is this tacit knowledge which is difficult to imitate because it is built up over a longer period of time. Therefore, with the creation of tacit knowledge the organization is more likely to create a sustainable competitive advantage over its competitors. Communication skills, social skills, product knowledge, flexibility and stress resistance are important skills to have within customer service departments (Martin and Fraser, 2002). As customers are more and more demanding, communication is an important feature of creating customer satisfaction. Customer service representatives need to have these communication skills combined with the knowledge of the products, to be responsive and perceptive towards the customer (Chand, 2010; Salomonson, 2012; Martinez, 2009). The people within the organization need to be attentive as well. Attentiveness reflects the focus and commitment towards the customer. This customer focus is needed in the supply chain of an organization to create value for the customer (Salomonson, 2012). When there is less customer focus within the people in the supply chain, it is the up to the customer service representative to create support within the organization. Therefore, the customer service representative needs to have the social skills to convince other departments to do what is in the best interest for the customer. This results in a continuous field of tension between the customer service representative and the internal organization. Therefore, people within the customer service department also need to be flexible and stress resistant. 12

13 When employees work for a longer period within the same organization, they gain experience within a particular industry or sector. The people within the organization who are experienced know the organizational processes, know the customer requirements and have built up tacit knowledge over the years. Further, within large organizations it often appears that people have been in different functions in different departments. This cross-functional experience and the length of employment have a positive influence on the service quality (Kuo, 2010). Within human resources, processes and routines are important to assure that situations in customer service can be handled properly Organizational (innovative) processes Innovation can be labeled as new product development (NPD) and as service innovation. Within NPD new tangible products are created and this type of innovation is seen as radical innovation with fundamental, disruptive changes (Crossin, 2010). Toivonen and Tuominen (2009) describe the service innovation process as follows: a service innovation is a new service or such a renewal of an existing service which is put into practice and which provides benefit to the organization that has developed it; the benefit usually derives from the added value that the renewal provides the customers. The service innovation process is an organizational process. Organizational processes are not static and need continuous improvement to stay aligned with the organization. The innovations on the organizational processes are incremental by nature and represent variation in existing routines and practices (Crossin, 2010). It is also possible that a review could shed a different light on the process which might lead to a fundamental change. Reviewing these processes on a regular basis will ensure that changes are made within these processes. Organizational processes are the way things are done within firms (routines) and have three roles: coordination/integration, learning and reconfiguration (Teece, 1997). Coordination and 13

14 integration is needed for linking the customer demand to the internal processes. For example, the organization can create a tool which transfers the customer demand directly into the manufacturing systems. Linked to the resource people is the learning role of the process. Learning is done by a collective set of people who are dealing with specific problems which can lead to process amendments or even complete new processes. Coordination and learning are followed up by reconfiguration, which is a learning skill (Teece, 1997). In a demanding and changing environment, firms need to reconfigure their resources to be competitive Technology The processes as described in the previous section need to be supported by the systems within the organization (Kor and Leblebici, 2005). Without the systems to underpin the processes, manual head-hand actions are needed to fulfill customer demands. Head-hand actions have a higher failure rate compared to actions which are automated via systems. Further, the systems in different departments in the supply chain of the organization need to be aligned. From a customer requirement within a sales department up until the delivery of this requirement towards the customer: the systems need to be aligned. The alignment creates transparency throughout the supply chain, which helps the organization in creating customer service quality. In example, a customer complaint has been captured in a formal system. All of the involved departments have access to this system. The system pushes the complaint towards the responsible department for resolving the complaint. When the complaint has been resolved, it will be automatically communicated with the customer. So, the systems within an organization are important to support the people and processes to be perceptive and responsive. Where this is an example for complaints management, the systems should also be aligned in every area which affect customer service quality. All customer related data (i.e. enquiries on 14

15 order fulfillment, complaints, order acknowledgements) needs to be captured in a formal system to ensure availability of data at all time, which needs to be visible for all departments within the supply chain. Customers desire a high customer service level, and firms need to evaluate their operational systems to create the value and improve the service level (Tsou, 2012). 2.4 Research gap Customer service quality and the management of resources are extensively described in the strategy field; however, there is little knowledge about the management of resources to create customer service quality. Without capable people, alignment of organizational processes and lack of support of technology within an organization, conflicts of interest might occur within the organization. This conflict might harm the customer service quality. Are the skills and knowledge of the customer service representatives at the desirable level and aligned with the processes and the systems they use? Are all the departments within the supply chain of the organization customer focused? Customer service quality has an (indirect) influence on the firm performance (Eklof 2008; Wouters 2004). Achieving higher firm performance is one of the ultimate goals of a firm (Bakay, 2013; Lau, 2011); therefore it is necessary that the organization manages their resources to create high customer service quality. The research question based on the gap mentioned above, which I try to answer within this thesis, is: How do firms manage their resources to create high customer service quality? 15

16 3. Theoretical framework To answer the research question how do firms manage their resources to create high customer service quality I need to know how firms manage their resources to be reliable, responsive, attentive and perceptive in the eyes of the customer. In general, past research has found these four constructs to have an influence on customer service quality (Chand, 2010; Salomonson, 2012; Martinez, 2009). These four constructs are most important for customer service quality because an organization needs to be able to: 1) live up to the agreements which are made with the customer (reliability); 2) communicate on the desirable level with the customer (responsive); 3) show commitment and focus towards the customer (attentiveness) and 4) understand the message of the customer (perceptiveness). The degree of influence depends on how these constructs are handled by the resources of the organization: people, organizational (innovative) processes and technology. Figure 1: influence of resources on customer service quality 16

17 The propositions will be based upon the three key processes within customer service: order entry, order fulfillment and complaint management. These processes encompass the total procedure process from the start of a new customer order, the booking process, production, delivery and possible complaints of the customer. For this total process, chain analysis is done to determine which resources (and the importance a backward valueof these resources) are necessary for each step in the process to create reliability, responsiveness, attentiveness and perceptiveness which lead to customer service quality. Figure 2: value chain theoretical model 3.1 Resources The resources people, organizational processes and technology are both separately and jointly important for the different steps within the three key processes. The alignment of these resources determines the ability of an organization to be reliable, responsive, attentive and perceptive. These four constructs will be explained in further detail in the next section. 17

18 3.2 Constructs customer service quality Reliability of an organization means that the provider of the products or services makes sure that the agreements with the customer are lived up to. As an organization, you can be reliable when you make sure orders are booked conform to the customer specification, the delivery of the product or service is within the agreed period and if there is a complaint that it is handled properly. To achieve this, the people within the organization need to have knowledge, skills and experience. Furthermore, processes need to be reviewed on a continuous basis to assure that these processes are useful to meet the customer demand. Responsiveness reflects the level of understanding or agreement between the provider and the customer (Salomonson, 2012). Being responsive also means that the provider needs to make sure that they respond quickly, and that they check with the customer whether the message is understood. In many organizations there are exceptions that need to be managed. In large organizations, there are several departments influencing the exceptions. In case of an exception in order fulfillment (material ordered by the customer that will not be delivered in the agreed period), departments such as manufacturing, supply chain, outbound logistics and customer service influence these exceptions. To make sure that the organization acts quickly, all the resources within these departments need to be aligned to avoid conflicts of interest. Attentiveness reflects a provider s focus on the customer. The provider adjusts his behavior to make sure he shows his consideration, commitment and involvement. Attentiveness cannot be created by one department within a large organization. The customer service representatives are trained to have focus on the customer and feel strong commitment towards them. However, they depend on other departments within the organization to meet and exceed customer demand. It is therefore important that the customer demand is cascaded throughout the departments within the supply chain. 18

19 Perceptiveness reflects the listeners attempt to understand the message of the customer (Salomonson, 2012). When the listener has a high perception this means that he can identify the needs of the customer and offer specific services or products to meet and exceed these needs. When the message of the customer contains a complaint, this complaint needs to be registered formally. When the complaint has been registered, the customer service representative needs to make sure that the root cause of the complaint is known and that the complaint is addressed to the responsible department. 3.3 Key processes of customer service The three key processes order entry, order fulfillment and complaints management encompass the total process from the start until the end of an order. Within this thesis, these processes are viewed from the perspective of a large industrial steel production company. Although the basis of these processes is the same for most production companies, these processes might be different in other organizations. Within order entry, the following sub processes are defined: pre-order entry, order entry and order acknowledgement 1. In these sub processes several different departments are involved and have a direct or indirect influence. Supply chain and sales need to make sure the allocation for the order has been reserved (pre-order entry), customer service needs to book the order (order entry) and sales needs to acknowledge the order (order acknowledgement). For the order entry process it is important to be able to react quickly and reliably. When customers send in their orders, they need a response within an agreed timeframe. To achieve this, people need to have the communication skills to be responsive. Furthermore, the 1 Based on the experience I have within Customer Service, these three were identified as key sub-processes. 19

20 response needs to be reliable. Reliability can be obtained when all involved departments make sure they follow the agreed order entry process. Order fulfillment starts where the process of order entry ends. Order fulfillment implies that the order of the customer has been acknowledged and that the order is available for the supply chain and manufacturing department to produce the order conform to the customer requirements. The process of order fulfillment is also divided into several sub processes. First, the customer order needs to be launched for production. Second, the production of the order needs to be executed. Finally, when the order is ready for dispatch, it needs to be delivered to the customer. In theory, the process is fairly simple. However, within these sub processes several departments are involved such as sales, customer service and supply chain planning and there could be pitfalls within each of the sub processes. Within the sub process launch material for production, it might be that the agreed capacity for a set of orders is decreased and not all of the orders can be launched according to the agreed customer delivery week. Choices need to be made which will have an effect on the agreed delivery week for particular orders. During the execution of the order, production can be delayed due to production issues, quality issues or scheduling issues. Orders need to be monitored proactively to ensure the flow of material. In case of expected deviations with regard to the agreed delivery week the customer needs to be informed. When the order is ready for dispatch, it will be programmed for transport. During transport there can be a delay due to technical issues with the type of transport that is used. All of these examples of pitfalls are not in favor of creating high customer service quality. The customer expects reliability on the delivery as ordered regarding the requested delivery week. In case of deviations, the customer expects proactive information on the exceptions (responsiveness). The deviations should be communicated with a clear focus and commitment towards the customer (attentiveness). 20

21 Once the material has been delivered, it is possible that the customer will not be satisfied and may send in a complaint. The way the complaint is handled is the process of complaints management. The dissatisfaction can be caused by several reasons. Within customer service quality, we only discuss the complaints which are caused by service issues. Technical complaints (i.e. the coil is not produced conform the agreed mechanical properties) are out of scope. Service issue may arise when there are exceptions in order entry, order fulfillment or also in customer care, which is related to the communication with the customer. The way complaints are handled is very important for the customer. Again, responsiveness is a key item. An organization needs to be able to act quickly on complaints and assure that the complaint is addressed properly within the organization. In addition to responsiveness, the people from the organization need to be able to understand the message from the customer: what is the real issue for the customer and what is needed to resolve the issue? Combining the resources and the key processes within customer service as mentioned above leads to the following propositions on customer service quality. Proposition 1: the more the capability that people have in managing order entry, order fulfillment and complaints management the more likely is the organization to achieve high customer service quality Proposition 2: the more alignment there is in the organizational processes between sales, supply chain and manufacturing to manage order entry, order fulfillment and complaints management the more likely is the organization able to create high customer service quality Proposition 3: the more the technology between sales, supply chain and manufacturing is aligned to support the organizational processes the more likely is the organization to achieve high customer service quality 21

22 Proposition 4: the more customer focus is created throughout the departments within the supply chain, the more likely is the organization able to create high customer service quality All of the above four propositions are linked to the constructs reliability, responsiveness, attentiveness and perceptiveness, which are used to measure customer service quality. 22

23 4. Data and method In order to answer the research question, it is necessary to do extensive qualitative research within several comparable companies. Due to the timeframe and available resources this is unfortunately not possible to do within my thesis. Therefore, I have chosen to do an in-depth case study within one of the largest global steel producers. With a case study, the results can be fruitful for the case itself due to the fact that case studies are rich, empirical descriptions of particular instances based on a variety of data sources (Eisenhardt and Graebner, 2007; Saunders et al., 2011). This variety of sources is easily accessible because of the network I have built up within the organization. However, the case study may not be easily generalizable for other companies and would need to be further corroborated by future research (Flyvbjerg, 2006). The case study will be done in one organization. The research will be on two sites within this organization: the site for strip products in the Netherlands (site A) and the site for strip products in the United Kingdom (site B). This steel producer is one of the world s most geographically diversified steel firms, with operations in 26 countries and commercial offices in over 35 countries. In Europe, this organization is the second largest steel producer. Several markets are served, such as Aerospace, Automotive, Construction, Consumer Products, Defense & Security, Energy & Power, Lifting & Excavating, Packaging, Rail and Shipbuilding. The organizational structure has a matrix form (see Figure 3). The Sales & Marketing department is a department which is sector aligned. The Supply Chain Planning and Manufacturing departments are located and focused on the two sites. 23

24 Figure 3: organizational chart The focus within the study is on site A, because most of the data will come from this site. The unit of analysis within this case study (Yin, 2009) will be the process of managing resources. In order to get the data, the value chain of the three key processes within customer services was were analyzed backwards. These three key processes are order entry, order fulfillment and complaints management. These processes encompass the total procedure from the start of a new customer order, the booking process, production, delivery and possible complaints of the customer. This analysis was done to determine which resources (and the importance of these resources) are necessary for each step in the process to create reliability, responsiveness, attentiveness and perceptiveness within the organization which lead to customer service quality. To gather the information, I have conducted nineteen interviews with various people from different departments within both sites. The interviews were held in the native language of the 24

25 interviewee, to make it as natural as possible for the interviewee. In order to get the rich data needed, these people were selected based on function, experience and department. The several departments involved have direct or indirect influence on the three key processes of customer service. Because of the different departments, it will be a cross-functional research which is necessary to create a multidisciplinary view. The main focus is on site A, where thirteen interviews were held: four interviews within Sales & Marketing, five interviews within Supply Chain Planning and four interviews within Manufacturing. Six interviews were held on site B: three interviews within Sales & Marketing, two within Supply Chain Planning and one within Manufacturing. The choice for this number per department is to have a relatively equal spread amongst the interviewees per department, to avoid the possibility of one department having a lot of influence on the results. The functions which were interviewed within these departments are middle management functions and the people from daily operations. The people from the middle management functions are aware of the strategy of the organization and also know how this is cascaded into the shop floor; the people from the daily operations know exactly how it is executed. An overview of the interviewees can be found in Appendix 1. The interviews which have been held are semi-structured interviews. Within these interviews, an interview protocol (see Appendix 2) is used which covers the propositions. The propositions are based upon the unit of analysis: how do firms manage resources? (Yin, 2009) Within the protocol there is a hierarchy of questions per key process of customer service. First, general questions were asked about the key process. Second, the four constructs reliability, responsiveness, attentiveness and perceptiveness are taken into account. After this, questions were asked on how for example the reliability can be increased with the available resources. Finally a check has been done on the cross-functional alignment of processes and the support of technology to underpin these processes. In addition to the 25

26 questions, the interviewees were also asked to score the constructs on a five-point Likert scale. Triangulating this quantitative data with the qualitative data from the interview transcripts helps in ensuring the validity of the data (Saunders et al., 2011). The interviews had an average duration of forty-five minutes (approximately fifteen minutes per key process), and were recorded and transcribed. The interviews for site A were all done face-toface, whereas the interviews for site B were done by phone or web conference. After all the interviews were held and transcribed verbatim, analysis was done on the transcripts. During the analysis of the transcripts, fragments of the transcripts were put in the coding scheme. A fragment is a sentence or part of a sentence from an interviewee which reflects a resource combined with one of the constructs of customer service quality. 26

27 5. Results From the analysis of the transcripts of the nineteen interviews, 908 fragments were coded based upon the resources, key processes, constructs and possible subthemes. These fragments are the foundation for the result section. The coding scheme with the explanation of the fragments can be found in Appendix 3. % Fragments per constructt % Fragments per resource Reliability Responsiveness People Processes Technology Attentiveness 16% Perceptiveness 15% 38% 16% 51% 47% 17% Figure 4:% fragments per construct Figure 5: % fragments per resource In accordance with the theoretical framework this chapter is divided into five sections. In the first section the constructs which measure customer service quality are briefly explained. In each of the following sections one proposition is analyzed, based on the data from the interviews. For the first three propositions the value chain of key processes order entry, order fulfillment and complaints management within customer services will be analyzed. For the last proposition, which is about the customer focus throughout the supply chain, the different departments within the supply chain will be analyzed. 5.1 Constructs customer service quality The constructs from the theoretical framework which measure customer service quality are reliability, responsiveness, attentiveness and perceptiveness. In general, these four constructs have an influence on customer service quality (Chand, 2010; Salomonson, 2012; Martinez, 2009). These four constructss are most important for customer service 27 quality because an

28 organization needs to be able to: 1) live up to the agreements which are made with the customer (reliability); 2) communicate on the desirable level with the customer (responsiveness); 3) show commitment and focus towards the customer (attentiveness) and 4) understand the message of the customer (perceptiveness). 5.2 Proposition 1 People Proposition 1 suggested that the more capability people have in managingg order entry, order fulfillment and complaints management the more likely is the organization to achieve high customer service quality. This section starts with the backwards analysiss of the value chain key processes of customer services and ends with an overview of proposition 1. On the resource people, 3444 out of 908 fragments (a fragment is a sentence or part of a sentence from an interviewee which reflects a resource combined with one of the constructs of customer service quality) were captured during the interviews. These 344 fragments were spread relatively equal amongst the different constructs. In Figure 6 this spread has been shown as follows: attentiveness 78 (23%), perceptiveness 78 (22%), reliability 99 (29%) and responsiveness 90 (26%). People Attentiveness Perceptiveness Reliability Responsiveness 26% 23% 29% 22% Figure 6: % of fragments per construct on resource people 28

29 5.2.1 Complaints management Within the resource people and the key process complaints management, 134 fragments have been captured. The majority of these fragments (110) were captured within the Sales & Marketing and Supply Chain Planning department. This is due to the fact that the people within Manufacturing are almost never involved in service complaints. For Reliability, a step has been made in making sure the service complaints from the customers are registered. The people within Sales & Marketing do not always feel the urge to register all the complaints. Instead of registering they feel more obliged to solve the issue for the customer. Creating reliability is key in achieving customer service quality. Even when an organization scores high on attentiveness, responsiveness and perceptiveness, if it is not reliable it will not be perceived positively by the customer. Further, the organization is not doing well at discovering the root cause of service complaints. The organization is easily satisfied with the first answer and stops at one times why, when in practice a deeper analysis could be done to identify the real root cause of a service complaint. The Attentiveness within all departments of the organization is high. Sometimes, due to environmental factors, employees are put in a difficult position. People are not always given the options to build a solution when they have found one. So, there is room for improvement but generally the people are committed. Based on the coding scheme (complaints management; attentiveness; people) 13 out of 19 interviewees mentioned that the attentiveness within their departments is high with regard to complaints management. This resulted in an average score of 3,8 (Table 1) on attentiveness. Is the communication with the customer on service complaints at the desirable level? The Responsiveness within the organization is reasonable; there are good and bad examples. The 29

30 people are able to solve the service complaints at the moment they occur and customers are informed accordingly. However, there is room for improvement in showing the customer that the organization is a learning organization, which helps ensure that these complaints are prevented in the future. The organization understands the customer needs and is therefore perceptive. The people within the organization are not always able to fulfill these customer needs. This is mainly due to the differences between departments. Within Sales & Marketing the perceptiveness of the people is higher than further in the value chain. Supply Chain Planning say they can improve on this area, because they have too little information about the end-customer. The people within Manufacturing and Supply Chain Planning are feeling remote towards customer needs. The people within Sales & Marketing influence the service complaints management process the most. The majority of the influence is on attentiveness and reliability. The skills of the people are in general well developed. The perceptiveness however differs between people. When there are a lot of service issues, the amount of customer complaints is not reflecting this. This is dependent on training and experience. Although not all complaints are captured at all times, the overall reliability is good. The people within the organization are becoming aware and more capable. The overall attentiveness is also high. In Table 1 the average score is displayed of the capability of the people on the four constructs within service complaints management. Also in Table 1 is the number of interviewees given who support proposition 1 on complaints management, supported by quotes from the interviewees. 30

31 Construct Average score on actual capabilities of people # of interviewees supporting actual people capabilities Reliability 3,6 13 not all complaints are registered Attentiveness 3,8 13 the attentiveness has increased in the last years Responsiveness 3,5 12 in terms of responsiveness there is always someone there to take the call Perceptiveness 3,6 13 most of the people understand the customer needs Table 1: capability of people on complaints management (n=19) When evaluating the differences between sites or departments, the biggest difference is the lack of visibility of service complaints for the people within the manufacturing department. This is the case for site A and site B. The visibility of the service complaints fades as it cascades down the supply chain. Two interviewees from Manufacturing gave the following response on this: (A) we are not involved in service complaints, we do not do anything with it. (B) we never get complaints from external customers. Are the people within the organization capable, when handling service complaints, of creating high customer service quality? The attentiveness and perceptiveness is high within Sales & Marketing, but decreases further in the supply chain. The customer complaints is handled within the Sales & Marketing department, and from there it is pushed towards a responsible 31

32 department (i.e. Manufacturing) to resolve the complaint. You would expect high involvement from the responsible department. However, as mentioned in quote (A) and (B), Manufacturing is almost entirely not involved in the service complaints process. Within reliability and responsiveness people need to make sure that the capturing of the complaints is in line with the amount of service issues and make the step towards continuous improvement on service complaints by finding the root causes Order fulfillment Within the resource people and the key process order fulfillment, 120 fragments have been captured. These fragments (sentence or part of a sentence from an interviewee which reflects a resource combined with one of the constructs of customer service quality) are based on the coding scheme which combines people and order fulfillment and have a consistent spread amongst the different departments. In general, people are highly capable on order fulfillment. People have a bit of influence on the reliability on order fulfillment, but not that much. People have the skills to be reliable in what they need to do (i.e. within Manufacturing ensure the flow of material). The influence people have lies in the management of exceptions. The people within the organization are capable of managing the exceptions, but there are opportunities for improvement. The potential within people to innovate needs to increase to make sure structural improvements will be made. Sometimes, when influencing order fulfillment, it is the strength of the people making a decision. According to one interviewee from Sales & Marketing: (C) the desire for skills is on plan, the current capability is variable (due to a lot of new people). People are not always given the capabilities to do it. 32

33 Sales & Marketing people have great amount of attentiveness and customer focus. There is a huge drive for the customer. Commitment is high within all departments; however, customer focus is decreasing further in the supply chain. But when there are issues with a customer, people from all departments are willing to help out. One interviewee from Supply Chain Planning made the following comment on attentiveness: (D) I think the attentiveness is there, when there is a customer delivery issue everyone is committed getting the material delivered. For the long term, to resolve these issues in order fulfillment, you need to organize in a different way to improve structurally. Customer focus needs to be the driver within all departments. Within Manufacturing the customer is not visible. People within Manufacturing are volume driven instead of customer order driven, because that is what they are being held accountable for. Below is a comment made by an interviewee from Manufacturing. (E) in our department we do not see the customer. We see only the customer name, but we do not know anything about the consequences of a particular order. Responsiveness: as Sales & Marketing communicates with the customers, the people within Sales & Marketing have a huge influence on responsiveness. However, throughout the whole supply chain on order fulfillment the responsiveness is not at the desirable level. There are also differences within the sales sectors. Within Automotive the responsiveness is on a higher level than for the Industry sector. Overall there is room for improvement, because it is not proactive in each of the sectors. When an organization is proactive it means that it is able to inform the customer at all times up front about order fulfillment. When the organization fails in being proactive, this will harm the customer satisfaction because the customer gets confronted with unexpected situations. The ability of being proactive is also dependent on the 33

34 reliability of the internal responsiveness. Sales & Marketing is depending on the information from Supply Chain Planning and Manufacturing. The people within Manufacturing are used to program the installations; communication is not their top priority. Perceptiveness within order fulfillment starts at the Sales & Marketing department. The people within this department are closest to the customer and therefore most aware of the customer needs. Depending on the sector people are in, the level of maturity in perceptiveness varies. The sales sector needs to translate the customer needs further in the supply chain. And because the maturity level varies, the perceptiveness within the Supply Chain Planning and Manufacturing department varies as well. When people from Sales & Marketing have made the customer requirements clear within the supply chain, the perception is that Supply Chain Planning and Manufacturing do not always act upon these requirements. But in the end there is no doubt on the capability of the people. The people are reliable and have commitment. From the current point of view they do what they are asked to do. Responsiveness and perceptiveness could be better in all areas, but are also cross-functional dependent on each other. Are the people within the organization capable, when handling order fulfillment, of creating high customer service quality? Overall the people are capable on all constructs, but on all constructs there is also room for improvement. The customer focus needs to increase throughout all departments and the internal responsiveness should improve to get the external responsiveness at the desired level. In Table 2 the average score of the capability of the people is displayed on the four constructs within order fulfillment. Table 2 also displays the number of interviewees given who support proposition 1 on order fulfillment, supported by quotes from the interviewees. 34

35 Construct Average score on actual capabilities of people # of interviewees support actual people capabilities Reliability 4,1 16 we have a big influence on the reliability of the order fulfillment process Attentiveness 4,1 15 no doubt whatsoever on the commitment of the people Responsiveness 3,8 16 we could do better in informing proactively Perceptiveness 3,9 15 The perceptiveness comes in terms of understanding what is required. Once we know what we need to do, we will do it. Table 2: capability of people on order fulfillment (n=19) Order Entry Within the resource people and the key process order entry, 75 fragments have been captured. Within site A the fragments are equally spread over the constructs. The majority of the fragments (sentence or part of a sentence from an interviewee which reflects a resource combined with one of the constructs of customer service quality) for both site A and site B are related to reliability (23 out of 75 fragments) and responsiveness (22 out of 75 fragments). Within order entry I found a split in three parts where people influence the most. These three parts are the forecasting process within pre-order entry, the administrative process of booking the orders correctly and the acknowledgement of the customer order. Sales & Marketing has a large amount of influence on the order entry process. The administrative process is stated as reliable. Supply Chain Planning and Sales & Marketing 35

36 have an influence on the reliability in the pre-order entry phase: Supply Chain Planning in assuring the allocation to book the order is reliable, and Sales & Marketing in assuring that the forecast of what is going to be booked is reliable. The reliability in the acknowledgement is dependent of the combination of the reliability in the pre-order entry phase and the order entry phase. The attentiveness is high, as is the customer focus within Sales & Marketing. Within order entry, the people within Supply Chain Planning are able to change production routes. When they do so, they do not take the consequences for the customer into account, as stated in the following comment from an interviewee from Supply Chain Planning: (F) an order is booked for a certain delivery week; when we change the production route then we do not look at the consequences for the customer In terms of Responsiveness, the organization does not act very well on exceptions in order entry. An interviewee of Sales & Marketing stated: (G) on around 80% of the order entry the responsiveness goes smoothly, but the people within the organization do not respond very well on the other 20%. This is due to the fact that a big part of the order book is repetitive, so people are experienced in this. The other 20% are about the special orders, which are coming in less frequently and they take a longer lead time in the order entry process. Overall the people within Sales & Marketing know what the customer wants when an order is booked. The influence of the people within Sales & Marketing on perceptiveness within order entry is high. The customer requirements are known, the overall perceptiveness is depending on how this is cascaded into the supply chain. Unless there is a good mix of people with 36

37 experience in within Supply Chain Planning and Manufacturing, the perceptiveness is less high compared with the Sales & Marketing department. The experience of the people within Sales & Marketing differs because of a higher attrition rate. Overall the people are capable, but responsiveness and perceptiveness could be better throughout the value chain. In Table 3 the average score is displayed of the capability of the people on the four constructs within order entry. In Table 3 is also the number of interviewees given who support proposition 1 on order entry, supported by quotes from the interviewees. Construct Average score on actual capabilities of people # of interviewees support actual people capabilities Reliability 4,3 13 within the administrative process the reliability is high Attentiveness 4,2 12 the commitment is always high Responsiveness 4,0 12 within the repeating order book the responsiveness is high Perceptiveness 3,9 11 sometimes we don t really know what the customers want Table 3: capability of people on order entry (n=19) People have the skills to be reliable in the administrative process. The acknowledgment towards the customer is reliant on the administrative process and the pre-order entry phase. Mainly in the pre-order entry phase people should be more accurate (i.e. by forecasting the demand) to increase the reliability. 37

38 5.2.4 Overview proposition 1 Proposition 1: the more the capability that people have in managing order entry, order fulfillment and complaints management the more likely is the organization to achieve high customer service quality Construct Key Process Results theoretical Results actual # of interviewees supporting actual results Reliability Complaints management 13 Order fulfillment 16 Order entry 13 Attentiveness Complaints management 13 Order fulfillment 15 Order entry 12 Responsiveness Complaints management 12 Order fulfillment 16 Order entry 12 Perceptiveness Complaints management 13 Order fulfillment 15 Order entry 11 Table 4: overview results on proposition 1 The actual results are based upon the number of interviewees (out of 19) supporting the proposition, where: = strongly supported ( 13 interviewees); = not strongly supported (7 interviewees < 13); = not supported (< 7 interviewees). = correct on theoretical results 38

39 5.3 Proposition 2 Processes Proposition 2 suggested that the more alignment there is in organizational processes between sales, supply chain and manufacturing to manage order entry, order fulfillment and complaints management, the more likely is the organization able to create high customer service quality. This section starts with the backwards analysis of the value chain key processes of customer servicess and ends with an overview of proposition 2. On the resource processes, 430 out of 908 fragments were captured during the interviews. Within these 430 fragments, the majority was on the construct reliability (282) and the rest of the fragments were spread relatively equal amongst the other three constructs. Figure 7 displays the spread among all the four constructs: reliability 282 (66%), attentiveness 49 (11%), perceptiveness 54 (13%) and responsiveness 45 (10%). Processes Attentiveness Perceptiveness Reliability Responsiveness 10% 11% 13% 66% Figure 7: % of fragments per construct on resource processes 39

40 5.3.1 Complaints management Within the resource processes and the key process complaints management, 112 fragments were captured. The majority of these fragments are on reliability (85). During the coding, the subtheme cross-functional was captured. This subtheme indicates the interdependencies different departments have. On this subtheme, 23 fragments were captured within complaints management combined with reliability. The average score on what people thought of the service complaints management process is a 2,9 (five-point Likert scale, n=19) on reliability. So although there is a relatively large amount of fragments, the score is not too positive. Within Manufacturing, the service complaints management process is not in the picture. Eight fragments were stated as not applicable, because Manufacturing is not involved in the service complaints process. The service complaints process starts within Sales & Marketing. The customer service representative captures the complaint and makes sure it is processed further in the value chain. If one link in the process fails, the reliability is not at the desired level for the customer. Links can fail when not all links in the chain are working in the same terms of reference. The service complaints which are captured are repeaters, they do not differ that much from month to month. The ability of the organization to structurally solve the complaints is currently too low. One interviewee from Sales & Marketing stated the following on the reliability of the service complaints process: (H) in the end we will become more reliable, but we are not there yet. With the current service complaints process, a start has been made to become more reliable. But the maturity of this process and the alignment between different departments needs to increase to create more reliability. Therefore, cross-functional improvement teams are needed 40

41 to solve complaints structurally. These teams are able to make a cross-functional analysis of complaints which helps in creating the reliability. The Supply Chain Planning department does not see all service complaints. They also think that the root cause analysis is not on a mature level. The goal of capturing the service complaints is to improve the internal organization. Every complaint is the result of a combination of failed internal processes. The importance of capturing service complaints is clear, making it cross functional can be very valuable. According to one interviewee from Supply Chain: (I) if you know the root cause of a service complaint, you can start with an intelligent improvement. The goal of capturing the service complaints is to improve your internal organization. Within Manufacturing the involvement in service complaints is very low. No questions are asked why material was late for a particular order for a particular customer. There is a low score on the amount of fragments in Attentiveness (12). The average score on what people thought on attentiveness is 3,5 (five-point Likert scale, n=19). Mainly in specific sectors such as Automotive there is a large amount of customer focus, because there is a cross-functional improvement team installed in this sector. There is also a low score on Responsiveness in the number of fragments (10). The average score on what people thought on responsiveness is 3,2 (five-point Likert scale, n=19). The organization is not very good at responding in terms of service complaints. Getting the right information is difficult, because the Sales & Marketing department is dependent on other departments such as Supply Chain Planning and Manufacturing. The service complaints are not in a black and white area such as technical complaints. Within technical complaints a 41

42 coil can be declined due to quality reasons, while within service complaints it is also about managing expectations. In terms of managing expectations, one interviewee of Sales & Marketing states: (J) Do we manage the customer expectation? I don t believe we do in every circumstance. Do we know what the customer expectation is? I don t believe we do in every circumstance The Sales & Marketing department struggles to translate customer needs towards the rest of the organization. On Perceptiveness there is also a low score on perceptiveness in the number of fragments (5). The average score on what people thought of perceptiveness is 3,2 (fivepoint Likert scale, n=19). The organization does not always know what the customer needs are, but it is nevertheless stated as important. What is the importance of the alignment of cross functional processes? On all constructs the scores are at least a 4 (five-point Likert scale, n=19). Alignment between the departments is necessary to be able to identify the root causes of service complaints. In Table 5 the average score is displayed of the theoretical influence of the alignment of processes on the four constructs within service complaints management. A specific difference has been made between the theoretical influence and the actual results. The interviewees stated that the influence of alignment of processes is high, but that the organization actually fails in the alignment of these processes. In Table 5, the number of interviewees is shown who support proposition 2 on complaints management, supported by quotes from the interviewees. 42

43 Construct Average score on the theoretical influence of alignment of processes # of interviewees supporting actual alignment of processes Reliability 4,2 7 if you know the root cause of a service complaint, you can start with an intelligent improvement Attentiveness 4,2 6 we don t receive customer complaints Responsiveness 4,2 6 the ability to influence accurate information is difficult Perceptiveness 4,1 6 it fails mainly by cascading the complaint into the organization Table 5: influence of alignment of processes within complaints management (n=19) Alignment in cross-functional processes is key. This is the case for all of the constructs. To make sure service quality is created, clear agreements need to be made between departments which are lived up to. Additionally, all of the departments need to have customer focus, need to be able to respond quickly and must understand the needs of the customer Order fulfillment Within the resource processes and the key process order fulfillment, 181 fragments have been captured. The majority of these fragments are on reliability (110). The average score on what people thought of the order fulfillment process is 3,0 on reliability (five-point Likert scale, n=19). The influence on the results is focused on reliability, where the score on reliability is stuck in the middle. 43

44 According to the Sales & Marketing department, the reliability in order fulfillment is that the organization does well when there are no capacity constraints. However, when there are capacity issues the organization is not able to manage these issues properly and so this has a negative effect on the customer service quality. This is due to the conflict between volume driven and customer driven. The different departments focus on their own targets. And these targets between departments conflict with each other. Where Manufacturing is volume driven, the Sales & Marketing departments is customer (order) driven. A second effect is that the total organization is focused on working capital and cash flow. The following quote was stated by one interviewee from Sales & Marketing: (K) we have a continuous conflict between volume driven and customer driven. If we choose volume, we automatically accept arrears in delivery Looking at the past few years, the order fulfillment process does not lead to great reliability. This is a consequence of the general planning principles within the organization. These principles are not in line with the demand of the market. More transparency is needed over what needs to be achieved through the whole chain. Within the Supply Chain Planning department more cross-functional agreements are made on how we should manage the reliability, so improvement has been made. The organization still works in different units, so you need to have people who have the total overview over the whole supply chain. The organization is too dependent on people giving each other information. The Manufacturing department has a big influence on the reliability. The perception within Manufacturing is that we do not deliver reliably to the customer. This is partly due to the lack of insight in customer needs within Manufacturing. When programming material for an installation, they have a conflict: the customer delivery week is not visible so they use the lead 44

45 time of the material which is in front of an installation. According to one interviewee of Manufacturing: (L) The lead time we use is not accurate, because it is possible that a coil with two days lead time is more urgent than a coil with forty days lead time. So it is possible that we not make the optimal choice in producing material for our customers. As instructed by the management, this process is driven by volume. A big part of the influence is at the front end of production, because the rear end of the production just consumes the material. The strategy of volume is a pull strategy; orders are pushed towards the end of the supply chain. The intelligence of the process when material is launched (which is based on the customer delivery week), is not visible throughout the whole value chain. The average score is 3,2 on attentiveness (five-point Likert scale, n=19). The commitment is high; the organization knows which customers are most important. In terms of customer focus the prioritization and escalation process makes the best of the performance for the customer. Within Responsiveness (average score on what people thought is 3,5; five-point Likert scale, n=19) the communication with the customer could improve. All departments state that the communication is important. Not only is the communication towards the customer important, but also the communication with other departments within the organization to get the information which is needed to inform the customer properly. According to one interviewee from Manufacturing: (M) you need to have a discussion amongst the three departments to say something is not going to work this week. We are not going to fulfill this order, or we are not going to keep the line busy or we are going to have the wrong material in the wrong place. 45

46 But it is how you have that discussion and what is the driver and to see what the optimum outcome is. Perceptiveness has an average score of 3,4 (five-point Likert scale, n=19) on what people thought of order fulfillment. On understanding the customer needs, the Customer Service department (within Sales & Marketing) scores highest of all, while other departments such as Supply Chain Planning and Manufacturing score low. One interviewee from Sales & Marketing stated: (N) Other departments do not have a clue about what the customer wants. Manufacturing does not know what the customer wants, and this is also due to the fact that they are not evaluated based on customer needs. The perceptiveness differs also per sector. Where the perceptiveness is high in the Automotive sector, there is room for improvement in perceptiveness in the Industry Strip sector. According to Manufacturing, the understanding customer needs is most important. To focus on customer needs Manufacturing needs better insight in these customer needs. One interviewee stated: (O) what is actually needed for the customer, that is important to know. We steer on volume and not on orders. In total 52 fragments are coded with the sub theme cross-functional. The alignment of crossfunctional processes has a big influence on the four constructs reliability, attentiveness, responsiveness and perceptiveness. The current effect, however, of the alignment in the crossfunctional processes is perceived as mediocre. So while the importance of alignment is clear within the different departments, the state of the alignment needs to be improved to make results visible and create high customer service quality. In Table 6 the average score is 46

47 displayed of the theoretical influence of the alignment of processes on the four constructs within order fulfillment. A specific difference has been made between the theoretical influence and the actual results. The interviewees stated that the influence of alignment of processes is high, but that the organization actually fails in the alignment of these processes. Also in Table 6 is the number of interviewees given who support proposition 2 on order fulfillment, supported by quotes from the interviewees. Construct Average score on the theoretical influence of alignment of processes # of interviewees supporting actual alignment of processes Reliability 4,7 3 we are in conflict between customer driven and volume driven Attentiveness 4,2 4 you get your customer satisfaction through order fulfillment Responsiveness 4,4 3 we have committed to orders, and we can t really communicate to our customers when they are getting the orders Perceptiveness 4,4 4 you don t know which order is urgent Table 6: influence of alignment of processes within order fulfillment (n=19) Order entry Within the resource processes and the key process order entry, 109 fragments have been captured. The majority of these fragments are on reliability (74). The Manufacturing department is almost entirely not involved in order entry as a key process. Further, attentiveness on order entry has a low score in number of fragments (8). 47

48 The average score on what people thought on Reliability in order entry is 3,6 (five-point Likert scale, n=19). The overall order entry process is reliable; it is the specials where the organization struggles. The pre-order entry phase with the forecast of the Sales & Marketing department and the allocation of the orders from the Supply Chain department is important and has a big influence on the reliability. Alignment between departments is needed when handling new orders or specifications. According to one interviewee from Sales & Marketing: (P) We are reliable in order entry on the product specification and the delivery address. We need to improve on being reliable in acknowledging the delivery week. Supply Chain states that in terms of capacity planning (pre-order entry) the organization is not that mature. The choices on for which customer do we want to accept and book the orders? are not deliberate. These choices could be made in pre-order entry, instead of after order acknowledgement. The administrative process of order booking is reasonably reliable, but the organization allows itself to be able to book orders when knowing up front that delivery is not possible in a particular week. One interviewee comments the following on the order entry process: (Q) The quality of the order entry process (equaling customer consumption of material in tons and time) is too low. If it is good, it is easy to fulfill the orders. If not, you are lost. The Manufacturing department is not involved much in the order entry process: only with regard to limitations of installations, which affect the ability to book an order. The effect is low, but when there are consequences for the order entry process they need to be communicated cross-functionally. 48

49 There were only eight fragments on attentiveness within order entry. The average score on what people thought on attentiveness is 3,7 on order entry (five-point Likert scale, n=19). Order entry is seen as an administrative part. The capacity plan is volume driven, and therefore customer focus is lacking within the pre-order entry process. The average score on what people thought on Responsiveness is 3,6 (five-point Likert scale, n=19). The main part in responsiveness has to do with the communication on the acknowledgement of the orders. Order acknowledgments are available for all of the orders. The discussion is whether the content is reliable. The product specification and delivery address is reliable, whereas the reliability on delivery week needs to improve. The average score on what people thought on Perceptiveness is 3,7 (five-point Likert scale, n=19). In most cases the organization knows what the customer wants. The response on what the customer wants is not always at the desired level. There needs to be a cross-functional understanding of customer needs. Order entry is mostly influenced by the Customer Service department (within Sales & Marketing). Sales & Supply Chain Planning have an influence on the pre-order entry phase. 36 fragments (out of 109 fragments) were captured on the subtheme cross-functional. This substantial amount of fragments indicates that there is a need for alignment between Sales & Marketing and Supply Chain Planning. This alignment needs to make sure the organization is able to be reliable, attentive, responsive and perceptive towards the customer. In Table 7 the average score is displayed of the theoretical influence of the alignment of processes on the four constructs within order entry. A specific difference has been made between the theoretical influence and the actual results. The interviewees stated that the influence of alignment of processes is high, but that the organization actually fails in the 49

50 alignment of these processes. In Table 7 is also the number of interviewees given who support proposition 2 on order entry, supported by quotes from the interviewees. Construct Average score on the theoretical influence of alignment of processes # of interviewees support actual alignment of processes Reliability 4,1 6 it is the special deals we struggle with Attentiveness 3,7 8 we see no differences between orders Responsiveness 3,9 7 waiting on technical sign off increases order entry lead time Perceptiveness 4,1 7 customer requirements (i.e. delivery week) are not always followed up Table 7: influence alignment of processes within order entry (n=19) Between site A an B there are differences in Order Entry. The main difference is in the preorder entry phase. Order book steering in site A is different than site B. Orders are booked earlier in site A, due to a different way of handling the capacity plan. 50

51 5.3.4 Overview proposition 2 Proposition 2: the more alignment there is in the organizational processes between sales, supply chain and manufacturing to manage order entry, order fulfillment and complaints management the more likely is the organization able to create high customer service quality Construct Key Process Results theoretical Results actual # of interviewees supporting actual results Reliability Complaints management 7 Order fulfillment 4 Order entry 6 Attentiveness Complaints management 6 Order fulfillment 3 Order entry 8 Responsiveness Complaints management 6 Order fulfillment 4 Order entry 7 Perceptiveness Complaints management 7 Order fulfillment 3 Order entry 7 Table 8: overview results on proposition 2 The actual results are based upon the number of interviewees (out of 19) supporting the proposition, where: = strongly supported ( 13 interviewees); = not strongly supported (7 interviewees < 13); = not supported (< 7 interviewees). = correct on theoretical results 51

52 5.4 Proposition 3 Technology Proposition 3 suggested thatt the more the technology between sales, supply chain and manufacturing is aligned to support the organizational processes the more likely is the organization to achieve high customer service quality. This section starts with the backwards analysis of the value chain key processes of customer services and ends with an overview of proposition 3. On the resource technology, 134 out of 908 fragments were captured during the interviews. Within these 134 fragments the majority was on the construct reliability (81). Figure 8 shows the spread amongst all the constructs: reliability 81 (61%), attentiveness 16 (12%), perceptiveness 19 (14%) and responsiveness 18 (13%). Technology Attentiveness Perceptiveness Reliability Responsiveness 13% 12% 14% 61% Figure 8: % of fragments per construct on resource technology 52

53 5.4.1 Complaints management Within the resource technology and the key process complaints management, 30 fragments were captured. The majority of these fragments (20) are focused on the reliability of the technology. Within Reliability there is little support of technology on the service complaints management process. The average score on what people thought of the reliability of technology on the service complaints management process is 2,8 (five-point Likert scale, n=19). The main reason for the lower score is that the alignment between interdependent systems is missing. Complaints cannot be pushed forward towards different (responsible) departments to resolve the complaint. In addition to that, there is no secured system for analyzing root causes of service complaints; it is mostly a manual process. According to one interviewee from Sales & Marketing: (R) in very, very few areas does the technological support enable workflows and actions to resolve those issues. Low amounts of fragments on technology within the service complaints management process were coded for the constructs attentiveness (3), responsiveness (3) and perceptiveness (4). Therefore these fragments have not been used within the result section. Overall, the scores on the technology within service complaints management process are on the lower half of the scale. This indicates that the technology does not support the complaints management system very well. The capturing of the service complaints is supported, but the linkages between departments are missing. In Table 9, the average score of the support of technology is displayed on the four constructs within complaints management. Also in Table 53

54 9 is the number of interviewees given who support proposition 3 on complaints management, supported by quotes from the interviewees. Construct Average score on actual support of technology # of interviewees support the actual support of technology Reliability 2,8 8 within the systems nothing is linked to each other. It is translated to reports, but the complaints are not automatically cascaded in the organization. Attentiveness 3,0 N/A Responsiveness 2,8 N/A Perceptiveness 2,8 N/A Table 9: support of technology on complaints management (n=19) Order fulfillment Within the resource technology and the key process order fulfillment, 64 fragments are captured. The majority of these fragments (36) are focused on the reliability of the technology. There is an equal spread of the fragments over the other constructs. Within Sales & Marketing the support of the technology is low on the reliability of the order fulfillment process. A lot of Excel-based files are used to support the organizational processes. The alignment is missing between interdependent systems. It is not always clear when material will be ready, so the translation of the expected readiness date is not properly secured in the system. According to an interviewee in Sales & Marketing: (S) we need more intelligence, more statistical functionality which better predicts when an order is fulfilled, in our systems. 54

55 The translation of customer demand into the planning cycle in the manufacturing department is not available currently. This does not help the organization in being reliable in order fulfillment. An interviewee from Sales & Marketing comments the following on technology within order fulfillment: (T) one of our biggest issues is that we do not have a system which shows us the accurate information on which we as a customer service department can stand behind. Not all departments see when an order is an urgent order. The intelligence in launching (where material is launched based on customer requirements) disappears after material has been launched for production. Also, not all details are known from the customer order, through the Supply Chain Department and Manufacturing. And those details can be important when fulfilling a customer order. An interviewee from site B mentions: (U) We have 52 different computer systems that currently do what SAP will do on its own in the future. If you have 52 people in line and you get them to hand over things from one person to the other hand-to-hand there is a chance they might drop it. I do not see a difference between people and IT systems. Having 52 systems does not seem a very robust way of operating Within Manufacturing, the information lacks customer requirements. Urgent orders are indicated via , not via a secured system. The Manufacturing department does not have the insight on what needs to be produced on time for the customer. Customer focus, attentiveness, is missing in the technology for order fulfillment. Without the systems in place which contain customer master data the agreements which are made between the departments around customers customer focus cannot be achieved. 55

56 Some technology has been improved for example the tool in how delivery schedules are processed. With this tool the organization makes it possible to use dashboards and standardized reports to inform the customer (mainly within Automotive) and get the responsiveness towards a higher level. However, this is not mature over the total Customer Service department (within Sales & Marketing). There is a lack of communication via systems from Manufacturing through Supply Chain towards Sales & Marketing, who needs to inform the customer. The systems are not supportive in that. Customer information is missing within the Manufacturing department; therefore the perceptiveness is low in Manufacturing. The planner in Manufacturing is not informed about customer needs; it is not integrated in his system. All across there are low scores on technology within order fulfillment. There is room for improvement to create connections between systems, and to create customer focus within the value chain. Most important is the reliability in expected readiness which is lacking precision. In Table 10 the average score of the support of technology is displayed on the four constructs within order fulfillment. In Table 10 is also the number of interviewees given who support proposition 3 on order fulfillment, supported by quotes from the interviewees. Construct Average score on support of technology # of interviewees support the actual support of technology Reliability 2,8 9 there is no system which guarantees the availability of material for the customer Attentiveness 2,6 7 manufacturing does not see the customer in their systems 56

57 Responsiveness 3,0 9 you would like to further improve the order fulfillment dashboards to enhance the communication Perceptiveness 2,8 9 from end-to-end you need to have the customer requirement visible, the systems are currently not supportive in this Table 10: support of technology on order fulfillment (n=19) Order entry Within the resource technology and the key process order entry, 30 fragments have been captured. The majority of these fragments (20) are focused on the reliability of the technology. The support of the technology in order entry to be reliable is reasonable. The systems are rigid and although there is not much room for creativity, the basis is good. Again the links between interdependent systems are missing. A comment from an interviewee from supply chain on order entry: (V) Order entry bookings are not linked to shipments. When shipments change, the consequences of this are not visible in the order entry systems. It would be of great help if that could be changed. Low amount of fragments on technology within the order entry process were coded for the constructs attentiveness (4), responsiveness (5) and perceptiveness (4). Therefore these fragments have not been used within the result section. 57

58 The systems in order entry are reasonably acceptable. So the level of support is also reasonable. The systems are rigid, but cover most of the requirements. Some improvements are made over time (i.e. the tool for processing delivery schedules). In Table 11 the average score of the support of technology is displayed on the four constructs within order entry. Also shown in Table 11, is the number of interviewees who support proposition 3 on order entry, supported by quotes from the interviewees. Construct Average score on support of technology # of interviewees who support the actual support of technology Reliability 3,6 14 the systems are rigid but supportive in being reliable within order entry Attentiveness 3,2 N/A Responsiveness 3,4 N/A Perceptiveness 3,5 N/A Table 11: support of technology on order entry (n=19) 58

59 5.4.4 Overview proposition 3 Proposition 3: the more the technology between sales, supply chain and manufacturing is aligned to support the organizational processes the more likely is the organization to achieve high customer service quality Construct Key Process Results theoretical Results actual # of interviewees supporting actual results Reliability Complaints management 8 Order fulfillment 9 Order entry 14 Attentiveness Complaints management N/A N /A Order fulfillment 7 Order entry N/A N /A Responsiveness Complaints management N/A N /A Order fulfillment 9 Order entry N/A N /A Perceptiveness Complaints management N/A N /A Order fulfillment 9 Order entry N/A N /A Table 12: overview results on proposition 3 The actual results are based upon the number of interviewees (out of 19) supporting the proposition, where: = strongly supported ( 13 interviewees); = not strongly supported (7 interviewees < 13); = not supported (< 7 interviewees); = correct on theoretical results; N/A = the amount of fragments within these constructs/key processes were not sufficient. Therefore these have not been used in the results. 59

60 5.5 Proposition 4 Customer focus Proposition 4 suggested that the more customer focus is created throughout the departments within the supply chain, the more likely is the organization able to create high customer service quality. This section starts with the backwards analysis of the value chain key processes of customer services and ends with an overview of proposition 4. The most important construct within Customer Focus is attentiveness. Being customer focused starts with being attentive towards the customer. Additionally, the organization needs to understand the customer (perceptiveness). When the organization understands the customer it is able to make agreements and live up to these agreements (reliability), and act responsively on the agreements. Customer Focus - Attentiveness Customer Focus- Perceptiveness People Processes Technology People Processess Technology 25% 6% 12% 9% 69% 79% Figure 9: % of fragments per resource on construct attentiveness Figure 10: % of fragments per resource on construct perceptiveness As shown in Figures 9 and 10, the customer focus is mainly influenced by the resource people (attentiveness 69%, perceptiveness 79%). In total 133 fragments (out of 908) were captured on Attentiveness and 150 (out of 908) fragments were captured on Perceptiveness. 60

61 5.5.1 Complaints management 48 fragments were captured on attentiveness/complaints management. The score on what people thought on attentiveness is a 3,5 (five-point Likert scale, n=19) in complaints management. As stated earlier, the main influence this is by the resource people (33 fragments). The commitment and customer focus is high within the people of Sales & Marketing. People can make the difference when it comes to customer focus. There are some differences in capability within the people, and that is the difference of hearing versus listening. People sometimes hear what the customer is saying, but listening requires extra effort because action needs to be involved. It is about taking ownership in complaints; does the organization just hear or is the organization going to listen and act upon it. According to one interviewee of Sales & Marketing: (W) People want, they are committed to it. But are we organizationally attentive towards the customer? No. Customer service is; the organization is not. Supply Chain Planning recognizes the importance of service complaints as they are part of the customer focus. Overall the customer focus has increased, but they mention that there is still room for improvement. The service complaints are getting in late at the Supply Chain Planning department. Therefore, finding the root causes on the complaints are not always easy. To solve complaints structurally and become more customer focused they note the importance of cross-functional teams. Only nine fragments were captured on attentiveness/complaints management within Manufacturing. Although the commitment of people is high in Manufacturing, the involvement in service complaints is very low. So there is no issue in the desire to be 61

62 involved, but because of the low level of involvement in the complaints customer focus is not high within Manufacturing Order fulfillment 58 fragments were captured on attentiveness/order fulfillment, mainly on the resource people (28). The score on what people thought on attentiveness is 3,2 (five-point Likert scale, n=19) in order fulfillment. The people within the Customer Service department (within Sales & Marketing) are the driving force in influencing the order fulfillment process. Commitment is a thing that is absolutely there, everybody is driven to make a difference for the customer. The constraint is in the process (i.e. restriction on urgent orders). One interviewee of Sales & Marketing commented: (X) You cannot put an extra urgent order on the list which is important for the customer. The perception within Sales & Marketing is that the customer focus fades when you go further into the value chain (departments such as Supply Chain Planning and Manufacturing). Supply Chain Planning states that the Manufacturing department has no customer visibility. A coil is a coil for Manufacturing, and they have no information on the consequences when they program a coil for an installation. In the case of incidents and customer issues, the commitment to make it work for the customer is very high. But a lot of processes are bandaids to cover up the root cause. A structural change of the organization is needed to get more customer focus. Besides that, all orders are treated equally, where they might need to be treated in a different way. According to one interviewee of Supply Chain Planning: 62

63 (Y) Manufacturing is volume driven, and not driven by orders. Further, overall choices are made in order to become more customer focused (i.e. by the categorization of customers), but these choices are not always honored within the total value chain. The commitment of the people is always there in Manufacturing. However, the customer focus is missing due to lack of customer visibility. People are capable when they have the information to be customer focused. Only in real exceptions is there a sense of customer focus (i.e. a potential line stop at an OEM customer). No visibility of delivery dates for customers also causes the lack of customer focus within Manufacturing. This has the consequence that the people within Manufacturing do not know whether they program the right material for the customer Order entry 27 fragments were captured on attentiveness/order entry, mainly on the resource people (15). The score on what people thought on attentiveness is 3,7 (five-point Likert scale, n=19) in order entry; a substantially less amount of fragments within order entry. The overall commitment from the departments Sales & Marketing, Supply Chain Planning and Manufacturing is good. The customer focus within order entry is the highest at the start of the value chain (Sales & Marketing). In the pre-order entry phase the focus is on volume and product, and less on customers. Where Sales & Marketing need to make sure the overall forecast is reliable and based on the customer needs (perceptiveness), Supply Chain Planning needs to ensure that the overall capacity is available to book the orders. Within Manufacturing only five fragments on attentiveness of order entry were captured. This is due to the fact that the Manufacturing department is almost not involved in this process. 63

64 5.5.4 Overview proposition 4 Proposition 4: the more customer focus is created throughout the departments within the supply chain, the more likely is the organization able to create high customer service quality Key Process Department Results theoretical Results actual Complaints Management Sales & Marketing Supply Chain Planning Manufacturing Order Fulfillment Sales & Marketing Supply Chain Planning Manufacturing Order Entry Sales & Marketing Supply Chain Planning Manufacturing Table 13: overview results on proposition 4 = strongly supported; = not strongly supported; = not supported; = correct on theoretical results To achieve high customer service quality, the organization needs to have customer focus in all departments in the supply chain. However, as stated in the previous paragraphs, the actual results show that the customer focus differs within the several departments of the organization. In all key processes, Sales & Marketing has the biggest customer focus. Further in the supply chain the departments have less customer focus, which is due to the lack of customer information and the fact that they are more volume driven. 64

65 6. Discussion In this section the results from the research are discussed and linked with the theoretical framework. Further, the practical implications and the limitations of the research are described, and recommendations for future research offered. The objective of the thesis was to find how firms manage their resources (people, processes and technology) in order to create high customer service quality. In the summarizing paragraphs of each of the propositions within the result section it is made clear that all of the resources have an influence on the four constructs (reliability, attentiveness, responsiveness and perceptiveness) within customer service quality. The actual results from the case study show that the organization struggles to manage their resources in creating customer service quality. In the following sections the most important insights of the research will be discussed. 6.1 People Knowledge, skills and experience are important contributors within human resource management (Kor and Leblebici, 2005). In this case study I expected that: 1) the people within the organization have built up their knowledge over the years; 2) the people have the right skills (communication, social, flexible and stress resistant) and; 3) the people are experienced. Knowledge, skills and experience combined defines the capability of the people. Further, the expectation is that the more capable people are within the organization, the more likely is the organization to achieve high customer service quality. First, the people within the Supply Chain Planning and Manufacturing departments have built a lot of knowledge and experience over the years, because the attrition level is low in these departments. In the Sales & Marketing department, it is more difficult to sustain the 65

66 knowledge and experience due to a higher attrition rate. Although you might expect to see a negative effect of the reduced knowledge and experience in the Sales & Marketing on the customer service quality, the overall score on proposition 1 shows that, in general, the people are capable in terms of reliability, attentiveness, responsiveness and perceptiveness. Second, communication and social skills are needed to create high customer service quality. Therefore, I expected the attentiveness, perceptiveness and responsiveness to be influenced highly by the people within the organization. To create high customer service quality, attentiveness is needed within all departments within the supply chain. Attentiveness encompasses two things: commitment and customer focus. The commitment of the people within all departments is high, which is reflected in the overview on proposition 1 (Table 4). The customer focus varies between different departments in all key processes. The customer focus is high at the Sales & Marketing department, but fades further in the supply chain. Therefore, I would expect a negative influence on attentiveness within order fulfillment, because this key process has the most involvement of all departments within the supply chain. However, the actual results show that there is a strong support (15 out of 19 interviewees) for the capability of people on attentiveness in order fulfillment. There is however no strong support for the attentiveness in the key process of order entry (11 out of 19 interviewees). This is related to the pre-order entry phase. In the pre-order entry phase the allocation to book the order is made. The allocation is based on product and volume, and not on customer forecast, and misses therefore the customer focus. To make sure the communication is on the desired level with the customer, the people within the whole organization need to understand what the customer needs are. This perceptiveness starts at the Sales & Marketing department, because they are closest to the customer. Where I expected the skills in perceptiveness of the people within Sales & Marketing to be at the 66

67 desired level, they vary within the different sector teams. This is also due to the relative high level of attrition which leads to a higher amount of Sales representatives with less experience. This is mainly visible in the order entry process. Because people are less experienced, they might not always be fully aware of the customer needs when an order is entered. Perceptiveness is linked to responsiveness. Understanding the customer needs and cascading this in the supply chain is necessary to create perceptiveness, and triggers the people within the organization to be responsive on customer needs. Responsiveness is not strongly supported for the key processes complaints management and order entry. On complaints management people fail in being responsive internally. Complaints are pushed towards different departments to resolve, but this process has not matured enough. Therefore, people need to make sure that the internal actions are made to resolve the complaints. The people within the organization lack capability to ensure that customer complaints are solved. Within order entry the lower score of responsiveness focuses on the order acknowledgement. When orders cannot be booked according to the requested delivery week, the communication with the customer on the deviation is too low. The people within Supply Chain Planning and Manufacturing are experienced, which is reflected in the strong support for reliability and responsiveness in order fulfillment. With the lower level of customer focus within these departments, the experience and skills within these departments can also be a bottleneck for further creation of customer service quality. They need to be instructed in a different way to achieve high customer service quality, which might lead to resistance. As a final observation, the people within the organization have, in general, the capabilities to create high customer service quality. Improvement needs to be made in customer focus and 67

68 responsiveness throughout the supply chain but the people within the organization are reliable, committed and understand the needs of the customer. 6.2 Processes Within the resource processes the expectation is that the more the processes are aligned within the organization, the more likely is the organization to achieve high customer service quality. To achieve the high customer service quality, I expected reliability to be influenced highly by the alignment of processes within the organization. As shown in Table 8 (overview results on proposition 2) the actual results on reliability differ substantially from the theoretical results on all constructs and key processes. To understand this, I will provide more insight on the historical path of the organization from the past five years. The organization was acquired by an external company in In 2008, the financial crisis appeared which had a huge negative impact on the economic environment. Since then, the organization struggles to find an optimum in the order fulfillment process between delivery performance (reliability), working capital and operating costs (see Figure 11). Manufacturing focuses on achieving low operating costs, Supply Chain Planning focuses on a low level of working capital and Sales & Marketing focuses on a high level of delivery performance towards the customer. These three different variables are currently in continuous conflict with each other, and therefore so are the different departments. Figure 11: conflicts between delivery performance, working capital and operating costs 68