Voice Of the Customer:
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1 International Supply Chain Solutions Voice Of the Customer: An Introduction
2 Organization of This Presentation Origins of VOC What is VOC? What does VOC deliver? What are the benefits of VOC? How is VOC done? When is VOC needed?
3 Origins of VOC? VOC originated with the recognition of three basic business truths.
4 1 Revenue enhancement has the greatest bottom line leverage of any improvements a client can make. Improvement in Operating Profit from each 1% improvement in selected operating factors for a representative* manufacturing client 3% 2.90% 2% 2.00% 1% 1.00% 0.93% 0.76% 0.60% 0.47% 0% Revenue Material G&A Mfg. OH Selling Ind. Lbr. Dir. Lbr. * Based on financial ratio analysis of twenty typical manufacturing companies. Actual client values will vary
5 Supply Chain Success Begins and Ends with the Customer Voice Of The Customer Customer Needs, Wants, and Expectations Network Rationalization Flexible Manufacturing Strategies Production Scheduling Flexible Fulfillment Inventory Planning Distribution Scheduling Activity -Based Costing Quick Response Suppliers Inbound Manufacturing Transportation Warehousing Delivery Logistics Salesforce Planning Integrated Micro- Marketing Total Customer Satisfaction Forecasting Electronic Data Interchange Vendor Managed Inventory Palletization, Bar Coding Net Landed Cost Customer Service Process Redesign Accurate, in-depth knowledge of the needs, wants and expectations that drive customer decision making is essential to achieving total customer satisfaction.
6 Resources are not unlimited Companies need to prioritize their efforts and allocate scarce resources to concentrate on the most important initiatives
7 What is Voice Of The Customer?
8 VOC (Voice Of the Customer) is a proven methodology for quickly and economically determining, ranking and quantifying the needs, wants, and expectations that drive customer decision making. VOC supplements a client s internal market research and customer satisfaction monitoring efforts.
9 VOC also yields important additional information, including: customer ratings of client performance, and the performance of competitors gaps between client perceptions and those of its customers best practice benchmarks trends and emerging expectations improvement suggestions VOC is also effective with suppliers and within client organizations.
10 What Does the Client Get From a VOC Survey? 1. Ranked Customer Expectations & Metrics 2. Customer Perceptions of Performance 3. Trend Analysis 4. Supply Chain Process Flow Analysis 5. Gap Analysis - Customer Expectations Vs. Performance 6. Gap Analysis - Customer Perceptions Vs. Client Perceptions 7. Customer Quotes
11 The primary deliverable of a VOC survey is a rank ordered list of customer expectations and their associated metrics. End User Expectations from Distributors Place Heavy Emphasis on Delivery Speed and Reliability Delivery Importance POOR FAIR GOOD EXCELLENT REMARKS Core Order Cycle Time 5 >24 Hrs 8-24 Hrs 4-8 Hrs 2-4 Hrs Bulk of purchases Items Order Fill Rate 5 <98% 98-99% % 99.5% distributor to On Time Delivery 5 <98% 98-99% % 99.5% keep in inventory Standard Order Cycle Time 5 >48 Hrs Hrs 24 Hrs <24 Hrs Stock items delivered Items Order Fill Rate 5 <97% 97-98% 98-99% >99% from distributor inven- On Time Delivery 5 <95% 95-97% 98-99% >99% tory or drop shipped Special Order Cycle Time 3 As stated in distributor catalog. Special order and Items Order Fill Rate 3 <90% 90-95% 95-97% >97% custom made items On Time Delivery 3 <80% 80-90% 90-95% >95% Other Factors Cost/Price Product Price 5 Cost reduction is a Transaction Costs 5 major driver Product Line Breadth of Catalog 5 Looking to sa tisfy all requirements from 3rd Part y Purcha sing 4 one source Technology/EDI Electronic Catalogs 4 On Line Catalog Interactive CD ROM Objective = fully automated, Automated Ordering 5 instantaneous system Paperless Transaction 4 throughout supply chain Technical Assistance Distributor Sales Force 3 Access to Manufacturers 3 Importance: 1=low 5=high Exhibit taken from actual VOC report
12 Customer perceptions of client and competitor performance versus expectations provides important insights to opportunities and threats Kimble is Perceived to Lead Corning in Relationship Related Areas, But to Lag Corning in Performance Related Areas Delivery Importance POOR FAIR GOOD EXCELLENT REMARKS To Order Cycle Time 5 K C Distributors compen- Inventory Order Fill Rate 5 K C sation with higher On Time Delivery 4 CK Kimble inventories. Drop Order Cycle Time 5 K C Corning Express Shipments Order Fill Rate 5 K C program = strength. On Time Delivery 5 K C Special Order Cycle Time 4 K C Corning Manufacturing, Orders Order Fill Rate 5 K C flexibility viewed On Time Delivery 5 K C as superior. Other Factors Cost Gross Margin 5 CK Inventory reflects Inventory Level 4 K C order cycle time Transaction Costs 4 CK and fill rate. Products Quality (Complaints) 4 CK Line Breadth 3-4 C K Kontes = Differentiator New Product Dvpt 3 K C Service EDI/Systems 5 K C Sales Support 1-4 C K Marketing Support 4 C K Information 4 K C Relationships 4 C K Importance: 1=low 5=high Consensus Ratings of Kimble K and Corning C Exhibit taken from actual VOC report
13 Trend analysis is used to illustrate how customers expect their wants, needs and expectations to evolve. Minimum Requirements Advanced Requirements Customer Performance Expectations are Becoming More Rigorous. PAST PRESENT FUTURE day del. to inventory Inventory level days day delivery of drop shipments 85%-90% fill rates Specials within 3-4 weeks 4-10 day del. to inventory Inventory level days 60% of sku s drop shipped 4-10 day delivery of drop shipments 90%-95% fill rates Specials within 2 weeks Order processing EDI capabilities 4-10 day del. to inventory Inventory level days 60% of sku s drop shipped 4-10 day delivery of drop shipments 90%-95% fill rates Specials within 2 weeks Order processing EDI capabilities 48 hr. delivery to inventory Inventory level days 80% of sku s drop shipped hr. delivery of drop shipments. 95%-99% fill rates Specials within 1 week Full EDI capabilities 48 hr. delivery to inventory Inventory level days 80% of sku s drop shipped hr. delivery of drop shipments. 95%-99% fill rates Specials within 1 week Full EDI capabilities Supplier managed inventory Inventory level <20 days 90%+ of sku s drop shipped hr. delivery of drop shipments 99.5%+ fill rates Specials within 48 hours. Totally electronic transactions & info. exchange. Exhibit taken from actual VOC report
14 Supply Chain Process Flow analysis can highlight critical capability and performance needs in a changing environment Key Trends in the Science Products Supply Process Elimination of direct purchases Very rapid delivery of basic items Distributors inventory only basic items Drop shipment (cross docking) of all other items Paperless transactions; high level of automation Rapid response throughout the supply chain The Science Products Supply Process is Moving Toward Increased Drop Shipments by Manufacturers with Rapid Response Supported by Electronic Data Interchange Place Or ders (E DI) Enter Receiving Info Electronic Match Pay Invoice ( EFT) End User Distributor Manufacturer Receive Basic Items (1/2-1 day) Receive Standard Items (24-48 hrs) Receive Specials (3-10 days) Sort Or ders St andar d & Speci al It em s Enter Shipping Info Invoice End User (E DI) B asic It em s Receive Shipping Info Recieve Shipping Info - 9- Pick Pack S hip (2-4 hr s) Receive Restock Cross Dock Cross Dock Determine Restock Needs Enter Shipping Info Enter Shipping Info (E DI) Pick, Pack & Ship Restock St andar d It em s Sort Or ders Pick, Pack & S hip ( 2-4 hrs) Manufacture Special (1-5 days) Ship Specials ( 2-4 hrs) S pecial It em s Enter Inventor y Order Manufacture for Inventor y -10- Exhibit taken from actual VOC report
15 Customer perceptions of gaps between expectations and client performance help to illustrate strengths and weaknesses. Client is viewed as strong in many higher level currencies for supply chain leadership, but weaker in several basic currencies High Level Currencies Cooperation Responsiveness Sales Force Marketing Relationships IT capabilities Tech. Support WEAK FAIR GOOD EXCELLENT Basic Currencies Size, Mkt. Share Line Breadth Product Quality Del. to inventory Drop Shipments Specials Product Prices Transaction Costs Exhibit taken from actual VOC report
16 Analysis of differences between customer and client perceptions helps to correct misconceptions. Customer and Supplier perceptions show important differences. Unimportant Somewhat Important Importance Important Very Important Critical On Time Delivery Honesty, Openness Accuracy, High Fill Rates Good Communication Partnership Relationships Customers Say client Believes Quality Products, Free of Damage Low Cost
17 Quotes* serve to clarify and drive home customer concerns and attitudes. s challenge is their operating systems. Their systems suck! Their sales force is a major strength. It is important for them to continue to work with the whole supply chain. Their sales force is worse than useless! Their field service people are great, but we see them far too often. Their product quality is outstanding, but the best equipment on the market can t make use of even 1/3 of it. The separation - the different faces they present to the market - cuts their own face. Maybe they can get away with it, but I would figure a way to provide a united front. * Examples taken from actual VOC reports
18 What are the Benefits of VOC?
19 Hearing and heeding the Voice Of the Customer enables clients to focus on what is most important to their customers, thereby increasing revenue in addition to reducing costs.
20 4.2% 17.6% 3.5% 14.3% 8.6% 8.0% 3.3% 19.5% 11.8% 18.8% CUSTOMER REQUIREMENTS Reduce Set-up Time Planning & Scheduling Manufacturing Productivity Finished Goods Distribution Inventory Management Supplier Partnerships New Product Development Equipment Development Organization Integration Order Management IMPORTANCE SATISFACTION TO-BE PLAN IMPROVEMENT FACTOR SALES POINT ABSOLUTE WEIGHT DEMANDED WEIGHT VOC findings help clients to prioritize improvement opportunities and allocate scarce resources. CUSTOMERS DIRECTION OF IMPROVEMENT HOW s Customer Requirements and Priorities WHAT s Quality PRODUCTS Line Breadth New Products DROP SHIPMENTS Drop Shipments Speed ORDER FULFILMENT Completeness Accuracy Low Product Prices COST CONTROL Low Transaction Costs Inventory Management % % % % % % % % % % SERVICE RELATIONSHIPS EDI/Systems Sales & Marketing Cooperation Communication Responsiveness % % % % % TECHNICAL IMPORTANCE ROOF MATRIX WEIGHTS ARROWS Strong Pos Strong 9 Maximize RELATIVE TECHNICAL IMPORTANCE Positive Negative X Medium Weak 3 1 Minimize Nominal Strong Neg# QFD* to prioritize effort and allocate resources *QFD is a feature selection tool widely used in product design and development.
21 4.2% 17.6% 3.5% 14.3% 8.6% 8.0% 3.3% 19.5% 11.8% 18.8% CUSTOMER REQUIREMENTS Reduce Set-up Time Planning & Scheduling Manufacturing Productivity Finished Goods Distribution Inventory Management Supplier Partnerships New Product Development Equipment Development Organization Integration Order Management IMPORTANCE SATISFACTION TO-BE PLAN IMPROVEMENT FACTOR SALES POINT ABSOLUTE WEIGHT DEMANDED WEIGHT Prioritization and Resource Allocation is a Five Step Process Step 4 Estimate Relationships Between Opportunities and Customer Requirements Step 1 Enter Customer Requirements from VOC Survey DIRECTION OF IMPROVEMENT WHAT s PRODUCTS DROP SHIPMENTS ORDER FULFILMENT COST CONTROL SERVICE RELATIONSHIPS HOW s Quality Line Breadth New Products Drop Shipments Speed Completeness Accuracy Low Product Prices Low Transaction Costs Inventory Management EDI/Systems Sales & Marketing Cooperation Communication Responsiveness % % % % % % % % % % % % % % % Step 3 Enter Improveme nt Opportuniti es Step 2 Assess Customer Requirements to obtain weighting factors TECHNICAL IMPORTANCE RELATIVE TECHNICAL IMPORTANCE ROOF MATRIX WEIGHTS ARROWS Strong Pos Positive Negative X Strong Medium Weak Maximize Minimize Nominal Strong Neg# Step 5 Determine Weighted Importance of each Opportunity
22 Additional Benefit VOC frequently identifies critical opportunities, threats and decision drivers that other methods have failed to identify.
23 Some Real-life Examples From Actual VOC Surveys An industrial imaging client discovered that its long standing quality improvement efforts had resulted in resolution capability in its film products that exceeded by several times the resolution capabilities of the best cameras and readers available, and had long since ceased to be a competitive advantage. A medical equipment manufacturer discovered that while its prized field service force was universally rated outstanding, customers saw their field service representatives far too often because the equipment was constantly breaking down. A chemical client who learned that many of its key customers regarded its sales force as worse then useless, also learned what those customers felt could be done to make the sales force valuable to them.
24 How is VOC Done?
25 VOC is most effective when done by an outside party A client s customers will tell outsiders things they will not tell the client! Customers will often tell an independent third party (who can guarantee anonymity) things they would never say to supplier people. Outside professionals have highly developed interviewing skills that client personnel typically have neither the need nor the opportunity to develop. Outside people are objective: they do not have the years of client/industry focused experience that often leads client personnel to interpret what they hear in ways that fit what they already know.
26 There are Ten Steps in a A comprehensive, in-depth, in-person VOC survey of 8 to 10 targeted respondents should take 4 to 5 weeks to complete. Preliminary issue identification Target respondent identification Target respondent notification Interview Guide preparation Interview scheduling Sales force interviews Customer Interviews Interview documentation Follow-up VOC Report preparation VOC Survey Week 0 Week 1 Week 2 Week 3 Week 4 Each VOC survey is tailored to the unique needs and situation of each client
27 Preliminary Issue Identification helps to insure that important issues, concerns and perceptions are not Steps include: overlooked. Interviews with key managers and others who have knowledge of the client and its customers to identify their issues, concerns and perceptions Literature search on the client and its market Conversations with knowledgeable individuals in BDO Seidman and the industry.
28 Target Respondent Identification is done in conjunction with client Sales and Marketing executives. Client managers who know their customers can ensure cooperation and a representative sample Sample should cover all major market and customer segments. Target 3 to 6 completed interviews per segment, if possible To get 3 to 6 completed interviews it is usually necessary to identify 6 to 8 target respondents Identify the key person to talk to in each target customer Management should provide contact name, title, phone, address and a brief synopsis for each target respondent Identify client sales persons to interview at this time also
29 Target Respondent Notification by client executives to gain their cooperation is crucial to VOC success. Client executives can get through to their customers and secure their participation better than anyone. Client management should speak to each target respondent (Customers and client sales personnel) to secure their agreement to be interviewed They should provide each target respondent with the following information. The nature of the effort Why they are being asked to participate Who will be calling them What they can expect in terms of: Time commitment Topics to be covered Confidentiality
30 Interview Guide Preparation is an ongoing task It begins before preliminary issue identification and extends throughout the survey. A draft interview guide is prepared and reviewed with client management before meeting with target respondents. Customized versions of the basic interview guide are prepared for each major respondent group (e.g.: Sales Force, OEM Customers, Distributors, etc.) to focus on their unique circumstances Interview guides are reviewed after each interview and refined to reflect new issues, information and insights
31 Effective Interview Scheduling is essential to insure that respondents are prepared and will give the necessary time. Respondents should be phoned by the interviewer ASAP after consenting to be interviewed. The interviewer should make sure they fully understand what is being done, why, and what they should expect during the interview. Focus on the objective of improving service to customers. Assure them of total confidentiality. Be sure they understand the time commitment Accommodate their preferences. Interviews should be confirmed 24 hours before the scheduled time and rescheduled as necessary
32 Sales Force Interviews are valuable preparation for customer interviews and for identifying gaps in perceptions. Sales Force interviews should be conducted as early in the interviewing process as possible, but after executive interviews. Whenever possible, the sales person responsible for a targeted customer should be interviewed before the customer. Establish baseline of sales person s perceptions Identify customer specific issues, if any Get additional customer background information Surface and deal with concerns and questions
33 Customer Interviews are the core of VOC Some useful guides for conducting customer interviews include: Surveys If you re going to be even a little late, call, explain, and reschedule if necessary. Arrive 15 minutes early for in-person interviews; call on-the-dot for telephone interviews Reconfirm that this is still a good time if not, reschedule, even if you ve just flown 3 hours to get there. Make sure all the respondent s questions are answered Ask general, open ended questions first; listen carefully Strive for understanding, not just information Probe to get at root causes and drivers of behavior Use feedback to verify understanding
34 Some useful guides (Continued): Be alert for sensitive areas and avoid them, even if it means skipping parts of the interview guide. Take copious notes Honor time commitments Keep track of the time and let the respondent know when approaching the agreed limit Be prepared to go longer, but only with the respondent s consent Ask for permission to follow-up by phone if necessary Thank respondents for their help Always remember that respondents are doing us a BIG favor by taking their valuable time to talk to us.
35 Interview Documentation is a critical task. Hand written interview notes should be transcribed ASAP to: minimize misinterpretations and information loss incorporate unrecorded details and insights before memory of them fades re-enforce learning Complete sentences and the respondent s own words should be used as much as possible to facilitate later extraction of quotes and other report inputs. Use a clean copy of the interview guide to facilitate organization, data entry and subsequent analysis Completed documentation should be backed up on disk so that it is available to others
36 Follow up can enhance the survey s value. Note major discrepancies and inconsistencies (if any) in interview notes, and frame clear questions to get clarification. Phone respondent within a day or two to get clarification apologize for the inconvenience keep it short express thanks for the additional help Make any indicated changes to the interview guide Send a brief thank you letter to respondent
37 Report Preparation begins early and continues throughout the survey. A tentative outline and format should be established as soon as key issues have been identified. Tables of customer expectations should be structured to facilitate incorporation into QFD Be alert for: differences between client perceptions and customer realities things others are doing that customers value trends; where customer expectations will be in 2-3 years AH-HA! insights Conclusions should be supported with customer quotes wherever possible.
38 When is VOC Needed?
39 Indicators of a need for VOC Dissatisfaction with current revenue, profitability and/or market share. Strategic and/or tactical planning uncertainties. Uncertainty as to which improvement efforts to tackle first. Ineffective Marketing, Sales, and/or Customer Service.
40 Summary
41 Summary VOC is a proven methodology for quickly and economically determining, ranking and quantifying the needs, wants, and expectations that drive customer decision making. VOC delivers in-depth insights into the factors and metrics by which customers evaluate their suppliers, and their perceptions of client and competitor performance. Hearing and heeding the Voice Of the Customer enables manufacturers to focus on what is most important to their customers, thereby increasing revenue in addition to reducing costs. VOC frequently identifies critical opportunities, threats and decision drivers that other methods have failed to identify. VOC is most effective when done as a joint effort by the client and an experienced, outside specialist. VOC is indicated whenever a client is contemplating a major change effort or facing significant business issues.
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