Merrifield Consulting Group

Article 3.9




            Surveys covering all types of businesses report consistently weak results for quality programs. About 5% of all firms typically report breakthrough results; 20% + are still in optimistic pursuit, but not yet making compelling guarantees; but, over 60% are flagging.


            Because distribution businesses are less complicated than manufacturing, the following short-cuts should help jump-start any distribution center's TQM program.


1.      Switch “total” to “customer” quality management (CQM). Identify the most important customers' top four service needs, and then focus on the service processes that support those needs.


2.      Teach all employees the following strategic points:

      What is the company's #1 target niche of customers;

      Who are the top 5 to 10 most profitable customers within that niche. Have employees memorize their names and put pictures of the customers on the wall if appropriate. This will personalize who is paying everyone's wages.

      Identify and measure on the wall the top four or more service standards that customers value. All distribution customers want in this logical order - fill rates, zero errors, on-time delivery or performance and immediate heroic recoveries of mistakes. Beyond these standards each customer niche is apt to have one or two compelling service niche needs.

      Because employees dislike poor service in their personal lives they don't knowingly want to provide poor service on the job. Tell them why and how to score “service” and get out of the way.


3.      Consider making the temporary “service investment” to free-up a “service manager”. This job will be to-gather and post service measurements daily, rethink the order-fulfillment process to handle order surges, and to reduce errors.


            What happens every tenth day when an order surge overwhelms the order fulfillment pipeline of inside sales to data entry to the warehouse to trucks to customers? Unless the people in and outside of this process pipeline are cross-trained, pre-scheduled and precommitted to handling surges, 100% on-time delivery can not happen.


            A hint to solving this pig-through-the-python problem is that people downstream and outside the process must jump on the surge and ride it through multiple steps of the process. If you have trucks, for example, find a good trucking company to outsource some or all of the delivery to ensure that at least twice the normal daily volume can uneventfully be delivered on-time - guaranteed!


4.      Whenever an error occurs or an upset customer calls, whoever picks up the call should own it and be able to immediately solve it to the customer's stated satisfaction at least 80%+ of the time. You can't have “heroic recoveries” that will keep the customer's loyalty if you have to stall them by waiting for authorization or by passing them off to other departments.




5.      The service manager should then do a post-investigation on every mistake to determine why it happened and then change one or more of the following three factors:

      people aptitude - the wrong person is in a job slot;

      people education - they can do it, they just weren't educated to know how;

      systems rethinking - make systems as customer-friendly, fast, simple, and goof-proof as possible.

      Continuously improve personnel systems to increase the odds that the right type of person is hired for each job and then systematically trained before they are unleashed upon the customers.


6.      Before doing any of the above, grab the last three+ months of credits that were issued to customers and have a cross-functional task team code them. Assuming that a credit is issued for most customer errors, then credits divided by transactions will approximate a company-wide error rate.


            The team should decide on about 12 to 18 codes with one or more for each of the following sub-categories: customer (caused); outside sales; inside sales; data entry; warehouse; shipping; suppliers; and other. When coding, don't get bogged down over correctly coding each credit, just best guess them. We want to improve quickly and make money, not die by analysis paralysis while dreaming of the Baldridge Award.


            Identify the top three most numerous problem codes and have the service manager dig for the real causes behind them and the solutions. The quality college ideas of statistical analysis by work team is deadening for small, simple businesses like distribution centers. Stall the Deming lemmings until after these 20/80 measures are finished in a few months.


7.      If possible, generate a monthly summary report of credits issued for each sales territory. The report needs at least two columns - the credit # and the customer's name. Then, two things can be done. First, identify target customers whose names appear a lot and have the salesperson help investigate. Then, figure the ratio of credits divided by transactions for each sales territory. There may be one or more salespeople who have ratios that are 2 to 6 times the average; these rogues must be confronted.


8.      If you can capture credit codes into a customer master file, then periodically rank all customers by their credit to transaction ratio. Up to 5% of all customers are apt to be abusive or disorganized; they will be noticeably at the top of this rascal ranking report. Shape them up or tactfully nudge them to your competitor.


9.      Tune in to “Station WIIM”( what's in it for me) for all employees. Explain many times that “ Do it right the first time” economics have numerous benefits. Short-term, morale will go up because of the absence of tongue lashings from upset customers and salespeople, and measurable improvement logged on charts boosts pride and confidence.


            Longer-term, the firm will retain customers at a greater rate. Happy customers, well-sold will give you last look plus something more for distinctive service. Then annual margin dollars per employee will grow to support premium wages for each job niche. And, faster growing companies offer more job growth opportunities for everyone. The company will also improve necessary profits for reinvestment to finance growing assets to support growing sales.




            Great service is dependent upon the bottom 80% of the payroll. If these folks don't know: who the core customers are; what their top four+ service needs are; and what's in it for them, then lasting improvement will not happen.


            Besides some big picture education for the troops, we need to try simple, to scale tactics for getting basic service standards up a few notches. Because distribution managers typically have too many hats to wear, quality ideas for large manufacturing environments fail in most small, service businesses. But, quality benefits are vital, so revive TQM programs with simple, quick tactics!



ÓMerrifield Consulting Group, Inc., Article 3.9