A New Look at Measuring Customer Service
by Jon Schreibfeder

A common measurement of the performance of your stocked inventory is the customer service level. It measures how often you have the items you've committed to stock when your customers want them. The customer service level is calculated with this formula:

Number of line items for stocked products shipped complete by the promise date
Total number of line items ordered

Notice that we're measuring line items shipped complete – that is, when the entire quantity is delivered on or before the promise date listed on the order. If the customer orders ten and we ship ten, we get credit toward the customer service level. But if the customer orders 25 and we only ship 24 before the promise date, we get no credit.
 

Why no partial credit for shipping 24 out of 25 pieces? Well, if the customer the customer wanted 24, they would have ordered 24. They wanted 25!
 

The customer service level measures how often we have the products we've committed to stock, when our customers want them. But does a high customer service level guarantee a satisfied customer? Not necessarily. Consider one of my recent experiences:
 

I ordered a small bookcase from a prestigious (i.e. expensive) mail order company. The phone clerk told me the item was in stock and that I would receive it in five to seven days. Three weeks went by and the bookcase didn't arrive. I called and was told that bookcases are shipped by moving van, and I should have been quoted three to four weeks delivery, not five to seven days. The bookcase eventually arrived, but it was badly damaged. The shipping box did not contain adequate packaging. I called and was told that another bookcase would be sent right out. Two days later, I didn't receive a replacement bookcase – I got a box of file folders! I made more phone calls. Nine weeks after I placed the original order, I finally received what I ordered.
 

I'm sure everyone reading this article has had similar experiences. Even though the item I wanted was in stock when I placed my order, the company did not deliver what I expected, and I was disappointed. Considering the manpower and freight expense necessary to correct the multiple errors, the company obviously lost money on the sale. And worse, they lost a customer! Do you think I'll ever order another product from that company? Not unless I need more examples of poor customer service for future articles.

What bothered me more than anything else was the "band aid" approach the company took toward solving the problems I encountered. Each time I called, I felt their representative was trying to get me off the phone as quickly as possible. They made no attempt to ensure that these problems would not reoccur in the future. How do I know?

• Two weeks after the promise date, when I called to check on delivery, I was told "those guys quote five to seven day delivery for all items, no matter how long it actually takes to get there."

• When I reported the original bookcase as damaged, they didn't ask what was wrong, the clerk just said in an exasperated tone, "we'll get another unit out to you."

• When I called to say that I got file folders rather than the bookcase, the first words I heard were, "you know you'll have to return those folders or pay for them."

• Only after a strong letter to the president of the company did I receive a note from a customer service supervisor saying that, as a concession for my inconvenience, they wouldn't bill the shipping charges for all of the shipments.

Sure, this is funny. You're probably laughing. But how often have you disappointed one of your customers? Could they tell the same type of story about their dealings with your company?
 

To remain competitive today, you need to expand your definition of customer service. Just having the material they want available in your warehouse is not enough. You must measure how often a customer is not satisfied with the products or services you deliver and the reason for their displeasure. Unfortunately, your customers won't always tell you when they're disappointed. So when they do report problems, you must treat the information they give you as valuable data. Capture this information and dissect it! Determine what went wrong, how you can correct the situation to the customer's satisfaction, and what you can do to prevent the same problem from reoccurring in the future.
 

To record and analyze reports of customer service failures, enter every customer-reported problem in a Customer Service Failure spreadsheet. Here is an example of the spreadsheet used by one of our clients:
 

Problem types fall into eight categories:

Problems typically are reported by a customer to your customer service, accounts receivable, inside sales, or outside sales department. It is imperative that each problem and its resolution are accurately logged. The verification column lists when the customer was contacted to ensure that the problem was resolved to their satisfaction.
 

Are we recording problems just looking for people to blame? No. We are trying to identify employees who need additional training as well as ways in which our current systems can be improved. If a malfunctioning system isn't improved, the same problem will occur over and over again. To fix a problem, we need to identify the actual reason a problem occurred. For example, type 2 problems (customer receiving the wrong product) might be caused by:

• The picker pulling the wrong product.
• The inside salesperson listing the wrong product on the order.
• A misprint in your catalog.
   

If we just yell at the picker every time a product is shipped in error, we probably won't correct the actual cause of the problem.
 

Our goal is to continually reduce the number of failures reported each month as a percentage of the total number of orders received and filled. How successful can your company become? One company using this type of measurement now records three problems per 10,000 orders (.03%), which translates into a customer service success percentage of 99.97%! And they continue to try to improve!
 

You can't improve the service you provide customers unless you carefully analyze your failures. Review each customer service problem with the appropriate individuals and departments. Disappointing a customer is bad. Not taking corrective action to ensure that similar disappointments don't reoccur threatens your company's future.

 

©1998, Effective Inventory Management, Inc., 722 South Denton Tap Road, Suite 206, Coppell TX 75019. All rights reserved. This article may not be reprinted or reproduced, in whole or in part, without the expressed written permission of Effective Inventory Management, Inc.