Most of us are familiar with service quality, aka customer service, in how we encounter every day life. Did we get that double mocha from the barista the same way and at least as fast as last time? Did the grocery bagger put the right things in the right bag quickly? Did the server bring the ketchup with the fries or after you asked her? When you are an original equipment manufacture in New England, the questions might sound more like “Will they still delivery on-time despite the blizzard?” or “Will they send their quote before Patriots Day?” But seriously, how does service quality apply to a sheet metal fabricator like ETM Manufacturing?
Not naturally, is the quick answer. When I first bought this company almost 10 years ago, the management team assured me that the whole industry had spotty on-time delivery because volume fluctuated so much. This was confirmed when I talked with our customers and after talking with my new management team. Some customers even admitted they had 1 or 2 buffer weeks built in to their schedules for sheet metal suppliers. And we do fluctuate – almost 4x in 2 months this year already.
A solution came to me indirectly from a book called “The Good Jobs Strategy” from a local professor that our Director of Operations, Jonathan Bowen suggested to me. We were trying to solve the problem of how to better care for our employees, particularly the ones that had topped out in their pay scale. The professor, Zeynep Ton, had opberved model retailers with their fluctuating demand and how they had solved the problem of great customer service levels no matter what the demand. Plus their workers were paid well above the industry average and their profits were amazing.
How do they do it? Most retailers (and manufacturers) add people when demand picks up and reduce workers when demand is slow. The fluctuating work hours makes it difficult to attract the best employees. Management also gets capacity planning wrong; some times they look at revenue when they should look at hours of work or some times the lack of workers reduces revenue which has them cut labot more. The model retailers overstaff planning for more business. If it comes, they are prepared and if it doesn’t come, they cross train, clean and count.
How can they be profitable with all this “wasted” labor? First if the labor is ready when demand surges, more customers will be satisfied and return to buy more. Second, if demand stalls, workers who elect to go get a chance to do that. Others get a chance to learn a new skill or perfect their own craft. This added skills makes them more valuable when the next surge comes (and more efficient). Instead of losing money on lots of overtime, the are investing money in training, cleanliness and stock accuracy to make them more profitable from that day onward.
Why doesn’t everybody do this? The real question is how much “extra” labor do you add before the ROI on customer service drops? Many managers in retail and manufacturing have added extra labor only to see stock clerks playing games in the warehouse or sheet metal workers slowing down to fill the entire shift. I think it starts with a strong management team that is on top of demand fluctuation and has a well defined improvement plan when demand stalls. That is clearly our approach as we work on making 2016 our best year ever.
from ETM Manufacturing http://etmmfg.com/3670
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