Steve Twydell of transport management company 3T Logistics looks at the issue of over and under serving clients in the logistics industry.
Servicing customers efficiently is a delicate balance of allocating the right number of staff and resources to the process whilst remaining financially viable. It’s also crucial to the success of any business involved in the logistics industry.
If customers complain that they are receiving inferior levels of service, or that services are being missed, many companies take the short term approach – muddling through and trying to persuade the customer to stick with them. They may also promise that at some stage in the future they will allocate more resources and make it all OK – a strategy that rarely works long term.
The root of the logistics problem
If you feel you have a real customer service issue, the only solution is to take a long, hard look at your business model. In my experience, 99.9% of business problems are generic. As the recession hit in 2008, the service industry caught the brunt of the panic and mayhem infiltrating the economy. As companies started to contract, frontline staff came under enormous pressure to increase productivity – whether it was possible or not. Furthermore, many companies cut resources and workload increased. Having experienced the problems first hand, I can personally testify to the dramatic rise in levels of stress and anxiety involved in servicing clients that the recession caused.
Ultimately, underservicing is a serious issue and fundamentally a breach of contract, but the reality is that someone cannot do more than they are physically or mentally capable of. With customers demanding more activity and increased value for money as their own margins are squeezed, some companies feel they have to take on tasks that they are not contractually obliged to do. Prior to 2008 the logistics industry was considerably more relaxed: if you were doing a good job for an organisation, and as in our case, you were creating savings and efficiencies, everyone was happy. The measurement of success was less detailed and more of an instinctive feeling.
The need for logistics measurement
Today, intangible measurements have been replaced with strict, structured KPIs and black and white numbers. Did you achieve this? Did you achieve that? Furthermore, these black and white performance indicators often suggest that businesses are not always doing the exact job that they should be doing. As a reaction, many companies in the service sector have gone down the path of over servicing their clients at the same time as under servicing in other areas, resulting in what I call the rectangle in the square (as per the diagram below).
The green rectangle represents agreed contract services; the overlaying orange rectangle, which produces the square, is the services that are being provided. In most cases this rectangle is bigger than the original rectangle. The non-overlapping areas on the left and right indicate under servicing and over servicing. Of course, any good company should go the extra mile for its customers. However, if you are losing money by providing the normal service you have sold, either your business model is wrong and, there is a fundamental structural problem in your business, or you are doing exactly what most companies have done during the economic crisis: over and under servicing.
The perception of blame
So, once you understand the concept, how do you fix the problem? In our case, in initial discussions, the problem was generally considered to be the customers’ fault. The common view was that we were over servicing clients so they should pay more. However, that would have been unacceptable to our clients who were dealing with their own problems. What many people failed to see was that if we said we wanted more money for doing more, the client could then actually challenge us for not doing the work that we were supposed to be doing in the first place.
Our approach was to ask the question ‘What do we do exactly, regardless of what’s written down in our agreements?’. This really struck a chord as it proved to be the crux of the issue. There was no clarity for our customers or amongst ourselves as to exactly what we were providing, so we began to implement a programme to address this.
Finding a solution
We started by recording what we were doing. Then, for every contract we wrote down exactly what we were supposed to be doing. We also went back to customers’ contracts and agreements and discovered that many of the structural operating plans and agreement plans were out of date and drastically different from what we were actually doing.
This process wasn’t just about getting agreement with customers, but across staff and departments. In fact, the process revealed that many staff held the view that the solution was just to charge the customers more. There was no clarity in their understanding of what their responsibilities really were and what they were supposed to achieve.
We created clarity with the customers by rewriting our agreements and restructuring them so that they understood what we could and could not do. We also had to make sure that all of our employees knew exactly what they should and should not do, creating more precision within job descriptions and their understanding of what was right and wrong within the business.
As we manage numerous carriers, it was also important to have transparency and agreement to ensure that they understood what they should and should not undertake. This involved going through their agreements, ensuring that all parties understood the process and what the implications were if the process was not adhered to.
Once you have established clarity with all the relevant parties, the key is ensuring compliance. If you understand what you are supposed to do as an employee; if the customer understands the service they are being provided with; the carrier understands the service expected of them and what is agreed, the focus shifts to ensuring compliance.
Whilst resolving business problems can be simple in theory, in practice, managing human beings is often more of a challenge. Depending upon the size of your organisation and how it has evolved, the organisational culture/structure can have a major impact on both clarity and compliance. In some organisations, people assume several different roles, whilst the functionality of each department may not have been looked at for several years, in which case, you may find that there are activities in particular departments that really should be in others. This exercise often highlights mis-functionality, necessitating a realignment of roles and responsibilities.
This may be simpler than it sounds, as in my experience people are often reluctant to relinquish responsibility, even if it is the wrong job, in the wrong department. The functionality process flushes out the capability of employees within an organisation – which can be an emotional process as it involves examining people at all levels, questioning if they are the right individuals to do their jobs. Do they have the requisite capabilities, and if they do not, can they be trained? Are they the right fit for the organisation and role? When you understand what people are supposed to be doing, you have a much clearer benchmark to measure their capabilities against. It is also easier to agree a framework or a process to get that person to the relevant level.
As with the solution to most problems, the theory is the easy part; the doing less so. However, the issue of customer service is crucial to get right. It’s also an issue that every business in the service industry has to face as failing to deal with the consequences could be fatal for your business. So, make clarity your focus, and with the right guidance, pretty much everything else will flow from there.
About the author
Steve Twydell is the CEO of 3T Logistics Holdings Limited, and has over 25 years of experience in the logistics industry working for Ryder, DST Dixons and Harrods. 3t Logistics is a transport management company helping organisations reduce their transport costs and increase control of their supply chain. For more information contact Steve via email at firstname.lastname@example.org.