The Need for Speed: How Customer Communications Puts Time on Your Side
Donlon, J. P., Chief Executive (U.S.)
The drive to deliver new products and services and to respond to a changing marketplace with the least delay has become business' equivalent of breaking the four-minute mile. Companies that recognize the value of quick response time can achieve astonishing and powerful results even if their product or service is not appreciably different from that of their competitors. Quick response time yields speed and flexibilitysomething for which many customers are willing to pay a premium. It also collapses internal decision cycles. In short, a combination of communication, technology, and organizational flexibility can allow CEOs to make better strategic product and market decisions. Using customer communications intelligently can maximize opportunity. To do so, however, one must be able to gather the right information from the customer, use it to analyze the impact of the challenge at hand, and act on it immediately.
Time, as Einstein pointed out, is relative. For a carmaker or an electric utility, time to market is normally measured in years. Cosmetics companies may measure rollout in months. Many banks and financial-services companies promise mortgage financing in weeks, and most loans in a single day. But in transportation, retailing, and services, response time is measured in minutes. Long lines, for example, are the bane of air travelers' existence-and a constant source of complaint. British Airways needed to shorten its check-in time and speed up cargo delivery. Using hand-held computers and wireless data devices, desk agents now can confirm reservation status, assign seats, process baggage, and even issue boarding passes on the spot to priority passengers waiting on line. By liberating priority passengers from long waits, the carrier has boosted its priority business 6 percent a year. BA also uses the technology to expedite fuel and cargo loading and to monitor maintenance and repair.
Instant communications technology also came to the rescue for Pepsi-Allied and Pepsi Pensauken Bottlers in managing their delivery and stocking of orders of Pepsi, Schweppes, Dr. Pepper, and Evian to food chains in 35 counties extending across Massachusetts, Connecticut, and New York State. Pepsi had been experiencing bottlenecks, frustrating its ability to distribute effectively. Often, many sales reps would call in orders from the field, tying up phone lines and creating delays in the ordering process. (Most orders came in during the afternoon, requiring trucks to be loaded at night.) Using wireless communication, orders now are collected in real time as they occur at the point of sale. As a result, Pepsi has saved up to two hours a day, giving it 25 percent more time to merchandise product at stores and to service more retailers.
In the following roundtable, held in partnership with RAM Mobile Data, CE asked participants how they employ customer communications to improve their ability to add value to their activities. For Physicians Sales & Service, for example, delivering medical supplies on time is critical. Stock shortages require immediate substitutions, and delivery delays demand instant resolution. PS&S equips its hundreds of sales representatives with laptop computers to check inventory levels; calculate prices, profits, and commissions; place orders; and confirm delivery-all at the customer's office. Cobra Electronics' Jerry Kalov pointed out the importance of getting point-of-sale information to a midsize consumer electronics firm competing with giant Japanese and Korean producers. Unfortunately, he says, most retailers "just do inventory control."
Although most companies are attracted to communications technology in order to reduce cost or to speed delivery, the true strategic advantage comes when they can use the instantaneous information to customize one product or service. But to do this, information must be converted to knowledge and followed by action. As PS&S' Patrick Kelly says, "Technology isn't the problem. It's the ability to find the right people to interpret and apply it to your business."
-J.P. Donlon UPWARD MOBILITY
William F. Lenahan (RAM Mobile Data): Mobile communications aims to give companies an automation tool that allows them to be more effective in front of their customers. Simply put, that means moving business processes closer to the customer. For most companies, this affects their socalled "mobile workers"-service people, salespeople, and anyone else touching customers. I'd like to look at some reallife examples of how companies are successfully utilizing the concept of mobile workers to more effectively satisfy their customers.
For example, GE's appliance division introduces about 300 new models a year and has 2,000 technicians to service them. If your GE refrigerator breaks down, you call an 800 number. The service representative transmits the call over the wireless network to a laptop in a GE vehicle in your neighborhood, giving the technician your address and information about the appliance, such as whether it's under warranty or covered by a service contract.
After finding that your refrigerator needs a part, the technician punches it into his computer, which tells him the part is in his truck. He installs the part and hits a button on the laptop. automatically updating both the truck's inventory and central inventory in Louisville, KY. If the part isn't available, he queries central inventory, which immediately starts the replenishment process, and the part is delivered to his vehicle the next day.
As a result of this time-saving technology, technicians can make one and half more service calls a day. But GE wasn't satisfied with that, so it added to the laptop a "point-of-sale transaction device" that authorizes and processes a customer's credit card in fewer than six seconds, giving GE its payment right away.
But the real return on investment stems from the fact that the technicians instantaneously can relay information on malfunctioning parts back to the manufacturing plants. Thus, they can prevent many service calls by solving early parts problems at the manufacturing level.
Another mobile communications user is food distributor Sysco Corp. Sysco has 6,000 salespeople around the country who call on 245,000 restaurants, hotels, and hospitals for food service. The representatives have laptops and take orders all day long. At the end of the day, they download the orders to the central computer. The purchasing people make sure they have the food in stock, then work two shifts, overnight, to load the trucks, so they can deliver the orders the next day.
Pretty efficient process, right? The only problem is that the salespeople have to stop taking orders at 3:30 p.m. and find a phone to call in the orders to be downloaded and processed. However, if Sysco gets the orders processed after every call via a wireless transmission, orders taken in the morning could be picked up, packed, and delivered that afternoon, rather than the next day. That means sales reps could sell eight hours a day, instead of wasting two hours dealing with the processing business.
The idea is to move the business process to customers' locations, giving them increased satisfaction because they're getting confirmation of their orders on the spot. Ultimately, of course, this means more than just changing how mobile employees work. It means rethinking packaging and distribution, and how communication is handled at the headquarters and manufacturing levels.
WHO BENEFITS? Arnold B. Pollard (CE): What businesses have the greatest opportunity to leverage this technology, but also the most to lose if their competitors do it first?
Lenahan: The transportation industry is one candidate. Everyone wants their products delivered quicker and cheaper. Trucking companies such as Yellow Freight, Viking, and Transmodal have to figure out how to get products delivered in a more efficient time frame.
The financial world also could benefit In the financial marketplace, applications enable us to trade stock via laptop computers. You can be tied in with your broker and make the transaction from anywhere. You can go to the top of the New York Stock Exchange, make a transaction, and confirm within 10 seconds the stock price and the fact that you just bought or sold it.
Mortgage transactions represent another major opportunity. Bank of America is about ready to roll out a major project, whereby a bank rep can sit in a customer's home, fill out a credit application, get the credit rating approved on the spot, and have the mortgage rates downloaded and locked in immediately.
Harvey B. Mackay (Mackay Envelope Corp.): Real estate seems to be another industry that could benefit from wireless communications, but it doesn't seem to be happening. Why is it so tough to crack? Lenahan: The biggest problem is that many realtors are not accustomed to using laptops and automated devices. The second problem is that multiple listing services differ from market to market. The databases are different and difficult to access. To wirelessly enable each of those multiple listings is a big project. But the payoff can be worth it, because real-estate agents can get the price and all the statistics on a house via laptop as they are sitting in front of it with a customer. That's a great way to shorten the sales cycle. Patrick C. Kelly (Physician Sales & Service): Mobile technology also plays an important role in the health-care arena. As a distributor of medical supplies, equipment, and pharmaceuticals, we were the first company in our industry to guarantee same-day delivery if an order is placed by noon. Now, that was fine when we had small branches in Mobile and Birmingham, AL, with five or six salespeople who could write up the orders by hand if they had to and rapidly deploy the product to the customer. But as our business grew, we realized that our salespeople were becoming order takers rather than equipment sellers. We also knew it would be impossible for our 37 salespeople in Dallas to get their orders in to 27 trucks for same-day delivery, particularly if those orders only came in at 11:30 a.m. So two years ago, we decided we had to change the way we do business.
First, we gave all our salespeople computers that tell them what products were in stock, track the order, and price it right in front of the customer. Not only that, but when the salesperson inputs an order, that information goes to the main hub in Jacksonville, so we know what was sold in the last hour.
In addition, we use radio frequency, cellular phones, and pagers. We guarantee that a salesperson will respond within 10 minutes to a customer query. We're trying to make our sales force a walking encyclopedia of knowledge. The end result: Two years ago, when we went public, equipment sales were 15 percent of our revenue; today, they are 22 percent.
J.P. Donlon (CE): Did you have to go back and fix things because you were developing so fast in one area? Kelly: As we started buying companies and adding more salespeople, we kept running into information traffic jams. Suddenly, 758 salespeople were communicating orders simultaneously, and the computers were going on the fritz. We eliminated the bottleneck at the local branch, but ended up with another at the main hub in Jacksonville. Finally, we had to rewrite all new software and reconfigure the hardware to be able to accept and channel the information. Donlon: How much did you invest in technology and training? Kelly: The total cost to automate 758 salespeople and backroom information was less than $3 million. And it was worth it. We're in a roughly $7 billion market that's growing about 12 percent a year. We're growing 46 percent a year, which means our shareholders have seen the stock appreciate eightfold in a short time.
LOVE AFFAIR WITH INFORMATION James M. Glasgow (AIMS Corp.): Getting the right type of information quickly also can profitably impact a company's margins, particularly a retailer's. For example, a retailer or wholesaler would love to know up front what type of an incremental life they would get out of a product if they tried to spike that business with an ad or reduced prices. Historically, it would take 13 weeks to find out the impact. Thirteen weeks is a lifetime. Products have come and gone in 13 weeks. So the faster you can get a response, the more you can impact your bottom line.
This also applies to new product distribution. For example, hair-loss drug Rogaine now is sold over the counter, and I'm sure the company would like to know every hour how many stores have its product on the shelf.
Dean A. Mefford (Viskase): Margins are not great in the food business, so anything we can do to reduce our customers' costs and make them more competitive presents us with an opportunity to gain market share. To do that, we need information. We want our sales force to know our customers' business as well it knows its own. Our salespeople have to understand what customers need and how they can reduce customers' costs. In turn, when we package hotdogs, for example, our manufacturing people have to know far enough in advance whether they need a new label because of government regulations or whether the customer wants to do a promotion the following weekend that requires a different casing.
Thomas S. Haggai (IGA): As a supermarket network, we need moment-tomoment information, so we go into the warehouses and order merchandise via laptop without touching any of it. Our people on the road can divert trucks en route from one store to another and can divert products on the trucks from one place to another. Kelly: Ever-shortening product life cycles mean that faster information is required by most manufacturers introducing cutting-edge technology and products. In health care, for example, a product life cycle is estimated to be three and a half to four months. These manufacturers must know how rapidly their products are moving and where to deploy their information to make sure they get as much market share as possible, because if they don't grab it fast, they lose the opportunity. They want real-time information from us. We can tell them how many products were sold this hour, because all our orders are collected in one depot. And, of course, having accurate and rapid information gives more power to our sales force to close transactions and grow profits.
Jerry Kalov (Cobra Electronics Corp.): In the electronics industry, decreasing product life cycles are a serious problem for those of us designing and developing products, because we can't meet every cycle; the technology just moves too quickly. By the time we design the product and amortize its cost, we're probably one or two cycles down the road.
Having said that, capturing point-of-sale information, for which we're interdependent on our distribution network, is important. That varies a great deal-some retailers such as Wal-Mart are very sophisticated in that regard, but the majority of them don't even do a point-of-sale capture; they just do inventory control. Glasgow: I've found that the consumer products end of the world is inundated with more information than we could ever assimilate in our entire lifetime-even if we stopped working and just sat around and looked at it for the rest of our lives. Information is very sexy. People love to have it. But it also can be deadly. We must prioritize exactly what our customers need to know and when. Nobody has really decided how we're going to do it, but the point-of-sale information we can get is critical.
Kalov: One big problem with all this proprietary information being transmitted wirelessly is the security of the data. Donlon: Are you self-conscious about talking on a cellular telephone because you think it's insecure?
Kalov: I am, because I'm in the electronics business, and I know it's insecure. [Laughter.] For the most part, we use local area network lines, but we are doing more and more with laptops. Lenahan: The data on our network are packetized, sent over the air, and scrambled using different channels. So they don't go over a consistent channel. Donlon: What about security for business in general?
Lenahan: I think Jerry is right. If you're sending wireless data over a cellular phone network, you have to be concerned, because the information can be intercepted.
Kalov: There is a way to encrypt it or minimize the breakage on it. But right now, there is a growing concern about all that information-including electronic data interchange transfers-being easily accessible to hackers. Companies could easily find out what orders are going to their competitors today, because the EDI systems are basically unencrypted. They're analog transmissions of data that are easy to get your hands around.
Glasgow: We have enough trouble disseminating the information we've collected-such as price lists and shelf appearancethroughout our organization, much less worrying about other people having access to it. Lenahan: You can group-broadcast that type of information to your entire sales force. You can use laptops to query databases and download the information you want when you want it, where you want it. There isn't any long-distance charge because you're doing it over the air. However, if you're getting a lot of bulk data, you're better off plugging in and wire-lining down.
Kalov: Sometimes it's difficult for me to grasp all this new technology we read about almost ad nauseum. The majority of businesses in America are not large corporate entities, they are smaller, independent companies. There's a significant entry barrier to joining this data transmission age. It's not just your system, it's the software and engineering that accompany it. When companies automate, they often become discombobulated, because the computers aren't necessarily going on LANs, and so they don't speak to one another.
Many businesses have installed minicomputer systems with file servers because they thought it was the thing to do, and then they found out they couldn't service individual station needs. And so, they wind up subverting the system by buying PCs and creating multiple databases that don't interconnect. Lenahan: The delay with wireless projects is integrating them into legacy systems such as databases that are already set up. But once you do the back-end connection, you have tremendous flexibility in the specialized data you can provide to your customers.
CUSTOMIZED COMMUNICATIONS Donlon: Would combining speed with customization benefit companies with specialized needs?
David R. Holmes (Reynolds and Reynolds Co.): I think you need a judicious blend of customization and standardization. Within our standard systems, we try to let a particular customer create its own reports tailored to its needs. But it's too expensive and difficult to interface if every customer wants different software and systems.
It's the same with sales automation. If I let each of our divisions go its own way, we'd have dozens of different systems. Then what do I do when I transfer a salesperson from one business to the next? It's just too expensive, unsupportable, and impossible to maintain numerous systems. Sometimes, standardization is something you must slavishly strive for and adhere to.
However, there is some flexibility in the software that allows divisions to adapt it to their operations. You have to map out the process and ensure that the technology feeds it. Then it's all a matter of training.
These days, you almost have to customize training. Some people know how to use Windows, others don't. Some people don't need to be convinced of the technology's benefits. Others-particularly those over 50-you have to show quantified results to reinforce that the system will help them sell X more cars, for example, and reap a higher return.
James D. Ericson (Northwestern Mutual Life Insurance Co.): We introduced a fairly sophisticated system in 1976 that allowed our home office to communicate with the various sales offices via computers. Ten years later, we introduced a product that depended on mixing and working off various programs. Suddenly, we saw a dip in sales. Our first reaction was that people didn't know how to do it or that the older employees were rejecting it. Instead, we found that the younger people were having the time of their lives planning the perfect life insurance policy.
Kalov: Interestingly, employees who used computers in school sometimes are obstacles to commonization, because they know too much about what their machines can do and are too busy trying to customize. Once everyone starts their own mini-programs, you end up with a disrupted system. Not only that, but some people become so dependent on automation that when you ask them what's two plus two, they take out the calculator. That's when you start losing the flavor of the business.
Donlon: Now that an increasing number of American firms are making more of their earnings outside the U.S., do they have a problem integrating their systems with those overseas?
Kelly: We're going to find out, because we just recently expanded into Belgium. We should be able to use the same system there that we are using presently, though the programs have to be interpreted in French, since that's what the sales reps speak there.
Lenahan: The Mobit ex Net work is deployed by 17 countries. So you can take the application you developed here to Germany, change the modem to the correct frequency, and it runs with the same capabilities.
Donlon: Wouldn't the Internet serve the same purpose?
Lenahan: Yes, but it is a somewhat insecure environment. You have to consider what information you want to put on it. You wouldn't want to put stock transactions or mission-critical orders and data on the Internet.
Kalov: Plus, it's slow during business hours. We experimented with putting a company store on the Internet for factoryrefurbished goods. We got our first order within 24 hours from Seoul, Korea, for radar detectors. Unfortunately, we're still waiting for the second order. [Laughter.] Kelly: We've had a home page for four months, and we have yet to receive a single order from it. Actually, that's great, because we don't want orders to be there. We want our sales force to take them, because we want them to interact with customers and show them additional ways to enhance their profits and products.
Holmes: We have a Web site called Dealernet that captures all the information a customer could want about an automobile. It also does credit checks, GMAC financing, and locates the specific car you're interested in. We have to give customers the ability to interface with us more easily, to input orders, and to check the status of their orders.
A SYSTEMATIC PROGRESSION Donlon: What is your greatest challenge to achieving the ultimate in customer communication, in terms of speed and/or customization?
Kalov: Our biggest challenge is being able to collect and forecast our inventory turnover. We need to shorten our development schedules and get products to market much faster. To do that, we have to collect data, find out our customers' needs, and sell them what they want to buy before they change their minds. Unfortunately, few of our customers in the electronics industry have sophisticated data collection entry. They all have pointof-sale bar codes, but they don't do as much with that information as you might think. They seldom make it available, and they seldom use it for forecasting. Why? Because they assume the product you're selling this month probably will be obsolete in three months, so it's not worth the effort. We need more data from the field, but we have to figure out how to get it without customer involvement.
We've talked about putting in a wireless transmission at the point of sale, but most mass merchants aren't interested in doing that. We've also considered using a cellular-based system for consumer surveys, putting up a small kiosk for a short time, so people could input answers to our questions and transmit them back to us.
Ericson: As you move forward in technology, you have to figure out what works for you. We're an old firm, and we tend to turn down some things we probably should be considering. But there's nothing worse than thinking you fixed the problem and then finding out the solution created a worse one.
Glasgow: Our greatest challenge is integration. The AIMS Group brokerage companies and our retail service company have AS/400s and PCs and laptops. The food brokerage companies represent 2,700 different manufacturers, and we deal with all the retailers and wholesalers, in addition to the food, drug, and discount chains. We have to figure out how to get everybody to use the same format in their systems. The food industry has spent a fair amount of time creating communications standards. But if you walk into any food broker's office, I guarantee he or she will have one PC hooked up to Heinz, one to Quaker, one to Unilever. There's no need for that, because they're communicating the same information about damage, market funds, etc. Of course, the security issue is part of it, and you certainly don't want the people from DelMonte knowing what the programs are from the people at Heinz, but if the airlines can exchange information, there must be a way. Kelly: The technology isn't the problem. It's the ability to find people who can interpret and apply it to your business. Your chief information officer doesn't have to be a techie; he or she must understand how the business affects the customer and be able to sort through all the information and find the resources to make your strategy happen. It's difficult to find people at that level.
Mefford: Improving our order cycle time is probably the most critical factor. To do that, our people must deal with the customization issue and know their customers very well. They have to be comfortable when they make sales calls that they quickly can pull together the latest information.
Sometimes, when employees are selling technical products, they worry that they can't deal with the discussion points. Having the ability to pull up the information instantly and thus find a solution to the customer's problem is going to be a critical element.
Charles A. Dickinson (Solectron Corp.): Our toughest job is getting our total organization thinking in terms of how we render service to our customers. Service companies tend to get arrogant. They look at what it takes to do what they're doing rather than what it takes to do what the customer wants. Anything we can do to make communications couple directly with the people who really perform the work will measurably enhance our ability to render service.
Lenahan: After building our network, we realized we had to go from just being a service provider to being a solutions provider. Our biggest challenge is working with our partners-the software, hardware, and middleware providers-to integrate wireless devices into different terminals, enable wireless applications software to use airwaves efficiently, and ensure that we can provide the right links to the mainframe at the field level. All of that takes tremendous and intense communication with our internal partners.
Holmes: Our challenge is being able to define what we want to do in business and then aligning that with the new communications capabilities available today, keeping in mind that these technologies must enable our people and allow us to get closer to our customers. From there, we have to assimilate those new systems and tools in a way that's digestible-both financially and in terms of our people learning them. You can't jump into this thing with a big splash and decide you're going to automate everything. There has to be some systematic progression.…
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Publication information: Article title: The Need for Speed: How Customer Communications Puts Time on Your Side. Contributors: Donlon, J. P. - Author. Magazine title: Chief Executive (U.S.). Issue: 114 Publication date: June 1996. Page number: 48+. © 1999 Chief Executive Publishing. Provided by ProQuest LLC. All Rights Reserved.
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