Tom:

Any reason why the magic number needs to be "5?" End of the day the "total return in doing business?"

They can be measured in terms of:

(1) For every dollar they invest in your products and/or service what is the additional dollar that they would recover (hopefully not invest more). Very useful in the supply chain evaluation scorecard.

(2) The same return measured as in return velocity known commonly as payoff period.

(3) What part of the customer's business metric or needs did the product and/or service contribute to?

For example if one were to deliver a product and/or service to a customer what part did it directly contribute to?

(a) Did it help reduce the customer's idling inventory?
(b) Did it help the customer increase his sales or productivity to his end customer?
(c) Did it help the customer become more consistent in their day-to-day products/processes or service?

Hope this is simple enough and yet effective for the professionals needing an answer to your query.

Shree

posted September 2, 2007

Hi Tom,

This is a great question with three great distinctions. To address the manufacturing and distribution, I'd defer to the July/August HBR articles on leadership brand: examples-Fedex-always on time, WalMart,-distribution-see the article for greater detail.

The answer to your question also depends on your goal.
The term service can be a fuzzy one. The Mercury News just had a great article about Exubera, copromoted by Pfizer. Service issues the article discusses:-Pfizer is a good company, so it's not to pick on them since we as Fortune said two months ago "are all failures". The key is to learn from that.

#1) knowledge of sales staff. The salespeople and management need to know the product, context, and systems driving the demands and trends.

#2) adequate reimbursement and access for patients

#3) cost/vaue proposition to customer within context of what is being done already.

Aside from that article, a couple of common sense things would be:

#4) follow-up

#5) leadership brand/brand equity

posted September 2, 2007

I agree with Dohemann.. it REALLY depends on your goal. Let me give you an example:

If you are a shareholder you would like your metrics to take into account long-term good will and might be willing to improve customer service (i.e. higher cost) to build the IMAGE of high customer service in the minds of POTENTIAL customers (hence no immediate payback).

However, if you are the customer service manager with a fixed term ending in the next 6 months, you would like to see a low cost per customer measurement. Note that customer service does not reflect directly in revenue of sales nor customer service revenues but would only affect that LATER.

I personally think that one of your metrics would have to be LATER SALES and LATER SERVICE, but this is of course a retrospective measurement: draw a correlation between rises of sales and customer service to previous rises in customer service spending. You will probably find customer service increases after a couple of next service rounds while sales rise after the product life.

You can measure this by learning whether customers are satisfied by their last service to the extent that:
1. They come back (you know this from records in the customer service logs)
2. Would come back
3. Would recommend the center's customer service
4. Would recommend the purchase of the product because customer service
5. Would advise AGAINST purchasing the product due to customer service

You should measure this in the customer service process if they have idle time, or in general surveys for random customers as well as potential customers.

posted September 3, 2007

hi Tom,

While I agree with the others that it does get very specific, we can try and address this is very general terms. Limited to only the first five attributes, there are hundreds more depending on your situation and you can then adapt this to your specific needs.

1. Customer Inbound Interaction - they called you.
Why? Address frequency and type
2. Reorder? Size and volume - increase or decrease? Why?
3. Complaint? What type of issue - quality, shipping, service?
4. Returns
Why? Again, address frequency and type
5. Poor product? shipping, delivery, item damaged? does not meet expectations? incorrect order?

Again, more is needed but this is a start and the "more" depends on what your needs are.

Eileen

posted September 3, 2007

I go back to one of the previous answers, primarily as I'm curious, which is why must there be 5?

You don't really say from which perspective you're looking at this, but the key metrics you focus on and measure your business success against must absolutely be centred around the customer - are you delivering what you say you will? This then leads on to - how do you know when you're delivering what you say you will? And more importantly, are your customers happy?

Organisational success is defined solely by these yard-sticks. At the highest level you obviously want to measure:

- revenue
- costs
- customer satisfaction

then you need to break these down.

Every process in your organisation will have inherent measures that define them, and these ultimately allow you to both determine how well you're presently doing, and ultimately where you need to improve.

Stephen M also suggests these experts on this topic:

• Steve T
• Terry S

posted September 4, 2007

Hi Tom,
Some people ask why the magic number 5. In opinion there should be as few as possible. Too many is confusing, often they are contradictory and they allow a manager to screw a person if he wants to and employees can slip through the performance net by doing well in some and having excuses for others...

Here are mine:

1. Reliability: Measures what the person/organisation was supposed to do but did not do. So delivery performance is measured as Throughput (or Sales)Value multiplied the number of days late. Throughput or Sales in absolute dollars. The effect of this measure is it values larger more important orders more and it increases the number very quickly the later an order gets. Traditional measures allow the person concerned to forget about what is already late and focus on not letting any other order become late. The target must be ZERO.

2. Effectiveness: Measures what has been done but should NOT have been done. Ideally a supply chain does not have any inventory - inventory is used to deal with any sort of inadequancy - such as clients' required lead-time being shorter than the company's capability. The measure is Inventory Value multiplied by the number of days in stock. The longer you hold it the worse the number looks. The target should be continual decline.

3. Cost - how well is the organisation doing against their budget, and only the locally controllable costs should be measured - any allocations from corporate is controlled by them.

4. Quality? Is included in reliability. If quality is poor - there is a return - then we have not yet delivered. There needs to be a mechanism to identify where the quality problem came from. So we don't need a special quality measure.

5. The measures have a priority: No 1 has the highest priority; no. 2 next; followed by # 3.

There - whatelse do you need? Before choosing another measure be sure it is not covered by one of these!

Rudi

posted September 7, 2007