A Logistics Perspective (Part 2):
Characteristics of Preferred Suppliers
When you consider what it takes to be a preferred supplier, the
first thing to realize is that this distinction awarded by the
customer based upon his perception of the value added to
his business by the service you provide. This carries some
- The perception of the supplier's actual service can be
distorted, even wrong, because of a lack of accurate performance
data, a mismatch between the actual service received and the
- Preferred suppliers are perceived to add value to the
customer's business. The least objectionable supplier (the best
of a bad lot) will not achieve this status although it is
conceivable that a lot of unfavorable characteristics can be
outweighed by a single virtue.
- The awarding of preferred supplier status can be
significantly influenced by other tangible or intangible factors
which may differ across competing suppliers and which may carry
varying degrees of relevance. The lack of uniformity or
"fairness" introduces a human element to the competition.
We said earlier that customers view preferred suppliers as
being easy to do business with. The word "easy" pretty well
matches the implications described above. So, if you add this all
up, what can you conclude about preferred suppliers'
characteristics that you can put to good use? Try this:
Suppliers are easy to do business with when they do a good job
supplying, when they minimize the work and cost involved in
supply, when they operate as a partner in the total supply chain
and when they communicate to ensure accurate information and
The Supply Chain Council identifies 5 attributes that comprise
supply chain performance:
1. Reliability - This is the ability of a supplier to
deliver the right product, in the right quantity, to the right
place, at the right time, in the right condition and packaging and
with the right documentation to the right customer. The key metric
is Perfect Order Fulfillment and the supplier's additional burden
is to correctly understand what is 'right'.
2. Responsiveness – How quickly products are provided to
customers measured as Order Fulfillment Lead Time.
3. Flexibility – How adaptive a supplier is to changed
circumstances that render existing capabilities incapable of
meeting customer requirements (e.g., plant strike, warehouse fire,
new governmental regulations, etc.). Quickness is the measure.
4. Cost – All supply chain costs need to be considered,
cost shifting does not equal cost reduction. Total cost is the
best measure; individual enterprise cost, although easier to
obtain and more commonly measured, can be misleading and, worse,
5. Capital Asset Management – How effectively total supply
chain assets are managed and employed in satisfying demand. Return
on assets, cash-to-cash cycle time and inventory days of supply
are key measures.
Each of these attributes can be measured at several levels of
process detail and, being consistently defined, enable
benchmarking. This makes it possible to determine not only if a
supplier is doing a good job supplying but also if they are doing
a better job than their competitors.
So, being a good supplier is a key to being a preferred supplier
and being a good partner can provide the added tangible and
intangible value that tips the balance toward preferred supplier
status. Some best practices that can be adopted to achieve these
goals will be discussed in the next issue.
View previous articles in this series.
Rewarding and Incenting Customer
Service Representatives (Part 5)
We are pleased to provide the final article in the series on
"Rewarding and Incenting Customer Service Representatives." In
prior articles we covered prerequisites for putting in place
effective rewards and incentive programs, and began discussing the
"how to's." We will finish up the series by covering Financial
Though numerous studies have concluded that money is not the
primary factor for motivating personnel to perform at desired
levels, financial incentives have their place and should not be
left out when designing rewards and incentive programs. We will
discuss two approaches for implementing financial incentives:
1. Period performance bonuses
2. Performance reviews / merit increases
Periodic performance bonus
Bonus programs provide the "opportunity" for personnel to achieve
a predefined financial reward (above and beyond their base salary)
for demonstrating superior levels of customer service. The period
of performance may vary depending on the organizational level of
the personnel. For example, it may be appropriate to have a
monthly or quarterly cycle for individual contributors and team
leaders. For senior account managers or customer service managers
you may want to implement a quarterly or annual cycle.
You can administer periodic performance bonuses for a team or on
an individual basis, or both. A team goal could include ensuring
that the customer service function makes the appropriate
"advances" in line with your overall service level goals For
example, if you have a goal to raise "first touch" resolution rate
from 60% to 65% in a given quarter and the team achieves that
goal, a predefined bonus is paid to the members of that team.
Bonuses may also be administered based on goals that were
established on an individual basis, such as completing a project
in an accelerated timeframe or demonstrating exceptional levels of
service, above and beyond the normal course of duty.
To achieve the anticipated benefits from a bonus program, you need
to ensure that it doesn't become an entitlement program,
where each person on the staff achieves the same bonus regardless
of his or her performance. There must be a clear distinction
between what level of performance is required just to keep the
job, and what types of behavior demonstrate superior customer
service and might merit a bonus.
Performance reviews / merit increases
The key to a performance review is making it a review / wrap-up of
what was already covered throughout the prior period (typically a
year). That is, there should be NO surprises to your customer
service personnel. You should have previously shared the measures
and standards of performance necessary to perform the job, and
what it takes to demonstrate superior levels of customer service.
You should have "visited" their performance against these goals
throughout the year, in conjunction with the bonus cycle
(discussed above). The performance review is a time to establish
longer-range goals and requirements to enable the employee to
advance in his or her career. It also includes the all-important
salary merit increase. Use your budget for merit increases on an
individual basis relative to each employee's performance against
personal and team goals and objectives. Be sure to again
acknowledge superior levels of performance demonstrated in the
prior period, to help ensure that a similar level of performance
occurs in the future.
In closing, rewarding and incenting customer service personnel can
be a challenge as you seek to achieve the desired levels of
performance, benefits and results. Remember, there is no silver
bullet. We have provided a portfolio of approaches that, working
together, have proven to be highly effective in achieving the
desired behaviors and levels of performance from customer service
personnel. For additional ideas, we suggest that you read the book
1001 Ways to Reward Your
Employees by Bob Nelson and Kenneth Blanchard. This book is
featured on the
Additional Resources page of our website.
View previous articles in this series
Rewarding and Incenting Customer Service
Contest Winner Submission
If you have received this newsletter from a friend
and would like to subscribe:
here to subscribe
View previous newsletters
In this issue, we
offer two recommended readings, one article and one book.
High Tech Has To Stay Humble," Steve Hamm reminds high-tech companies
of the importance of catering to corporate customers, and provides
strategies to help companies put customers first.
To complement our
series on rewarding and incenting customer service personnel, we recommend
Bob Nelson and Kennth Banchard's book
1001 Ways to Reward Your Employees.
Additional Resources section of the Customer
Centricity website for more recommended reading selections.
Contest Winner #2:
Killebrew of Digex was one of the winners of our recent "Rewards and
Incentives" contest, designed to generate unique ideas for rewarding and
incenting customer service personnel.
her submission, Ms. Killebrew writes:
and rewarding customer service is about setting an example for your team -
i.e., 'catching them being good'
reinforcing the right behaviors at every turn, and keeping the dialogue
full submission can be viewed on the Customer Centricity website.
About Customer Centricity, Inc.
We strengthen overall company performance through
better service delivery and management.
We boost efficiencies in front-line customer service and technical support
teams, order processing, fulfillment, field service, logistics and other
key operations functions.
In short, we align the resources of your organization to exceed your
customers' expectations in the most effective and efficient manner
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