In today’s competitive landscape, a company meeting its service proposition is imperative. Customers have lots of options, access to information and opinions, few barriers to change and a review culture that punishes even the smallest mistake. Not only must companies perform well, they have to make sure customers believe they are performing well.
One of the first questions we ask our clients is how they measure their performance from their customer’s viewpoint. Some clients provide us with vendor score cards from their customers.
Most clients have some On-Time/Complete (OTC) statistic that is stated as a percentage. Many have talked very proudly of their OTC record of 98 or 99 percent. From this perspective, 98% OTC means that you shipped your customer 49 good pieces before you shipped them a mistake. 99% OTC means that you send your customer 99 good pieces before you send them a mistake. Depending on order size, this can mean several errors in every shipment.
We suggest measuring what we call Quality Error Ratio, or QER. This is a measure of the number of good pieces shipped to the number of bad as a ratio. Any mistake in the process is an error, from order entry to invoicing, be it an order entry error, pricing error, quality issue, late or partial shipment, invoicing or any other error. Anything that did not go exactly as promised to the customer is a mistake. But only count errors that make it to the customer. If the error is caught and corrected before it makes it to the customer then it is not considered an error for QER. Those issues still need to be addressed but that is a topic for another discussion. This gives you the most accurate, quantitative measurement of your performance in the eyes of your customer.
This is an incredibly powerful tool, especially since it is stated as the reciprocal of OTC. QER focuses on the thing that hurts customers by telling how many error free transactions they experience for every miss. When looking at an OTC drop from 99.5 to 99, the drop seems important to address. Looking at the same change in QER, the ratio drops from 200:1 to 100:1.
This data is best used in sales and customer management. Having the sensitivity of being reciprocal to OTC, improvements can be communicated by the salesforce to customers. Another function is customer management, specifically expectations management. When investigating customer complaints (through warranty orders, backorders, rejects from customers, etc), it may be discovered that there is an expectation gap. This requires communicating what you see as your commitment to your customer, or changing your commitment to meet the customer expectation. Either way, the expectation gap has to be resolved or the relationship doesn’t work.
Rethinking the measure of your performance as viewed by customers is a major move toward understanding your value to your customer. Once you understand how your customers view your performance, you can address shortcomings and go and sell the improvements.
If you would like help developing your QER measurement contact Title 2 Business Services today!