Most Singapore executives assume that there is a direct correlation between the level of service that a company provides its customers and the cost of providing that service.
But our experience assisting organisations around the world in benchmarking their supply chain performance is that supply chains which deliver best-in-class service to customers, do so at half the cost of their peers.
At first this may seem counter intuitive but we see two main factors in play that support the logic of this claim.
1. Best-in-class service means getting it right the first time, every time – these companies don’t make many mistakes so there is less rework, less returns, less expediting etc.
This means lower cost. Many companies do not capture the costs of poor service or poor quality and as a result do not understand the size of the improvement opportunity in this area.
In addition to the measureable costs of poor service there are the intangible costs, such as damage to reputation. In the age of social media, news of poor service travels at the speed of a click and can be accessible to millions of customers and potential customers online.
Just look at the number of review sites that exist today.
Poor service makes it very difficult to get a customer interested in your products. And if your sales people are spending all of their time apologizing for poor service levels, they will have very little time to pitch new offerings to customers.
2. Focus on the detail - costs become readily apparent when you have a passion for service excellence. You can’t look at one without unavoidably looking at the other.
Peeling back the layers of a process to understand why it is not producing the desired level of service will also reveal where there is waste in the process.
Of course another consideration of best-in-class service is if you are providing a better service than your competition, you can charge more for it.
It becomes a virtuous circle. Plus, where service is consistently superior and customers know it and rely on it, market share increases.
So whichever way you look at it, best-in-class service makes you more money and costs you less. Where does your service rank?
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
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Stuart Harman is a Partner at Oliver Wight. Stuart has over 20 years experience working as a change agent in organisations all over the world and has specialist expertise in strategy management, Integrated Business Planning, and purchasing, as well as Agile, Lean and Sigma.