Reference no: EM13896447

American Vinyl Products

To: Brad Hadley, President, American Vinyl Prod- ucts (AVP)

From: Bev Trudeau, Director of Purchasing, American Performance Car, CA

Subject: Customer Service at American Vinyl Products

Our two companies have basically had a good relation- ship over the last two years. We have generally been pleased with both the quality of the products as well as the price offered. These features, while important, are not critical. What is critical to our future relations is customer service. This is one area where you have recently fallen down. Our staff has persistently experi- enced delays in getting through to your staff by phone. When we do, we experience further delays in getting answers. Our needs are few but simple. We want to con- tact American Vinyl quickly. We want to get through to a person quickly. We want to place orders, confirm status and change requirements quickly. Three days ago, Brad Allenby from our purchasing department spent 20 min- utes waiting to get through. He had a critical problem that had to be resolved. He kept waiting. All the time, all he heard was how it was important that he remain on the line and that he would be answered in the order in which he was received. He finally gave up and called Joan in your marketing department. Even then, it took 24 hours before he got an answer. This is unacceptable. Unless you adequately resolve the problems with your phone system, we will take our business elsewhere. As you are aware, your contract with American Performance Car is going to be up for review in six months. Your product is not so unique that we cannot quickly find an alterna- tive supplier. I am sorry for the angry tenor of this letter. However, this note reflects the frustration that we have experienced. It is totally unacceptable that we cannot even get hold of anyone at American Vinyl after 3 p.m. our time here in California. Your company must become more customer-oriented. Or else. You have 90 days to provide us with an acceptable resolution to the current situation.

As Tom Adamson put down the fax and looked at Brad, the president, Tom knew that things were not good. The phone system had been a persistent source of problems for American Vinyl Products (AVP). Tom knew that this complaint was not an isolated event. He also knew that Brad had commissioned a local telecommunications com- pany to do a study on AVP's phone system. Their recom- mendation was that a new system be put in that offered more lines and more staff capacity. Brad thought that this might be the answer. Tom also knew that he would be asked to come up with recommendations for improving the current system.

As Tom got up and left the office, he reviewed the infor- mation that he had recently gathered. AVP was a small manufacturer of vinyl and plastic products, including vinyl car products (e.g., decals and pin striping for cars), plas- tic after-market products (e.g., new brake lenses for cars designed to make the car look more sporty) and decals for the recreational market (AVP sold name decals to Four- Winns in the boating marketing and to Bombardier in the ski-doo and sea-doo markets). Located in Charlotte, Mich- igan, this company had experienced a great deal of recent growth. Part of the reason for this growth could be traced to the excellent customer service that AVP gave its customers. AVP sold primarily to three groups of customers. The first were the do-it-yourselfers (DIY). These typically bought vinyl striping from a local retail or car accessory store. As a rule, their purchases were very small yet they needed a great deal of information. Often, they would call AVP asking for a catalog of products, information on how to use AVP's products (or information on how to correct a problem with an AVP product), or information on where they could get AVP products. As a rule, DIYs were very price sensitive. The second market consisted of professional users. These were the people who used AVP products as part of their business (e.g., in a body shop). While buying a moderate amount of product, they were often more interested in getting very technical infor- mation pertaining to the use of an AVP product. They were often considered to be very demanding with the result that only the most experienced sales staff worked with them. Finally, there were large corporate accounts, accounts such as American Performance Car. These accounts would call AVP typically to place orders, to determine the status of current orders, and to see if they could change the status of current orders (i.e., change the due date, the order quantities, or the product mix). Typi- cally, their calls were short and to the point. The differ- ences between the three groups are summarized in the table.

Customer Type	Average Calls per Day	Average Time per call (min.) Range in ()	Average Revenue per call
DIYs	200	20 (min of 5, max of 35)	$5.00 per call (estimated)
Professional users	40	10 (min of 5, max of 20)	$40.00
Large corporate accounts	20	5 (min of 1, max of 10)	$400

The same phone process served all three customers. All three customers called into the same 1-800 num- ber. Once they called, their calls went into a queue area where they waited until a service representative was available. The calls were answered on a first-come, first- served basis. In this phone-bank area, the current system would periodically remind them that: (1) their call was important, and (2) their calls would be answered in the order received. When the calls were answered, a repre- sentative would try to determine the type of customer and then determine what was needed to answer the call. Typically, the representatives would fill in a form (in the case of a catalog request), look up locations of outlets selling their products (done using a large book centrally located), and look up possible solutions from a tips file or generate a follow-up form (in the case of a customer requested change or status query). When done, the infor- mation would be placed in a large basket for processing. Finally, the representatives would then give the customer a best guess of when they could expect an answer (if further information was needed). Because of the great diversity in the types of calls and the demands of the callers, training and staffing was considered a major obstacle. At present, the line was staffed with 10 repre- sentatives on average over an 11-hour period (however, over the two-hour staggered lunch, there were fewer rep- resentatives). The department was open from 7:00 a.m. until 6:00 p.m. The rate at which the calls came in was difficult to predict. However past experience was that it was never level. Finally, since 1995, 40 percent (and growing) of the sales came from California, Washington, Nevada, and Oregon. Unlike Michigan, which is in the Eastern time zone, these states were located three time zones away.

Questions

1. You have been asked to help Tom. What recommendations would you give him about how to improve the operation of the phone system?

2. Tom has a recommendation for increasing the capac- ity of the phone system. Is this recommendation adequate to help address the problems facing AVP? Make sure that your answer is supported by the appropriate analysis.