Repairing Customer Satisfaction

Background:

Innovative Manufacturing Company is a 30-year-old business that is participating in the food and beverage industry segment. As a private label manufacturer, Innovative customers are not the end consumers who consume their products but rather the retail operations who contract to have products produced under their private label name. Customers include Walmart, Aldi, Trader Joe’s, Costco, and Sam’s Club. Innovative achieved an Average Compound Growth Rate (CAGR) in its first 25 years of operations of 8.5%, making the company one of the fastest- growing enterprises in the segment.

However, over the last five years, the company has experienced a decline in revenues despite participating in an industry segment that was not impacted directly by the 2020-2021 COVID-19 Pandemic. While the company and industry segment did experience some of the supply-chain and inflationary issues that plagued overall global manufacturing, from 2018 through 2023, the segment recorded a CAGR of 22%.

Over the period of declining revenues, the company CEO had made several attempts to reverse the course of declining revenues but was unsuccessful. In the fall of 2023, the Board of Directors (BOD) lost confidence in the CEO and decided to terminate the CEO’s contract and seek a new leader for the organization.

In December of 2023, the new CEO of Innovative Manufacturing Company was chosen. The Chairperson of the Board of Directors (BOD) hired the CEO based on their reputation for uncovering root causes for problems, making data-driven decisions, having the edge to make difficult decisions and the ability to execute on those decisions, and exceptional communication skills.

As an initial step to uncover the root causes for the revenue decline, The new CEO commissioned a Net Promoter Score (NPS) survey of the existing customers. The survey included questions designed to determine customer pain points and a question designed to measure overall NPS for the Company. The results of the NPS survey were disappointing, to say the least. With an industry average NPS of 51%, the company’s NPS was 34%, well under the industry average. In addition, the survey revealed some alarming factors described by customers leading to the low NPS, with the top three being:

1. Declining product quality is impacting the company’s customer’s brand image.
2. Poor delivery performance is causing shortages of items during peak selling periods each week.
3. Lack of the best-in-class customer service that customers had come to rely on to resolve issues.

With the survey results in hand, the CEO realized the above-reported issues are a problem but not the root cause of the problem, and additional research, analysis, and some challenging decisions will be required to right the path for the Innovative Manufacturing company.

As part of a revamping of the executive team, the CEO hired three new vice presidents (VP) to oversee quality, production, and customer relations. You were selected for one of these new positions.

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The CEO charged each VP to develop data and metrics associated with their respective areas of responsibility to help frame the problem. That data is included in Exhibit 1 (Quality), Exhibit 2 (production), and Exhibit 3 (Customer Service). Upon some research and discussions with members of your executive team, some basic information has been revealed.

The defect rate on several manufacturing lines has increased in recent years; however, no efforts have been made to determine the root causes.

• While employee retention has remained stable for most of the company’s history, the turnover rate has increased over the last three years. Unfortunately, the HR group was not collecting data in exit interviews by omitting the critical question, “I know why you are leaving the company, but can you share at what point you decided that the value proposition of remaining with the company no longer was sufficient to stay?”
• By analyzing orders and deliveries, the company’s on-time delivery had declined from a once industry- leading 98% to just above 72%. It was also determined that the ERP system, implemented in 2000, is no longer supported by the software company.
• Data has revealed that the first call resolution rate had declined from 80% to 55% and that there is no integration between the Customer Relationship Management (CRM) system and other company databases. Each CSR is responsible for making collection calls for outstanding Accounts Receivables and inputting vendor invoices into the accounts payable system.

Considering the negative financial and brand impact already realized from the unsolved customer complaints, the CEO has charged each VP to present their framed problem, root causes, and potential strategies at a meeting after three and six weeks, with a final presentation of solutions after nine weeks.

– Data-Driven Decision-Making for Leaders