Volume 6 Issue 5 June 2005
The Cutting Edge
Doing it Right the First
Minimizing the Cost of Customer Satisfaction
by Jim Plavecsky
Several weeks ago, I received a call from a potential customer. He was interested in a warm-edge spacer system. Following is an excerpt from our conversation.
Customer: “Well, I have been putting this off for years, but with energy prices the way they are, I am finally going to have to look into investing in a new system to run warm-edge spacer. I want to improve my overall window U-Value, and reduce condensation at the edge.”
Plavecsky: “That’s great. We can give you all of that. But while we are at it, let’s take a look at your current manufacturing system and look for ways to improve quality.
Customer: “I don’t really have much money to spend on upgrading my process. That’s not really a big concern here. Our failure runs less than two percent.”
Plavecsky: “You say it is less than two percent. So what you are telling me is that it is at least greater than one percent.”
Customer: “Yes. It is somewhere in-between.”
Plavecsky: “OK. Let’s assume it is only one percent. You are making how many windows per year?”
Customer: “About 25,000 windows.”
Plavecsky: “That means you are making around 50,000 IG per year. Even if your failure rate is only one percent, you are answering up to 500 service calls per year! “What does it cost you per service call?”
Customer: “Well, you have to make the replacement IG, put it on a truck, send a service guy out … I guess he is paid about $15 per hour. You have his travel cost to and from the job site. He has to deglaze the unit, reinstall and dispose of the trash and deal with the customer. I would say that before it’s all said and done, we are spending about $100 to $150 per service call.”
Plavescky: $150 per service call multiplied by 500 is $75,000 per year! That is about what we are going to spend to completely revamp your IG line. So, if we can get your failure rate close to zero, then your payback on this investment is only one year!
Customer: “Wow. What took me so long?”
Calculating Customer Satisfaction
This scenario happens all too often. When calculating unit costs, manufacturers often fail to include estimated service cost up front in the calculation. If a window manufacturer is putting a 10-year warranty on the glass package, the actual cost of fabricating each IG unit must include more than the materials, labor and overhead. It must also include a per-unit cost of service given the desired level of customer satisfaction that the company is trying to maintain. Even if the warranty says that labor is not included, most manufacturers want to maintain high levels of customer satisfaction, so they often go ahead and take care of the problem completely, including labor, in order to please their customers.
So if this is the case, then the true cost of fabrication must also include what I would call the “Customer Satisfaction Cost per Unit.” This is the actual cost that is incurred per year to maintain complete customer satisfaction in servicing problems that could have been prevented by doing it right the first time. In this case, assuming that the failure rate is only one percent and that each IG unit failure was in a separate window, the Customer Satisfaction Cost per Unit could be as high as $75,000/25,000 or $3 per window.
What is ironic, especially in the new construction market, is that fabricators will often balk at product or process changes costing only pennies per window, but will spend money later to take care of unhappy customers after the window is sold and installed.
The window market is strong. It is healthy. But it is not presently growing at a pace that it has shown us in the best years. So, in order to grow market share, market-savvy fabricators will find ways to build customer satisfaction into the window before it is shipped. This means fewer problems, fewer service calls, happy customers and more time to concentrate on finding new customers as opposed to servicing unhappy ones.
Jim Plavecsky is the owner of Windowtech Sales Inc., a sales and consulting firm specializing in the window and door industry based in Columbus, Ohio.
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