CONDUCTING A CATALOG OPERATIONS AUDIT

May 01, 1999 9:30 PM  By

Promises, promises: All catalogs make them, but the best actually deliver both the goods and the service. Any catalog operations manager can tell you it’s easy for the marketing department to make grand promises, but fulfilling them can be challenging-especially in today’s complex catalog marketplace, in which a single company might sell products from many titles, distribute goods from multiple warehouses separated by thousands of miles, and depend on complex computer systems that could rival those of the space program.

Your operations department must create work flow systems and procedures to efficiently move product through your distribution centers; devise special packing and handling operations to make sure products arrive in top condition; ensure that returns processing takes place promptly and without hassles; and implement forecasting systems that optimize inventory so that product is available when customers order it.

With operations of such complexity, how can you be sure you’re keeping the promises made by your marketing department and making your customers happy? An operations audit can hold the key.

Take your operational pulse An operations audit involves combining research analysis and on-site fact-finding to determine exactly what your operational performance is now and what you need to do to meet or exceed your goals. Operations audits can help you improve productivity; use distribution center space more efficiently; increase the capacity of orders processed; streamline work flow by reducing steps, processes, and costs; and generally achieve higher profits and lower costs. You can tailor your audit to analyze any one of these issues or to tackle a combination of areas at once.

Assuming that your chief concern at the moment is keeping your customer service promises, the first step is to gather all the research you already have and collect any information that you are missing. Among the data you’ll need:

* Internal operations reports. All departments-including receiving, quality assurance, inventory control, replenishment and picking, packing, and shipping-contribute to your ability to achieve the desired level of efficiency and service. Weekly reports can reveal which departments are reaching desired levels, which aren’t, and how they are affecting one another. Reports should include units of work processed per paid hour, as well as error reporting.

* Returns reports. Most fulfillment software systems produce a “reasons for returns” report, which analyzes customer returns by product vendor, item, reasons, and quantity returned as a percentage of units shipped. Typical returns reasons include duplicate shipments; late delivery; wrong item, color, size, or quantity shipped; and damaged or missing parts. Analysis of any patterns in these reports can help you identify operations areas in need of improvement.

* Call center customer reports. Most catalog management systems can create reports that analyze customer complaints and inquiries. These aren’t limited to operations and fulfillment issues, however, since customer complaints often cover pricing, creative depictions of product in the catalog, returns policies, and shipping charges. Customers are likely to ask about everything from merchandise availability to size, fit, color, quality, and care requirements. And if a catalog customer has any problems on the back-end-incorrect item shipped, slow returns processing, less-than-helpful customer service reps-you’ll certainly hear about those, too. Inquiries and complaints provide direct links to your customers; capturing what they’re saying and analyzing it can be invaluable in keeping your customer service promises.

* Call center monitoring reports. Catalogers have historically monitored telephone reps during training, but monitoring can also yield valuable customer information. Even if you don’t have the resources or personnel to do “live” call monitoring, you can tape-record calls for the supervisor to listen to from a remote location hours after the call. Whatever the method, call monitoring can help you find out whether your rep training is effective; if your processes, such as database system prompts, work; and if consumers are happy with your service.

* Customer satisfaction cards. Customer satisfaction survey cards included with merchandise orders also provide valuable information. These cards typically ask customers to rate their shopping experience, including the knowledge and courtesy of customer service reps, the promptness of delivery, the condition of the package on arrival, the packaging quality, the product appearance, and service. These cards are most effective if you keep them simple by giving customers the choice of several responses, such as “excellent,” “good,” “average,” and “poor.” Prepaying postage can increase the response rate from an average of 1.5%-3% to as much as 5%.

* Secret-shopper studies. Designated “shoppers” from within your company who place orders by phone, by fax, and online get a firsthand view of how well the call center, order fulfillment, returns, and invoicing functions are working.

* Quality assurance sampling reports. Spot-checking outgoing packages provides information about picking accuracy, insertion of paperwork and promotional materials, and package appearance.

Benchmark comparisons Once you have gathered all the research and data available on your operation, you can begin your audit by comparing desired standards of service with actual performance. Comparing your figures-both actual and goals-to those of other catalogs can also help you evaluate your performance. While there isn’t a public source of such information, you can find benchmark data through some trade publications or consulting firms. (Industrywide benchmarks from F. Curtis Barry & Co. appear here and on the next page; also, see the Benchmark Report on Operations, p. 77.)

It’s also effective to hook up with one or several other catalog companies and compare operations audit results. But be careful to compare apples to apples by measuring your company against a catalog of about the same size that sells the same type of product and has similar operations. For instance, apparel pack rates vary widely depending on the type of apparel and how it’s stored and packaged. Packing merchandise on a hanger involves carefully wrapping it in tissue paper and boxing it, which might allow for completion of only 15 orders an hour. On the other hand, flat-storage merchandise that’s already packaged in plastic can be inserted into envelopes, allowing the facility to move 100 orders an hour.

Being there These sources of information about your operation are invaluable in identifying problem areas. But your audit doesn’t stop there: An on-site survey of the fulfillment center is vital. Here are some areas to focus on:

Initial walk-through. As you walk through the center, look at it as though you were visiting for the first time. How organized is it? Are productivity boards or reports displayed for all employees to see and check themselves against? Does the operation look efficient? Are there areas of congestion and bottlenecks?

Space, work flow, and processes. How much space do the various departments need? Do space requirements vary from peak season to the rest of the year? Is there any unnecessary or excessive movement from one department area to another? Are materials-handling systems and conveyors used appropriately to move product, orders, and returns through the center?

Staff input. Interview managers and department personnel. They’ll know where the problems are and where improvements can be made. Don’t forget to ask questions about space, work flow, and processes.

From audit to action Once you’ve gathered and analyzed all the operations information you can, patterns will emerge, and you’ll have a quantifiable picture of what you do well and what you need to improve. But the final step is the action plan-or what will make your audit yield meaningful results.

In creating a plan, remember that Rome wasn’t built in a day. Before you tally up a list of changes that could overwhelm your team, determine where you can achieve the biggest improvements from the smallest number of changes. Focus on the areas that will yield the greatest benefit, and outline the steps to take.

And before you invest in even a foot of conveyor belt, remember another saying: “Measure twice and cut once.” First develop a prototype design for any warehouse changes, and circulate it among management and staff for comments. Keep redesigning the plan until all concerned are satisfied that it’s an optimal, efficient design. Use the same philosophy to justify large capital investments; run the numbers and cost-justify to make sure the payoff will be there.

Finally, write your action plan so that it provides for continual improvements over time. Manageable changes introduced gradually will be more effective and more readily accepted by your work force than one massive overhaul. Gradual change helps makes continued improvement a part of your corporate culture.

And don’t assume that a one-time operations audit is enough. Comprehensive audits should be conducted on an ongoing basis-at least once a year-to stay in touch with customer needs, accommodate your company’s growth, keep pace with your competition’s improvements, and keep up with whatever promises your marketing department dreams up next.

Service stars Lands’ End. Not many things are certain in life, but timely delivery of an order from casual apparel cataloger Lands’ End is. If a customer calls to order a shirt and pants, and the customer service rep says the order will arrive within five days, it will. Thanks to a super-accurate computer inventory system and a healthy in-stock rate, Lands’ End can typically ship 90% of orders immediately.

Tiffany. Opening a box from jewelry and gifts marketer Tiffany & Co. is an event in itself. The signature blue box with its white ribbon (red at Christmas) promises something wonderful. For instance, a pair of gleaming silver candlesticks inside have no doubt been polished just before packing.

Crutchfield. Some consumers still worry that shopping online leaves them vulnerable to credit card fraud. At electronics cataloger Crutchfield they don’t have to fret; the company guarantees that customers’ credit cards are safe from online theft or fraud, and it promises to pay for any Website-related loss.

Eddie Bauer. Special services are just part of the routine at apparel marketer Eddie Bauer. A catalog customer who orders two pairs of trousers that need to be altered can typically receive the order in three days. It would be hard to find a local tailor who could match that speed.