15 Areas Ripe for Cost-Cutting

If you’re like many of your colleagues, you’ve been asked to reduce operations costs or increase your department’s productivity and efficiency. Here are 15 areas to look at in the contact center and the distribution center:

1) Agent scheduling. Scheduling agents in the customer contact center can be a very complex task. Contact centers generally do a good job setting a schedule based on projected call volumes and filling the schedule with available agents, but often there’s a difference between what was projected and what actually happened. Take time to review the original schedule against the actual volume of calls and the number of agents who worked. This simple task will provide insight into effectiveness of the schedule. And if you don’t use scheduling software, consider making a case for it: It’s been shown to pay a return on investment relatively quickly by scheduling more effectively, thereby lowering costs.

2) Organizational structure. Business typically ebbs and flows, yet organizational structures tend to remain in tack for long periods of time. This could be an optimal time to review your organizational structure. For instance, the Web now accounts for 35% of orders, on average, at a typical multichannel merchant, with many businesses reaping more than half of their sales online. If your company’s Internet growth is 20% a year, do you require the same number of full-time contact center agents as you did a year ago? Can you use more part-time phone reps instead? Does this affect your supervisor-to-agent ratio? One supervisor to 20 agents is a good ratio.

3) Off-phone work. Off-phone work in the customer contact center has increased over the years due to the growth of e-commerce, e-mail, and online chat. Many off-phone tasks have evolved into major projects. Internet orders containing customization, special instructions, or customer comments are typically handled offline, for instance. Maintaining product information on the order management system is a critical component of providing great customer service, and in many companies the process of updating this information has been pushed into the contact center. Analyzing the various types of off-phone work will reveal unnecessary steps being performed by the agents.

4) Product and policy training. Product training is becoming a complex undertaking as merchants constantly search for new product. Keeping agents informed of the latest product information is a challenge. Contact centers that provide regular product training through an formal training program benefit when the customer places an order. Agents who are not well trained on the product will have to ask for assistance, which can lengthen the call time. Many large centers have a full-time product trainer. In addition, pop-up windows that appear to agents as they log in can be an effective tool for relaying information on problem products, customer policies, and important company meetings.

5) Call monitoring. Monitoring agents and providing feedback on a regular basis is essential to maintaining optimum performance in the contact center. It provides an opportunity for supervisors to hear what customers are saying as well as helps them gauge agents’ strengths, weaknesses, and overall efficiency. Supervisors can then use the information for performance reviews that can increase productivity. And monthly call monitoring by management and merchants is a great way for them to stay in tune with the customer.

6) Universal agents. Universal agents–those who can take orders via phone, respond to e-mails and handle customer service functions–are an asset to your organization. These agents are capable of switching tasks as the workload requires, maximizing their productivity. Using universal agents, particularly at off-peak times, reduces the need for dedicated agents. A mix of universal and dedicated agents within the contact center provides a balanced workforce that reduces costs and increases efficiency. The use of universal agents does make it tough to track the actual work performed, however, along with the costs associated with each task for benchmarking purposes.

7) Backorders. With the cost of a backorder ranging from $7 to $12 per unit, it doesn’t take long for them to take a toll on the bottom line. This is where a somewhat advanced forecasting system can help. The ROI occurs within 12-18 months based on the reduction in backorders and the improved turnover.

8) Slotting. An ongoing program of determining the correct picking slot locations is a must. Consideration should be given to product velocity (sales) and size (cube) in placing it in the pick line. Having as a goal the storage of at least one week’s average unit movement in the pick slot along with providing a variety of slot sizes should be a key focus.

9) Picking. There are many picking methodologies to choose from: batch picking, zone picking, pick and pass, pick to cart, and pick to box, to name just a few. By analyzing the type of product and the type of orders (single vs. multi, for instance), the most efficient pick-path processing can be created reducing travel time. Separating fast movers from slow movers and establishing a “hot pick” area for extremely fast movers should be considered. Picking rates should generally range from 115 to as high as 180 units an hour.

10) Packing. If you are not using a pick-to-box methodology, does your system have the capability to determine the box size for the packer? Is the pack station clean, neat, and ergonomically correct? Is the appropriate dunnage inserted into each box? Where is the pack verify performed? These are just a few of the questions to look at when analyzing the pack area. Remember, presentation to the customer is as important as getting the shipment out of the door quickly. Packing rates should average 35-40 an hour.

11) Inbound freight. Inbound freight is one of the most overlooked areas for significant cost reduction in many companies. Multichannel companies often spend 2%-4% of gross sales on inbound freight. Most successful companies that have paid attention to inbound freight view inbound freight management as controlling inventory in transit. Since inventory is, in many cases, your largest asset, the management of this asset is critical to your success. There is a growing trend toward paying for freight collect rather than prepaying. Inbound freight should be bid out competitively often.

12) Outbound freight. With parcel carrier increases in the range of 3%-5% annually, it’s not surprising that management often asks, “What can we do to reduce our shipping charges?” In a typical catalog company, outbound freight ranges from 8% to 12% of net sales. Regularly seek bids for outbound freight to ensure the best pricing. Combining inbound and outbound freight with one carrier may produce savings.

13) Replenishment. Ensuring that sufficient product is available when the picker needs it ranks as one of the most frequently broken warehouse rules. A combination of scheduled replenishment of the primary pick slot using the min-max and demand replenishment concepts should be employed to increase the likelihood that product is available when needed. If product is not available for the picker, the order is set aside until it can be resolved. This creates inefficient productivity.

14) Vendor compliance. A detailed and enforced vendor compliance program will do as much to improve the warehouse operations as anything else you can implement. Vendor compliance means that product arrives from a vendor as it should – in proper condition and in the agreed-upon manner. In addition to product quality, compliance standards that vendors must meet include packaging and shipping, advanced shipping notices, case labeling, accounting and paperwork requirements, routing guides, and scheduling and statistical sampling, to name just a few.

15) Benchmarking and KPIs. The best indication of how your operation is performing is through benchmarking. By developing a set of consistent and measurable key performance indicators (KPIs), you can measure your costs, productivity, and efficiency. Once you’ve completed and analyzed your existing operation, you will want to compare yourself to accepted industry benchmarks. Avoid using general industry averages as those won’t be specific to your business in terms of product type, size, and customers. Many companies are using management reporting online for critical contact center and fulfillment KPIs.

Curt Barry is president of F. Curtis Barry & Co., a Richmond, VA-based operations consultancy.

Other articles by Curt Barry:

10 Steps to Smoother System Selection and Implementation

Juggling Web and Phone Contacts

Multichannel Inventory: What You Need to Know

Keeping Vendors Compliant

Multichannel System Challenges

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