customer service, metrics, customer satisfaction, warehouse, inventory

Very little has more impact on a company’s success than customer satisfaction. Most people realize that on-time delivery plays a key role in how business’ satisfy customer needs, but customer satisfaction can be an expensive undertaking if the company doesn’t manage all aspects of customer service and the business processes that affect them. True customer satisfaction is a measure of sales, delivery and after sale performance. What better time to raise awareness of the vital role customer service plays and the ways to improve it in a business than over customer service week?

For example, if you consistently backorder items or deliver them late, customers will eventually become angry. They will also become dissatisfied if the product arrives on time but can’t be installed by the services team until later, or if it doesn’t function properly or is missing parts. There are plenty of ways for customers to not be satisfied, but only one way to make them happy—do everything perfectly, every time.

Meeting Customer Expectations

Inventory accuracy and minimizing stockouts are very important to customer satisfaction, but a few other metrics also impact the ability to meet customer expectations.

DIFOT (Delivery in Full by Line and/or Order)
This measures the number of orders or order lines shipped on time and without backorders or shortages. This is calculated by dividing the total number shipped in full and on time by the total number scheduled.

Forecast Accuracy
This is defined as the ratio of forecast to actual demand in a period. It’s calculated by finding the mean absolute deviation by period for each line item.

Order Costs
Customers don’t care about how much it costs to process orders, but you should. If your team must perform acts of heroism to get orders entered, or if you impose a lengthy and unnecessary approval process, you are needlessly increasing your costs, but without adding value in customers’ eyes. To calculate, add the cost of order entry and maintenance, approvals, EDI, installation and installation planning (if applicable), fulfillment, distribution, invoicing, collection and related accounting costs and divide by the total number of orders.

Order Cycle Time
This is the elapsed time between order receipt and shipment.

Service Request Resolution Time
This can be defined as the average time in minutes or hours between the service request and the resolution.

Unreimbursed Freight
Companies often absorb the cost of expedited shipments when the delays are attributable to internal factors. A high level of unreimbursed freight shows that the team is taking extraordinary measures to satisfy customers.

Measuring Customer Service and Satisfaction

Companies can use these metrics to help ensure they are doing everything possible to satisfy their customers at a manageable and sustainable cost. Monitoring these metrics can show whether customers will feel confident that your company delivers on its processes, but they also show where internal processes may be making this hard or expensive to accomplish.

Measuring DIFOT tells whether your company is meeting customer expectations. You can use QAD Business Intelligence (BI) or applications within the Channel Islands user experience (UX) to measure DIFOT.

It’s easy to meet delivery expectations if you carry excess inventory, but it’s an expensive and impractical solution. Improving forecast accuracy can help improve DIFOT without increasing inventory. If forecast accuracy is off, set up cross-functional teams to ensure that forecasts meet company objectives and are reasonable. Consider inviting input from key customers as well.

If forecasts and inventory balances are accurate, look to production processes or supply chain effectiveness for potential answers. Streamline and simplify processes wherever possible, especially those that affect order cycle times. For example, use a product configurator rather than an engineering approval process, and use built-in parameters to ensure that order discounts are within guidelines.

Forecast Accuracy
Consider using a planning and optimizing tool such as QAD DynaSys to help measure forecast accuracy. Implementing a Sales & Operations Planning (S&OP) and Integrated Business Planning (IBP) process can help ensure that the forecast is accurate by eliminating double counting or over-optimistic projections. When the forecast is accurate, you don’t waste resources manufacturing unneeded product, and priorities are clearer throughout the organization.

Order Costs and Order Cycle Time
Companies sometimes add order entry process steps designed to manage exceptions, but the problem is that routine orders must often pass through the same time-consuming steps. Use the built-in tools in QAD Cloud ERP to calculate available to promise dates and to ensure viable configurations and healthy margins. Then most orders can speed through the process, helping improve customer satisfaction.

Also, take the time to map out all order management processes to eliminate any non-value-added steps. If you’re moving to the cloud, it’s a great time to reevaluate business processes to improve efficiency.

Service Request Resolution Time
Nothing frustrates a customer more than having a non-functioning product. Use a modern quality management system such as QAD CEBOS to design quality in during the design planning phase, and you will automatically reduce service and warranty costs and improve customer satisfaction. Use QAD BI or the Channel Islands UX to measure average resolution time.

Unreimbursed Freight
Even in the best run companies, stuff happens, so there may be times when it makes sense to use expedited freight and absorb the cost in the name of customer satisfaction. But if you find unreimbursed freight levels are too high or climbing, it’s a sure sign that something is off in the organization. Consider unreimbursed freight as an early warning signal, and then use these other metrics to pinpoint the sources of the problems.

Best Practices for Customer Service

  • Use S&OP or IBP to ensure forecasts are accurate and meet customer objectives
  • Enlist customer input to improve forecast performance
  • Periodically review order and delivery processes to eliminate non-value-added steps
  • Rely on software parameters to process routine transactions
  • Balance inventory levels with desired customer service / DIFOT levels
  • Implement a modern service management solution
  • Take advantage of built-in analytics
  • Use Advanced Product Quality Planning (APQP) or Design for Quality techniques to ensure product serviceability and extend the mean time between failures (MTBF)
  • Use available to promise to schedule orders and lines

Choosing Metrics

There are literally hundreds of possible metrics you can use to manage your company, but using too many metrics can simply confuse the team. Decide which metrics make the most sense and if you use metrics that affect each other, make sure your targets are in line. Some businesses decide to use management strategies such as objectives and key results (OKR) to set, and track goals and targets at the corporate level. To learn more about OKR and how your company can use OKR software to streamline your operations, check out Additionally, don’t target extremely low on-hand inventory levels if you promise same-day shipping from stock delivery. Everything has a cost, and every decision affects multiple metrics. That’s why it’s important to know your customer and which factors they value most. Once you have a firm handle on what your customers value, you can measure performance against those factors, reserving other metrics for when you need to investigate emerging performance issues.

What challenges are you finding most significant when it comes to customer service? Let us know in the comments section below.