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When Deligo Technologies began to analyze return on investment data for its customers, two factors had to be clearly defined and understood. In every project justification, there are both hard costs and soft costs that Deligo looks to reduce.
Hard Costs are the actual dollars outlaid by a company. Examples
include costs of printed materials and salaries for employees who
handle any given function.
Soft Costs are the current costs associated with
inefficiency and with the status quo.
Examples include call escalation in the
customer service department, follow-up-calling
and engineering time spent. The best way to illustrate this is to
use an example. The following information has been taken from an
actual Deligo Technologies client who will be known as Flow Corp.
FLOW CORP'S HARD COSTS
Hard costs for Flow Corp included printed material, website costs and staffing ? customer service representatives, application engineers, product managers, and regional sales managers.
Those are the obvious ones.
Deligo also helped Flow Corp determine the cost of "customer touch
points." Touch points occur every time
an employee makes actual contact with a customer via phone or face
to face meeting. Chart 1 below breaks the cost of these phone calls
down by department, while Chart 2 shows the total cost of a sale.
We have included the cost of designing and maintaining the website
in both graphs to show the comparison
with both phone calls and face-to-face sales calls.
Credits were another area of hard cost which Deligo helped Flow
Corp to uncover in this analysis. Credits
were costing the company an estimated
$300,000 per year with the main cause for credits being miscommunications.
With the e-commerce strategy that Deligo Technologies designed and implemented
for Flow Corp, the company's distributors
took more control of the order process
and began to check order information before being shipped. This
website function eliminated many mistakes and drove down costs.
Top-line sales grew, too. Flow Corp increased its sales revenues
with the US Government by more than
$500,000 because government departments were able to place orders
directly with on-line, instead of the traditional bid process thus
saving both the government and Flow Corp's transaction costs. Many
of these orders were replacement parts and products.
FLOW CORP'S SOFT COSTS
In this area of the study, we concentrated
on the ways Flow Corp?s e-commerce
strategy led Flow Corp's employees to perform their primary jobs
more efficiently - or simply stated, doing
more with less.
In the first year,
Flow Corp placed catalog and pricing
content into a media database that
included all printed material - installation
and operation manuals, product specification
sheets, preventive maintenance bulletins,
and product brochures - allowing
customers, distributors, and employees to have
access to the information on a 24/7
basis. This led to more than $1.1 million in savings. Inefficiencies such as the following were reduced:
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