Flow Corporation is not unique in that the ROI from any technology or ecommerce initiative should absolutely be measured – frequently. For any company that is willing to be open about its actual costs and personnel efficiencies, Deligo Technologies can help them perform this type of study, and make improvement recommendations. All measurement studies are customized to fit our clients’ needs.
The most conservative figures were used in all cases.
Activity Based Cost Study
and ROI Data
With this approach, Flow
Corp allowed itself to move slowly into
a full e-commerce strategy, allowing
the company to begin thinking of ways
to re-engineer many current processes
and lower their transactions cost in
the long run.
Phase 1 focused on the economies of information (content), which entail both richness and reach. Richness deals with the content and what the information actual says to the user. While reach deals with how the cost of this information is passed both internally and externally. This ROI study deals mainly with this issue. As Flow Corp moved into Phase 2 of their plan they saw a significant and positive impact on their transaction costs.
Phase 2 allowed Flow Corp the luxury to think about the ways it would be able to reengineer their process, to increase effectiveness of customer service reps and application engineers with regional managers. This was accomplished with the following benefits.
- E-support for publishing the company’s knowledge base
- Direct Customer access, 24/7
- Immediate availability of new and
revised solutions that eliminated redundant
problem solving
- Support for multiple communications
channels so that customers could request
answers in the way they preferred (Web,
email, or voice)
- Reduced Call time
- Reduced call escalation
- Enhanced employee training time
- Boosted CSR efficiency and customer “Self
Service” on the web
- Raised customer and distributor satisfaction
Unlike many capital expenditures, web-strategy
typically is not received as candidate for
improving profitability. Customer service
and support organizations usually foster
company growth by adding extra people to
maintain customer satisfaction (inevitably
spending more money) or reducing service
levels to save money (potentially driving
customers away). A well thought e-commerce
strategy eliminates the need to make the
choice. Based on the activity base cost determined
from interviews, Flow Corp was able to successfully
incorporate changes.
ANNUAL COST
Hard Cost (HC) vs. Soft Cost (SC)
Printing Costs (HC)
Catalogs $228,800
Binder
Costs $20,000
Product
Launches $25,000
Tech
Data (Parts List) $2,500
Shipping
Cost $95,000
3
People & Benefits $55,600
CS
Newsletters (4) $12,800
TOTAL $439,780
Customer Service (SC)
Total
CSRs 11
Avg.
Cost of CSR $27,000
Total
Cost of CSRs $297,000
Avg.
Number of Calls 30
Total
Calls (Annually) 85,800
Estimate
Cost per Call $3.46
Estimate
Cost per Minute $0.22
CSR = Customer Service Representative
Estimate Cost of Handling Different
types of Calls
| Reason For Call |
Estimated Percentage |
Estimated number of calls |
Estimated time to handle |
Estimated cost per (aggregate) |
| Price/Delivery |
50% |
42,900 |
10 Min |
$94,380 |
| Delivery Info. |
30% |
25,740 |
10 Min |
$56,628 |
| Product Info. |
20% |
25,740 |
20 Min |
$75,5042 |
| Quotes |
|
|
|
|
| Other |
|
|
|
|
TOTAL $226,512
The
top three reasons for these calls are as follows;
1) Part number look up
2) price of product 3) Availability
Additional Information (Customer Service):
Lead Follow Up — 5 / Day
Estimated
Close of Leads — 1-2%
Number of
Orders Daily — 50
Average Order
Size — Parts: $175.00 / Product:
$1,500.00
Avg. Number of Credits — 65/
Month
Estimate Cost of Credits — $25,000/
Month
Estimated Total Cost of Credits — $300,000
Top three reasons
for credits as follows;
1) Product supplied incorrectly
2) incorrect
quantity
3) warranty
Regional Manager Activity Cost Analysis
Number
of Regional Mgrs. 15
Average
Cost per Regional Mgr (salary & expenses) $126,800
Total Estimate
Cost For Regional Mgrs $1,902,000
________________________________________
Average Number
of Calls Per Year 4,680
Cost per Sales
Calls $406
________________________________________
Estimated
Percentage of Time "Putting Information
Together" 15%
Estimated
Cost to "Put Information Together" $285,300
Application Engineering
Number of Engineers 13
Avg.
Cost of an Engineer $66,000
Total
Cost of Engineers $858,000
________________________________________
Avg. #
of Sales Calls 156
Avg.
Cost of Sales Call (Customer Touch Point) $5,500
________________________________________
Estimated Phone calls
Per
Day 7
Avg.
# Calls Per Month 140
T
otal
# Calls per Year 21,840
Avg.
Cost of Phone Call
(Customer Touch Point) $39.29
________________________________________
Estimated Time to
"Put Information Together" 75%
Estimated
Cost to "Put Information Together" $643,500
____________________________________
Percent of Call Transfer
From CSRs 10%
Cost
of Call Escalation $85,800
Product Managers
Number
of Product Mgrs. 8
Avg.
Cost each Prod. Mgr. $63,000
Total
Cost all Prod. Mgrs. $504,000
____________________________________
Avg. # of Sales Calls (Face to Face)
per PM 25
Total
# of Sales Contacts 2400
Estimated
Cost of Sales Call (Touch Points) $210.00
Estimated
# of Phone Calls per Day 5
Total
Phone Calls Per Month 100
Total
Phone Calls Per Year 9600
Total
Cost per Call (Touch Point) $52.50
___________________________________
Estimated Time to "Put Information
Together" 20%
Estimated
Cost to "Put Together Information" $108,000
Percent of Phone Calls Transferred
from CSRs 20%
Estimated
Cost of Call Escalation $100,800
Summary from combined categories:
- Estimated cost savings to "put information
together": $ 939,300.00.
- Estimated cost savings of "Call
Escalation" calls from CSR's: $
186,600.00.
Total: $1,125,900. Hard and Soft Cost Combined
These combined costs "put
information together" and "call
escalation"
vary from company to company, but exist
in varying degrees. This study simply
points out "how much" they exist within
Flow Corp and how the integration of
automation driven from the Deligo software
creates a noticeable payback.
The savings can be measured over a specific period of time with the proper measurements if your company is willing to be open about actual cost and personnel efficiencies as the paradigm within your company?s culture changes.
Deligo's management team
stands ready to help in this type of
study. It will be tailor-made to fit
your organization.
