Operations and Processes: The Keys to Creating a Successful Experience

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DSN December 2013, Cover.

Direct selling companies know that behind every successful consultant stands an army of people who are working hard to ensure the total customer experience is a highly successful and positive one.

No matter how wonderful a product is or how fun an event has been, once the order is placed the customer experience is taken out of the hands of the consultant and turned over to those behind the scenes—the customer service rep, the warehouse manager, the picker/packer and the IT team member—who ultimately determine the overall satisfaction level of the customer.

The foundational functions of a business—from order processing to supply chain management to IT systems—are critical to success. A company’s operational elements must be continuously maintained and constantly updated or the company eventually grinds to a halt. Routine meetings and efficient distribution and delivery processes aren’t the sexy part of the business, but they literally make or break the business. Without them, the consultant might lose confidence in the company and could leave in frustration.

The foundational functions of a business—from order processing to supply chain management to IT systems—are critical to success.

So what is the total customer experience? It encompasses much more than attending a party and ordering products. A recent article in the September 2013 Harvard Business Review (HBR) reported that customers don’t think of businesses in terms of individual touch points such as websites or shipping or even gatherings. Instead, they measure their satisfaction through their entire experience. Well-run, frequent parties held by a top consultant can be trumped by slow product delivery to the customer. And since direct selling companies actually have two layers of customers—the consultant and her final customer—the effect becomes twice as important. According to HBR, the quality of those cumulative interactions, called the customer “journey,” shows up in the bottom line.

  • In measurements of customer satisfaction performing just one point better than peer companies on a 10-point scale corresponds to at least a two percent better performance on revenue growth rate.
  • The gap between the top- and bottom-quartile companies on journey performance was 50 percent wider than the gap between top- and bottom-quartile companies on touch point performance in one of the surveyed industries.

Think of your own experience, and the survey rings just as true for direct selling as for other industries. Have you ever discontinued a popular product, replacing it with another that was truly improved, only to receive complaints from consultants that their customers were leaving them? Customers still had access to a top-notch product, the same great service as always and your money-back guarantee, but they were disgruntled nonetheless—and so were your consultants. Their view of the company is based on their whole experience, which is fueled by every element of your operational system and all your processes. While customers and consultants are practically unaware of these things because they’re mostly behind the scenes, to them you’re the sum of all your parts.

That’s why so many direct selling companies are currently putting a lot of focus on the operational side of the business, making substantial investments to ensure the field has those systems and processes in place to help them be successful.

“We’re committed to making sure that our field tools work well, our back-office systems are efficient, and every phone call, every ticket and every order shipped is the best it can be,” says Al Richey, Vice President of U.S. Operations at Nerium International. “That only helps cause satisfaction and retention. The last thing I ever want to do is lose a customer because operations dropped the ball. We set a high bar, but it’s our bar.”

“The last thing I ever want to do is lose a customer because operations dropped the ball. We set a high bar, but it’s our bar.”
—Al Richey, Vice President of U.S. Operations, Nerium International

Processing the Order

In 2011 Scentsy was named to Inc. magazine’s annual 500 list of the nation’s fastest-growing private businesses. The party-plan company’s 2010 revenues of $382 million and three-year sales growth rate of 2,904 percent had it placing 85th on the list.

But growing at such a pace brought with it some very real concerns—mainly, how do you keep pace with the demand for product? Scentsy’s IT Department, headed by Chief Information Officer Matt Cooley, was tasked with improving and refining the company’s front-end system. Utilizing key software platforms from Microsoft and SAP technology, they developed an e-commerce and fulfillment platform that allows consultants to quickly place orders and track order progress.

The SAP system, which was launched in January, allows Scentsy to deal with the various demands of an e-commerce business—such as placing last-minute orders, handling surges in volume, doing custom calculating for commission structure and helping project commissions.

At Ambit, co-founders Jere Thompson and Chris Chambless recognized the IT challenge as they built the company. They invested in a proprietary, robust, scalable system called BlueNet™ that could handle rapid growth. The company’s Chief Information Officer, John Burke, recruited expert staff members to build a system that could flawlessly perform all the functions a traditional energy company needs, as well as pay commissions to the company’s independent energy consultants—plus, it had to be able to grow along with the company. They also chose a headquarters location with an open environment that fosters communication among all staff members.

“BlueNet is the reason we’ve been able to grow to where we are today,” says Eric Johnstone, Ambit’s Vice President of Marketing and Field Services. “We had to put a lot of systems and processes in place before we had our first customer.”

Salt Lake City-based USANA uses Odyssey, a proprietary logistics technology system, to track associates’ past and current orders across its 18 markets as well as rank advancement and contact information. In a typical month, the company handles 82,000 orders.

USANA has also embraced mobile technology: Its online shopping cart, online enrollment and auto-orders can all be accessed from mobile devices, and its True Health Assessment showcases the use of Online Enrollment and Shopping on an iPad. USANA has full-order tracking online from the shopping cart, from the USANAtoday back office and through automated emails.

Distribution Centers

Even though robust operational infrastructure is universally acknowledged as one of a company’s must-haves, some companies have found that rapid growth can overwhelm it. Thirty-One Gifts discovered that it had an enviable problem a few years ago when growth threatened to outpace the ability of the company’s business processes, systems and overall infrastructure to support it. The company made a bold decision. With more than 5,000 new consultants joining the company each month, it froze recruiting for four months in 2011 to allow it to beef up its infrastructure and processes.

“We knew that implementing the recruiting freeze was something we had to do,” explains Thirty-One President Andy Neri. “We started the company with a commitment to our consultants to give them the opportunity to be successful, but we also knew we had to have critical business processes and infrastructure to not just keep pace with growth at that time, but to get us out in front of it to be foundational for the future.”

With more than 5,000 new consultants joining Thirty-One Gifts each month, it froze recruiting for four months in 2011 to allow it to beef up its infrastructure and processes.

The company used the pause to expand into a new personalization and distribution center; to upgrade warehousing and order management systems; to improve training for consultants; and to add staff at its call center.

Today, the distribution center in Columbus is automated and systematically controlled. Picking is done there at the center, with conveyer belts taking products up to the mezzanine level where monogramming is completed (which can add one to two days to the delivery process). The distribution center ships an average of 740,000 units per week, and according to COO John DiCecco, 99.8 percent of the orders are 100 percent correct. Approximately 16 percent of all orders are shipped directly to the customer and 84 percent are shipped to the consultant/hostess; 99.6 percent of all customers receive their orders complete, without backorders.

Scentsy has also invested heavily in distribution centers to help handle the surges in volume. In a typical month, the company processes approximately 365,000 shipments in North America, but that number can flex during peak seasonal volume to over 600,000 shipments a month.

In September 2011 the company opened a 190,947-square-foot distribution center on the Scentsy Campus in Meridian, Idaho, and announced plans for a 150,000-square-foot distribution center in Texas, where more Scentsy products are sold than any other state.

The Coppell, Texas, center handles approximately 27 percent of Scentsy’s orders in the United States and has reduced shipping times to customers in the south and central U.S. from three to four transit days to one to two days. The center also has a custom-built pack station with a dedicated packer, as all Scentsy distribution centers do.

“Because of the intricacies of our packs, we invest heavily in our packers,” says COO Tabb Compton. “We need the highest quality of packs and the highest quality of fill rates and accuracy to that pack. Rather than using more automated systems, we want that true team-member touch because they are the last person to touch the consultant before the delivery is made.” Scentsy boasts nearly 100 percent accuracy on items selected to items shipped.

Speed of Delivery

Nu Skin has been in business for almost 30 years and now operates in 53 countries. Logistics for such a company is a huge undertaking, and at Nu Skin, that complex function is overseen by a Vice President of Logistics. Scott Schwerdt, President of the Americas Region, estimates that operational coordination occupies about 50 percent of management’s time internally, purely because of its complexity and significance.

“Getting products into 53 countries, with different formulations and different regulations is such a significant part of our business because it can make or break us,” he states flatly. “Failure to have products on the shelves for distributors is tantamount to putting them out of business. Or if they can’t order directly from the company, it impacts their confidence. If any one of the operational legs of our business falls down, it can stop them dead in their tracks.”

Schwerdt notes that Nu Skin’s sophisticated SAP logistics and sales system software tracks the complicated movement of products throughout the company and to their eventual destination, providing management with a complete picture of operations at any point in time. Daily logistics meetings and weekly global operations meetings let managers look at every issue affecting the business and then take any necessary steps to make sure they’re delivering on their commitments.

“Failure to have products on the shelves for distributors is tantamount to putting them out of business. Or if they can’t order directly from the company, it impacts their confidence.”
—Scott Schwerdt, President of the Americas Region, Nu Skin Enterprises Inc.

Operational systems usually work best when a business is predictable. Some innovations aid that process. At Nu Skin, its enviable auto-ship program is one of the keys. Most of its monthly shipments are generated by its auto-ship function, allowing the company to predict each quarter’s results with almost 100 percent accuracy.

USANA delivery can vary depending on the ship zone and method used for shipping. Products are shipped directly to customers from USANA’s corporate headquarters in Salt Lake City, and on average the process can take anywhere from two days to 10–14 days. The company boasts a 99.9 percent accuracy rate on delivery.

For Mannatech, 99 percent of orders are shipped directly to the consultants, and the average delivery time is 2.4 days, with a 99.8 (plus or minus 0.15) percent accuracy rate. If an order is shipped short by mistake, the customer calls to notify the company and Mannatech sends out a comp order to correct the shipping mistake. The inventory for the comp order is actually accounted for when the next cycle count is done, which results in a wash of the inventory level for that item. Mannatech absorbs the additional cost to ship out backorders.

At Scentsy, 70 percent of products are sent to the consultant and 30 percent directly to the customer the consultant represents. The company has worked hard to be able to get to all contiguous U.S. locations within three days; the actual transit time is 2.2 days. The timeframe from the date that Scentsy receives the order to delivery is two to three business days. So, overall, the company operates under a five-day business model, which might be extended during the holidays and at the end of the month when volumes typically increase.

Scentsy is very diligent about tracking missing items and has a missing items ratio of .02 percent of total units shipped versus units reported missing to its customer support group. It has a 99.9 percent ratio on fill rates. The company spends a lot of time to ensure the items being promoted in the catalog are available at any point in time. If items are backordered, Scentsy will process the order the moment the product is replenished under a first-in, first-out model, without charging additional shipping.

Handling Service Issues

Even with the best in operations, service issues inevitably arise and must be handled quickly and efficiently.

The perfect storm can converge, and one did earlier this year at Ambit. On a Saturday—prime time for part-time direct sellers to work their business—Ambit’s consultant back office, Power Zone, went down. The Ambit team immediately began communicating through emails and texts to its field sales leaders, who then cascaded the information to their teams. The problem turned out to be an external issue that was resolved within four hours.

“We had a post mortem the next morning and let consultants know what had happened,” says Johnstone, Ambit’s Vice President, Marketing and Field Services. “The issue turned out to be minor because we tackled it right away and quickly informed everyone who needed to know or take action. In our culture, titles aren’t important. You do what you need to do and think like an entrepreneur in this organization.”

As harrowing as an operations crisis can be, it’s also an opportunity to improve. “You can do all the due diligence in the world and prepare, prepare, prepare,” Johnstone reflects. “But there can be something that wasn’t communicated properly to us, and one little thing can affect another. We always have lessons learned from every market.”

USANA has two call centers in the U.S. handling calls for North America, Europe and the Caribbean Islands. The company believes it is important to provide a convenient and personalized avenue for the associates and customers to place orders, answer questions or receive help with their business needs. The average call wait time is 36 seconds.

USANA’s customer service team is available through all media, including phone, email, Facebook, chat, and through the mail. All attempts are made to personalize the service each customer receives. On average, USANA’s customer service department handles talk time—for eight different languages—in about 294 seconds. However, USANA’s customer service team does not set talk-time limits and encourages its Customer Service Reps (CSRs) to remain on the call as long as the customer needs them to handle the situation with One Call Resolution.

“You can do all the due diligence in the world and prepare, prepare, prepare, but there can be something that wasn’t communicated properly to us, and one little thing can affect another.”
­—Eric Johnstone, Vice President, Marketing and Field Services, Ambit

Mannatech has an in-house call center, and CSRs are available via phone to assist customers with placing their web orders. Customers have a tracking number for each order that is placed. The company accepts issue reports via phone, email, mail or fax. Most issues are addressed immediately over the phone or email by the CSR. More complex issues are answered within 24–48 hours.

“We are constantly searching for ways to wow our customers,” says Landen Fredrick, Vice President of Global Operations. “Whether it is initiatives to decrease hold times or to improve the overall experience each Associate has with our representatives, we are always in a state of constant improvement. Overall our goal is for the customer service we provide to be a distinction that sets us apart.”

Scentsy has a company owned and operated Customer Care Center on its Meridian campus. The Customer Support Group tracks speed in answering and first-call resolution. The call wait time is 30 seconds to 1 minute, and the goal is that all solutions are provided within 24 hours.

Excellence is one of USANA’s four core company values and is emphasized through customer service’s weekly trainings, mentoring sessions, one-on-ones and call monitoring feedback. Excellence is tracked through a Compliment vs. Complaint scorecard with the goal to maintain at least 10 times more specific compliments than complaints, which the company has been able to achieve year after year. This year USANA’s customer service department has recorded 20 times more compliments than complaints.

“While we love the compliments, complaints are also welcomed so USANA can continue to grow and strengthen its services,” says Chief Communications Officer Dan Macuga.

Honoring the Consultant

“Operations can’t grow a business, but it can kill it,” notes Nerium International’s Richey. “The most important way to make sure we’re driving operations to the best of our ability is to get out from behind email and the other things that can distract us, and get together face-to-face, focusing on the thing that needs to be done.”

At Scentsy, there is rarely a refinement, process improvement or quality initiative brought to the executive team that does not get approved if it clearly would impact the consultant in a positive manner.

He notes that Nerium is set up as two organizational groups that collaborate regularly. “The biggest thing is open communication,” he emphasizes. “No boundaries. Being collaborative. It doesn’t matter who gets credit. As long as we’re taking care of our Brand Partners and customers, we’re getting the job done.”

At Scentsy, there is rarely a refinement, process improvement or quality initiative brought to the executive team that does not get approved if it clearly would impact the consultant in a positive manner. The company is always looking out for its consultants, finding ways to help them succeed.

“Showing our consultants that we are doing everything we can in operations to ensure their success is probably the most important aspect of this business,” says Compton. “Over-delivering on their expectations is the investment we make to ensure that we can meet the service standard of our consultants. They are the lifeblood of this organization.”

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