Benchmarking PVF Distributors

By Joan S. Adams <adams@pierian.net> +1-212-366-5380

Inter-industry comparisons can be misleading.

I was recently asked if I knew of any benchmarking studies on customer service in the PVF industry. The answer was no, although the annual ASA Operating Performance Report (OPR) does provide financial benchmarks for its PVF and plumbing members. My understanding is OPR is limited to financial data, and in general I’m skeptical of intra-industry benchmarks for reasons I detail below.

Benchmarking hit the scene a few decades ago. Companies within an industry would get together, hire an outside entity to study them, and rank each company’s performance compared to the others in the group. All told, it was a pretty good idea. Companies that thought they were doing really well often found out that their competitors were doing better. Much was learned when similar companies benchmarked everything from margins to debt ratios, productivity, employee turnover, money spent on R & D, average age of employees, etc.

However, benchmarking often lost a lot of its punch due to the narrowness of the group. GM is a painful example. For too long GM only compared itself to Ford and Chrysler, when they should’ve been looking at Toyota, Harley or John Deere.

Benchmarking within the PVF sector tells us only so much. If, on average, customer service is merely “OK” in PVF supply houses, then a benchmarking study may lead you to believe your customer service is excellent because it’s above the industry norm. In reality, it might only be somewhat better than lousy because the industry as a whole doesn’t do things very well. Inter-industry studies give companies a false sense of security. They tell you that you are doing better than the rest of YOUR industry. Ergo, you must be excellent.

In order to really get value out of benchmarking, PVF companies need to look at service outside of PVF. Basically, if you want to achieve true excellence, you must compare yourself with the best.

For example, help desk call centers measure customer service by counting the number of times the phone rings before being answered. Then they measure the amount of time the customer is on the phone before he gets an answer or the call is escalated (gets sent to someone higher up the food chain). Call centers measure how long the customer is on hold, how many times her call was escalated and, finally, if the problem was resolved. These are interesting measures—something from which a PVF distributor could benefit.

So while there are no PVF benchmarking studies out there that I’m aware of to measure customer service, you can still benefit by learning from other industries. Think of 8–10 customer service performance criteria that can be measured, then take a look at other industries/companies famous for customer service to see what they define as excellence. First, you need to measure your current level of performance in order to develop your baseline. (If you don’t know where you started, how can you possibly know if you’ve improved?)

Develop a program for improvement for each. Three months later, measure again to see where you made progress (keep going) and where you didn’t (time to change your approach).

I would focus on two major areas:

• Errors—nothing says bad customer service like a big fat goof:
  • Number of billing errors
  • Number of shipping errors
  • Wrong material
  • Wrong quantity
  • Defective material
  • Number of stock outs
  • Number of missed delivery deadlines
• Cycle times—the definition of bad service is making the customer wait:
  • Time to respond to phone calls
  • Time to resolve a problem
  • Time from RFQ to quote
  • Time from order to delivery
  • Emergency respond time
  • Time to resolve aforementioned goofs

Ambulance services stringently measure emergency response times. McDonald’s measures stockouts (the number is very, very low—across how many jillion stores?) Mail order catalog companies track every manner of shipping error. I’ll bet my favorite, Land’s End, has an astonishingly low number in view of their volume.

Most companies are willing to share their performance information with you. Set the bar high, and seek out the very best to compare your performance against if you want to see dramatic results.