Supply issues result in major losses for UK firms

The knock-on effect of resolving problems with suppliers is costing UK business more than £10 billion every year and consuming the time of the most senior executives' according to the latest research from the Institute of Customer Service.

The research, which consists of interviews with more than 2,000 people, revealed that the average time spent by employees rectifying problems caused by suppliers falling short of the standards promised costs UK business £10.5 (£10.508) billion, the equivalent of 0.7 percent of UK GDP.

UK employees spend on average 4.7 hours a month addressing problems with suppliers, however delving deeper into the figures reveals the true cost to business could be even higher. Senior managers and directors are disproportionately more likely to be responsible for dealing with supplier issues, increasing costs by diverting their focus from growing their business to deal with suppliers.

Supplier problems consume financial resources

Nearly 60 percent of executives earning over £100,000 a year spend on average more than one day a month dealing with the consequences of suppliers getting something wrong. This number falls to less than 28 percent for executives earning between £90,000 and £90,999, and drops even further to under 5 percent of people earning between £10,000 and £19,000 a year. By and large, the more you earn, the more time you spend on dealing with the consequences of suppliers getting something wrong.

Jo Causon, CEO of the Institute of Customer Services, comments: "Resolving customer and, particularly, supplier issues is consuming a significant amount of senior executives' working week – time that could be spent on developing new and innovative services which drive growth. With so many organisations operating complex supplier networks, the quality of relationships - with both customers and suppliers - is central to improving an organisation's performance.

"The Institute of Customer Service consistently demonstrates that organisations that focus on proactively managing their relationships with customers and suppliers achieve higher customer satisfaction, which translates into improved business performance. This research highlights the tangible impact on business' bottom line."

Customer service drives better business performance

The Institute of Customer Service has monitored the UK economy closely for nearly six years. During this time it has identified consistent improvements in customer service as experienced by customers. Up until the most recent UK Customer Satisfaction Index (UKCSI), released in July, each successive biannual report showed improvement. The latest report revealed that customer service has plateaued, suggesting that organisations need to recalibrate their focus on customer service in order to take full advantage of a return to growth in the economy.

Customer service is a proven driver for business growth - companies that invest most time and effort into providing the highest quality customer service have a real advantage over competitors. Statistics show these companies have consistently outperformed the competition during the economic slowdown. It is important to maintain this effort as business confidence improves to avoid the expensive knock-on effect of poor service on the rest of the UK economy as it grows.

Reducing the drag on the UK economy

Causon adds: "After almost six years of economic uncertainty, the UK economy looks increasingly to be recovering from the financial crisis.  But in order for this to be sustainable excellent customer service must be inherent in every part of the value chain.  Both public and private organisations must focus on customer service and engage everyone in their workforce to reduce the drag on economic recovery.

There is no doubt that the UK can become the world leader in customer service across all industry sectors – it's in a good position to do so.  UK Organisations need to focus on customer relationships at all levels in their organisation, drive appropriate customer service metrics at board level and develop the skills which underpin excellent service.  Otherwise businesses will struggle to deliver stable and sustainable business performance, let alone growth and face losing the momentum they have worked so hard to maintain during the financial crisis."


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