Increasing customer value : assessing the technical customer complaints process within Tata Steel-MLE through SERVEQUAL

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Increasing Customer Value: Assessing the

technical customer complaints process

within Tata Steel-MLE through

SERVEQUAL

Balesar, Raj (10884173);E-mail: rajbalesar@hotmail.com

MBA Company Project/ Thesis supervisor: Jack van der Veen

10/19/16

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Executive summary

Purpose

The aim of this research was to assess the current customer process for product quality complaints within TS SPMLE, in order to improve the process, using the SERVEQUAL model. In addition, this research aimed to develop a model which could quantify customer value based on the total cost of ownership principle. This model would be used to assess how customer value is affected by the choice of improvement initiatives. The initiatives were determined to close the gaps in the current process for product quality complaints within TS SPMLE.

Methodology

This research was conducted through a combination of exploratory and action-based research. The customer process was assessed using an interview protocol based on the SERVEQUAL model. Furthermore, the empirical data from the interviews, from the assessment of the process, were analyzed using a qualitative data coding method.

Results

The assessment of the current customer complaint process for product quality complaints within TS SPMLE revealed that all the four gaps, as discussed in the SERVEQUAL model, are present within this process. The standards gap is the biggest gap in the process, followed by the

service delivery gap, the communications gap, and finally the provider gap. This research also

proposes several alternatives to close each gap in order to improve the process for product quality complaints within TS SPMLE.

Due to the lack of reliable data, the model for quantifying customer value was not set up. Instead, this research described how such a model might be developed.

Research limitations/implications

Lack of reliable data to set up the model for quantifying customer value was the major limitation during this research. Therefore, this research proposes that TS SPMLE engages in establishing data collection systems and processes that will enable development of such models for quantifying customer value in the future.

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List of definitions

This section provides the list with terms, and their definitions, frequently used throughout this research.

 Product quality complaints: complaints only relating to the following attributes of the product: surface appearance, mechanical properties, and material width and thickness.  Net working days (nwd): include all days of the week except Saturdays and Sundays.

 Lead time: the total time, in net working days, from the moment the customer complaint has been registered till the complaint has been technically closed and feedback has been provided to customer about possible causes of this problem. For automotive customer complaints on product quality the lead time for resolving complaints is fifteen (15) nwd. The lead time is the sum of individual response times for each phase of the resolution process. The definitions of the individual response times for each phase are given next.

 Response time a: the time required to book the complaint in the complaint system. For automotive customer complaints, the aim is to book complaints within one (1) nwd.

 Response time b: the time required from the moment the complaint is booked till the analysis of the complaint, for a possible root cause(s), by the work unit. For automotive customer complaints, the complaint analysis should take no longer than seven (7) nwd.  Response time c: the time required from the moment the work unit analysis phase is

completed till the formal closure of the complaint by CTS. For automotive customer complaints, this phase should take no longer than seven (7) nwd.

 Complaint acceptance: a complaint is accepted once it has been determined by the CTS department that there is sufficient evidence which supports the complaint. The complaint is booked in the complaint registration system of TS SPMLE. The complaint registration system of TS SPMLE is called COMPASS.

 Work unit analysis: depending on the nature of the product quality complaint, several lean tools can be employed to determine the underlying reason(s) for a particular product quality issue. Examples of lean tools applied within the current customer process for

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product quality complaints within TS SPMLE are: practical problem solving (PPS), A3 analysis, and 8D analysis.

 Technical closure: once the work unit analysis is concluded, the CTS department verifies that the analysis meets the customer demands or requirements. And, if the customer demand or requirements are met, the customer is informed about the outcome of the analysis. Thereafter, the complaint is technically closed and handed over to the commercial department.

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Chapter 1 Introduction

This chapter starts with a brief overview of steel and its manufacturing process. After that, the impact of the most recent economic crisis of 2008/2009 on the steel industry, specially the European steel industry is discussed. The third part of this chapter discusses the impact of the 2008/2009 crisis on Tata Steel Europe and how Tata Steel Europe is trying to keep afloat during such turbulent times. The information provided in this chapter aims to educate the reader with background information about the current state of the steel industry. This information will help to better understand the problem description (part 4) leading up to the central problem statement for this research (mentioned in part 5). After discussing the scope of this research (part 6), the contribution of this research to the academic body of knowledge is discussed (part 7).

1. Steel & Steel manufacturing process

Steel is an alloy made up of iron and carbon. Besides containing less than 2% carbon, it also contains about 1% manganese and other trace elements such as: silicon, phosphorus, sulfur, and oxygen. Steel is widely used in engineering and construction works across the world. It affects every aspect of our lives on a daily basis (World Steel Association (2016)). See Appendix A for an infographic about the role of steel in our daily lives.

About 70% of steel produced throughout the world is produced through the blast furnace – basic oxygen furnace (BF – BOF) route. The remaining 30% is produced through the electric arc furnace (EAF) route. Both routes differ in that they use different raw materials when producing steel. The BF – BOF route uses iron ore, coal, and recycled steel, while the EAF route uses recycled steel and electricity. Steel produced using the BF-BOF route first reduces iron ores to iron, also called hot metal or pig iron, this reduction process happens in the blast furnace. Then the iron is converted to steel in the BOF. After casting and rolling, the steel is delivered as coil, plate, sections or bars (World Steel Association (2016)).

Steel made in an EAF uses electricity to melt recycled steel. To get the desired chemical composition for the products, this route also uses additives, such as alloys. To reduce the large amounts of electrical energy used oxygen can be supplemented in an EAF. Downstream process

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stages, such as casting, reheating and rolling, are similar to those found in the BF-BOF route. See Appendix B for an schematic overview of the BF – BOF and EAF steel production routes (World Steel Association (2016)).

Using the BF – BOS and EAF production routes, the total global production of crude steel for the year 2015 amounted to 1621 million tons (mt). Almost half of the global steel produced in 2015 was made in China (amounts to 804 mt for 2015), making it the largest steel producing country in the world. Not only is China the largest steel producing country in the world, it is also the largest consumer of finished steel products in the world (it accounted for 45% of global steel consumed in 2015). Appendix C gives an overview of the global steel production and consumption figures for the year 2015 (World Steel Association (2016)).

2. Impact of the 2008/2009 economic crisis on the steel industry

Despite the increase in production for steel year on year, at the moment the global steel industry resides at a cross road. As the world is emerging from the recent global economic crisis of 2008/2009, the global steel industry is struggling to regain its pre-crisis momentum. The global steel industry is facing a challenging future. The main reasons being that pre-crisis capacity addition have resulted in a global overcapacity post-crisis. Also, the demand for steel in developing countries, such as Brazil and China, is stagnating, while geopolitical tensions among countries is increasing (Szewczyk (2016)).

The recent short term projections (as shown in Appendix D) by the world steel association regarding the world steel demand confirm the challenging times ahead. The projections for 2016 show a decrease in global steel demand of 0.8% compared to the 2015 figures. The projected decrease in global steel demand for 2016 is on top of the 2015 contraction in global steel demand, of 3%, when compared to 2014. It is projected that the demand in 2016 will be around 1488 mt. In 2017 the world steel association forecasts a minor increase in global steel demand of 0.4% (World Steel Association (2016)).

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The regional short term projections differ from region to region. The recent regional forecasts for 2016 and 2017, produced by the European Steel Association (Eurofer), shows a strong increase in steel demand in the European union (EU). While regions such as Asia, Central & South America, and the Commonwealth of Independent States (CIS) are expected to have mixed short term steel demand (see Appendix E), the EU steel demand for the years 2016 and 2017 are expected to be above the global demand forecast for steel (Vermeij & Lusignan (2016)).

Despite the promising short term figures, the EU steel industry is facing the same global issues as the other regions of the world. Besides structural production overcapacity, stagnating growth in developing economies such as China, and ever increasing geopolitical tensions, the EU steel industry is facing increased imports for steel from countries such as China and Russia. Increased imports of steel are a consequence of the lack of level playing field (e.g. no import duties for steel, no non-tariff barriers, strict state aid rules, and an open procurement process) in the European union (Lauber (2016)).

The increase in steel imports has negatively impacted the European steel industry. It has resulted in some manufactures closing down part of their facilities while others were forced to lay-off numerous employees to consolidate their losses. The increased imports have furthermore resulted in prices of steel being at least 20% lower than pre-crisis price-levels. The current troubling times have prompted European steel manufactures to rethink their strategies. In order to survive the fierce competition, European steel manufactures have expanded their product offering with more differentiated products (light weight, flexible, formable, etc.). In addition, they are also offering product related services to their customers in order to differentiate them from the foreign competition.

3. Tata steel Europe and the steel crisis

Tata steel Europe (TSE) is amongst the top 3 most profitable steel producers in Europe for past two years (Tata Steel (2015)). However, in order to maintain its profitability in the short and long term, it will have to deal with the challenges as mentioned in section two of this chapter.

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As outlined in its 2016-2016 annual plan, TSE aims to deal with them by focusing on becoming a customer centric company, through:

 Delivering the products that customers want and require at required quality and customer specifications through employing its assets strategically (e.g. developing and utilizing assets as close as possible to the customer which are also able to cope with the rapid changing customer demands);

 Delivering the appropriate services for products which exceed customer demands or requirements (e.g. quick response to customer queries, focusing on enhancing the customers’ production process through joint product and process development, etc.) TSE has subsidiaries on the mainland of Europe (e.g. TS strip products MLE: SPMLE) as well as subsidiaries in the UK (e.g. TS strip products UK: SPUK). Tata steel IJmuiden is part of TS SPMLE. Each subsidiary is required to contribute the overall strategy of TSE, which is illustrated by the TSE strategy wheel shown in figure 1.

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Figure 1: Tata Steel Strategy wheel for the European Business (Tata Steel Europe, 2016)

The strategy wheel is the standard way by which the key aspects of the TSE strategy are communicated within the organization. As can be seen from figure 1, one of the five key aspects is customer focus, which is defined as: focusing on the customer to enhance their business by delivering the product as required with regards to quality, service, and on time delivery.

Operational excellence, another key aspect, is defined as: being the preferred partner to our

customers in our chosen markets (e.g. automotive, industry strip, building envelope, and lifting and excavating) by demonstrating the potential of steel. TSE’s (and its subsidiaries) primary customer market will be the automotive sector. The automotive markets in the America’s, Europe, and Asia are expected to grow at a higher pace in the coming years than the other markets. The expected growth rate for the automotive market will be on average 4,3% annually till 2020 (Statista (2015)). TSE is therefore gearing all their initiatives across all the production hubs to be able to better serve automotive customers. The emphasis throughout this research will therefore be on the automotive sector because the research topic is derived from automotive market information.

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Page | 12 Responsible, the third key aspect is defined as: showing ownership for ones’ words and actions

in order to be the reliable partner for our stakeholders. Innovative products and services are defined as: having a continuous flow of new products and services to meet the needs of our customers, thereby increasing our market share.

People, the most important aspect, is defined as developing and stimulating employees to

achieve their full potential in order to meet customer demands and requirements. Motivated and skilled employees result in increased customer satisfaction which in turn results in improved performance of TSE. So, the entire service profit chain improves if employees are developed and motivated (Heskett et.al. (1994)).

TS SPMLE has several programs in place to support the strategy of TSE, namely: STAR (asset development), MES (improving IT infrastructure), CLS (maximizing raw materials utilization as well as waste reduction), and Customer Value 2 (CV2). The CV2 program has three main focus areas: enhancing product quality, enhancing delivery performance, and improving the responsiveness to customer queries and complaints. The focus areas for the CV2 program stem, in part, from the results of the annual customer satisfaction survey held amongst TSE customers (TLF (2015)). These results show that TSE is lagging in the aforementioned areas when compared to competitors such as Voëstalpine, the Austrian steel producer.

Voëstalpine has been known to outperform the competition consistently for a long time because they have improved and innovated on their product offerings and quality, their delivery performance, and customer services over time (Voestalpine (2014)). They started their transformation journey during the 90’s steel recession in which they almost went bankrupt due to severe market conditions. The steel recession of the 90’s started around 1991/1992 whereby steel manufacturers in Europe faced many of the same challenges they face now: structural overcapacity and cheap imports (Digibron - Kenniscentrum gereformeerde gezindte (1993)). The success of their transformation is also evident when looking at their (financial) performance during the last recession of 2008-2009 which was far above industry average (Voestalpine (2014)).

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The focus of this research will be on improving the responsiveness of TS SPMLE to customer queries and complaints. More specifically, this research will focus on improving the current process for product quality complaints resolution within TS SPMLE so that the responsiveness of TS SPMLE improves. Focusing on improving the process for product quality complaints resolution will therefore result in improved responsiveness of TSE.

The importance of the strategic initiatives of TSE to succeed becomes even more crucial if competition from countries such as China and Russia are to be included. The state funded steel producers from these countries have been offering their products on the contracting European steel market far below market prices.

Adding to the pressure for the strategic initiatives of TSE to succeed are the deteriorating financials of TSE from the previous year’s, which has prompted the parent company to re-evaluate its capital expenditure scheme for TSE and hence also TS SPMLE.

Failing to realize the strategy of TSE, and thus also the strategy of TS SPMLE, can result in further deterioration of company performance in the short run. Price competition is fierce and will most probably increase in the future. This is a battle that TSE cannot win. As mentioned, the strategy of TSE therefore is to excel on other factors at a ‘reasonable price’. Needless to say that such a strategy only works when indeed TSE is able to demonstrate superior performance on these ‘other factors’. This becomes all the more important when Chinese and Russian organizations further penetrate the market. On the long run it can result in the company being sold or worst being closed down entirely by the parent company.

In order to have a sustainable future, TSE and therewith TS SPMLE need to adopt their current way of doing business (which solely focused on increasing ones’ own profits) to a business which is customer focused. This research aims to contribute to TSE’s strategy, of becoming a more customer focused company, by increasing the customer perceived quality through improving the process for product quality complaints resolution. Customer perception can be regarded as a bundle of product and service dimensions of both technical and functional in nature. A comparison between the customer perception and the customer expectations results in customer perceived quality (Grönroos (1984)).

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Page | 14 4. Problem description

This section provides information on which the central problem statement for this research has been developed. Information from market research on customer satisfaction and analysis of lead times of resolved complaints, results in the formulation of the central problem statement as mentioned in section 5 of this chapter.

In order to distinguish itself from the competition, TSE adopted its strategy to become a more customer centric organization. By offering services such as early vendor involvement and

dedicated customer complaint resolution for customer complaints, TSE aims to become a

customer centric organization. These services not only create value for TSE but also aim to create value for its customers. These services should result in a win-win situation for TSE and its customers.

Unfortunately, the past customer satisfaction index (CSI) scores do not reflect the ambition of TSE as discussed in the previous paragraph. The CSI is a measure about the satisfaction level of TSE customers and their perception of the TSE product and service offerings. The CSI scores discussed in this section refer to the individual score of TS SPMLE. CSI measures customer satisfaction along the following parameters: product quality, delivery performance, timely response to queries, lead time, business relationship, value for money, ease of doing business on a daily basis, expertise and advisory services, understanding and acting on customers’ future business needs, health and safety behavior, product availability, and stock availability. The appearance of the parameters also indicates their relative importance (weight in composite CSI scores) in determining the overall CSI score.

The CSI scores are ranked amongst 110 manufacturing companies subjected to the customer satisfaction index annually. The best competitor for 2015 had a CSI score of 86.0% for its automotive sector. The CSI scores for the automotive sector of TS SPMLE for the years 2014 and 2015 were: 75.3% and 78.2% respectively. The CSI score for 2014 put the company in the bottom quartile; while the score for 2015 put the company in the third quartile.

As mentioned before, one of the elements making up the CSI score for the automotive sectors is the parameter timely response to queries. Customers were asked about their experience

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(with regards to time and efforts) in getting their queries resolved, the overview given in appendix F shows the results for the 2015 CSI survey. The results show that 10.7 % of the 75 interviewed customers had queries relating to complaints in the past six months prior to the survey. From this group 66.7% indicated that their complaints required a lot of efforts to get resolved in a timely and orderly manner. In absolute terms, the number customers that put a lot of efforts into getting their complaints resolved amounts to just five (5) customers. However, for a company aiming to become customer centric and gearing all their strategic efforts to better serve automotive customers, having five dissatisfied customers is still too much. In the opinion of the author it is important for TS SPMLE to cater to the needs and wants of these dissatisfied customers, because given the current state the European steel industry all customers are equally important for TS SPMLE to remain afloat and build a sustainable business for the future. Neglecting the dissatisfaction customers have about TS SPMLE’s current service offering purely because these customers represent a very small fraction of the TS SPMLE’s customer base, is just like neglecting an early smoke alarm because the fire is not visible yet. Unattended, this early warning may turn into a full blown out of control fire. Once out of control, the fire (i.e. the increasing number of dissatisfied customers) will cause a lot of problems for its surroundings (i.e. dissatisfied customers may result in loss of business for TS SPMLE). In the worst case the uncontrollable fire burns down everything (i.e. for TS SPMLE this would mean it would have to shut down its business).

The results of the CSI survey, however, don’t provide any information about the number of complaints this group of 5 customers had trouble getting resolved in the six months prior to the survey. Skeptics may therefore rebuff the arguments put forward by the author that CSI survey results should be regarded as early smoke alarm. Therefore, an inward analysis on complaints resolution times is required. The following paragraphs discuss the result of this in depth analysis on complaints resolution times.

The analysis conducted, as part of this research, on 726 handled (and resolved) complaints by TS SPMLE with regards to lead time for the past two years (01-01-2014 till 01-01-2016) confirmed the findings of the CSI survey. The outcome of the analysis was that: 68% (493/726)

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of the analyzed automotive technical product quality complaints took longer than the norm of 15 net working days (nwd) to get resolved (see figure 2 for more details). This inward analysis not only confirmed the results of the CSI survey, but also shed light on the actual performance of the complaint resolution process for product quality complaints within TS SPMLE. The performance of the complaint resolution process for product quality complaints within TS SPMLE can at best be described as mediocre because based on the data analyzed a customer has just 32% probability that its complaints will be resolved within the norm of 15 nwd. This result does not in any way demonstrate TS SPMLE’s ambition, and therewith TSE’s ambition, of pursuing a customer centric organization.

Figure 2: Overview of analyzed automotive technical product quality complaints (Balesar, 2016).

The analysis further revealed that 83% (411/493) of automotive complaints relating to product quality, took more than twenty-one (21) days to get resolved. Needless to say that for TS SPMLE, whose strategy is focusing on the automotive sector as the primary sector for its product and services, this outcome is not acceptable. In the opinion of the author, if no actions

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are taken to improve the service offering of TS SPMLE, the company may have to worry about additional issues (relating to poor service offerings) besides those issues of economic and political nature (discussed before in sections 1 and 2 of this chapter). The information provided in this section clearly demonstrate the need to improve the current process for product quality complaints within TS SPMLE, if TS SPMLE wants to improve their service offering and have fair chance of realizing their strategy. This research will therefore focus on this topic of improving the current process for product quality complaints within TS SPMLE. Based on the information provided in this section and the information provided in the previous sections, the following research question has been set up to analyze and improve the customer complaint resolution process for product quality complaints.

5. Central Problem statement

How can the current complaint resolution process for product quality complaints within TS SPMLE be improved, such that lead times for product quality complaints are improved, and how will the improved complaint resolution process for product quality complaints affect the customer value for TS SPMLE customers?

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Page | 18 6. Research scope

This section first gives definitions of terms used in the central problem statement in order to better understand the central problem statement. Thereafter, a brief overview and discussion of the scope of this research is given.

To be able better understand the central problem statement, the following list with terms and their definitions should be consulted:

 Product quality complaints: complaints only relating to the following attributes of the product: surface appearance, mechanical properties, and material width and thickness.  Net working days (nwd): include all days of the week except Saturdays and Sundays.

 Lead time: the total response time, in net working days, from the moment the customer complaint has been registered till the complaint has been technically closed and feedback has been provided to customer about possible causes of this problem. For automotive customer complaints on product quality the lead time for resolving complaints is fifteen (15) nwd. The lead time is the sum of individual response times for each phase of the resolution process. The definitions of the individual response times for each phase are given next.  Response time a: the time required to book the complaint in the complaint system. For

automotive customer complaints, the aim is to book complaints within one (1) nwd.

 Response time b: the time required from the moment the complaint is booked till the analysis of the complaint, for a possible root cause(s), by the work unit. For automotive customer complaints, the complaint analysis should take no longer than seven (7) nwd.  Response time c: the time required from the moment the work unit analysis phase is

completed till the formal closure of the complaint by CTS. For automotive customer complaints, this phase should take no longer than seven (7) nwd.

The scope of this research is limited to part of the customer complaint resolution process in order to keep it manageable in terms of complexity and time available. The scope has been determined and agreed together with the management of CTS. A schematic representation of

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the customer complaint resolution process for technical product quality complaints is given in figure 3.

Figure 3: Customer complaint resolution process for technical product quality complaints (TS SPMLE CTS (2014)).

As shown in figure 3, the scope for this research comprises the entry of the complaint by the customer or the account team representing the customer up till and including the technical closure of the complaint. The commercial settlement and formal closure of the complaint (all colored red) are not within the scope of this research. The current process for product quality complaints resolution can be described in three main phases. These phases are defined as follow:

 Complaint acceptance: a complaint is accepted once it has been determined by the CTS department that there is sufficient evidence which supports the complaint. The complaint is booked in the complaint registration system of TS SPMLE. The complaint registration system of TS SPMLE is called COMPASS.

 Work unit analysis: depending on the nature of the product quality complaint, several lean tools can be employed to determine the underlying reason(s) for a particular product quality issue. Examples of lean tools applied within the current customer process for product quality complaints within TS SPMLE are: practical problem solving (PPS), A3 analysis, and 8D analysis.

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 Technical closure: once the work unit analysis is concluded, the CTS department verifies that the analysis meets the customer demands or requirements. And, if the customer demand or requirements are met, the customer is informed about the outcome of the analysis. Thereafter, the complaint is technically closed and handed over to the commercial department.

7. Contribution to (academic) body of knowledge

This research contributes to the academic body of knowledge by putting in practice two academic frameworks. The first framework (the customer value matrix proposed by Gülyaz & van der Veen (2015)), demonstrates why and how a company, such as TS SPMLE, should move away from the classic product-dominant logic to another way of conducting business which involves a more service dominant logic.

The second framework put in practice is the SERVEQUAL model proposed by Parasuraman, Berry, & Zeithaml (1985), which to the knowlegde of the author has not been put in practice before within a manufacturing company. However, by demonstrating that the applicability of this framework can be extended, possibilities for linking product quality systems (often present in manufacturing companies) to service quality systems (which are gaining ground in manufacturing companies because the business environment such companies operate in evolve rapidly) become available.

Customer focused companies, what TS SPMLE aims to become, should have a right balance between product quality systems and service quality systems. The “right” balans can only be aimed for if both product quality systems and service quality systems are linked. This research provides an example how this could be done.

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Chapter 2 Research Methodology & Outline

1. Research Methodology

There were three major phases during this research: definition phase, measure & analyse phase, and recommendation phase. During the definition phase the main research question (as stated in Chapter 1, section 5) was determined. The main research question was determined based factual information about the performance of the current resolution process for product quality complaints within TS SPMLE (refer to section 4 of chapter 1) and also information relating to customer satisfaction scores.

To be able to answer the main research question, several sub-research questions were defined. These sub-questions are answered in separate chapters further in this thesis. The sub-research questions were:

1. How is the current process for product quality complaints within TS SPMLE designed? What are the current targets (in #days) with regards to the response times for: complaint acceptance, work unit analysis, and technical closure of complaint?

2. How can the current customer complaint process for product quality complaints be assessed for possible gaps? What are the gaps in the current customer complaint resolution process which impact the response time for product quality complaints as such that the norm of 15 nwd is exceeded often? What can be done to reduce or eliminate these gaps such that complaints relating to product quality can be resolved within the norm of 15 nwd?

3. What is customer value in the context of this research and scope? How can customer value be quantified in the context of this research and scope? How is customer value affected by possible improvement initiatives for the current customer complaint resolution process?

The sub research questions will be addressed in the order as they have been listed because in the case of sub research question 1 and 2, the process for product quality complaints resolution cannot be assessed if the process is not first discussed in detail. Sub research question 3 might have been addressed before any of the two other sub research questions but the author has

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opted to address this sub research question last. The reason being that this question involves setting up a model for quantifying customer value and in the opinion of the author, the use of the model is rather dependent on the outcome of the other two sub research questions. However, due to the lack of data, the model was described instead of developed.

Shown in figure 4 is the research flow model which depicts how each of the sub research questions relate to one another and thereby helped in answering the main research question of this research.

Figure 4: Research flow model showing the relationship amongst the different steps of this research.

During the measure and analyse phase sub-research question 2 and 3 were addressed. The measure and analyse phase consisted of two parts. In the first part, sub-research question 2 was addressed through exploratory research. In other words, the current process for product quality complaint resolution was assessed by interviewing different users of this process through open-ended questions. These open-ended questions were asked following an interview

Current customer complaint process assessment SERVEQUAL Complaint acceptance Complaint containment Work unit analysis Product quality complaint data about customers Literature input regarding: TCO, CVM Customer value quantifying model Future customer complaint process Improvement initiatives

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protocol set up specifically to assess the current customer complaint resolution process. The open-ended questions were set up based on the SERVEQUAL framework which is regarded as a service process assessment tool. The protocol used for assessing the process is shown in appendix G. The SERVEQUAL framework assesses service processes by asking customers about the expected and perceived quality through a series of questions relating to specific, so called, gaps. In this research a similar approach was adopted for assessing the current process for product quality complaints resolution with the exception that instead of interviewing customers, employees of TS SPMLE were interviewed. These employees are in fact the internal customers of the current process for product quality complaints within TS SPMLE. They know the process inside out and could therefore provide vital insights about the process and its potential shortcomings.

The analysis of the interview responses was conducted based on qualitative a priori data coding. This method for analysis of the interview responses would enable to categorize the data using the existing SERVEQUAL framework. A detailed description of the steps followed during the analysis of the interview responses is given in appendix H.

The interpretation of the analysis results was conducted in a straightforward and basic manner because to the knowledge of the author, the SERVEQUAL model has not been used previously in the assessment of a service process in the manufacturing industry. The assessment of the TS SPMLE process for product quality complaints resolution, using the SERVEQUAL framework, is a first of its kind. Furthermore, there seems to be no previous evidence to support the usefulness of the SERVEQUAL model in assessing manufacturing service process. Therefore, the author refuses to engage in complex mathematical models for the interpretation of analysis results. The author wants to demonstrate the usefulness and applicability of such a framework in the manufacturing sector so that the list with assessment tools is extended beyond certain types (for example lean six sigma).

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1. As a first step in the interpretation, the main gap categories (provider gap, standards gap, service delivery gap, and communications gap) were ranked based on the number of mentions each main gap category had received during the analysis.

2. A mention is defined as the number of times a particular interview response is associated with the sub categories of a certain main gap. This measure is also used to rank gaps amongst each other. The maximum number of mentions a gap or sub-category of gap can get is 28 mentions. For the subcategories, the maximum mentions were determined to be 28 because that is the maximum number of responses obtained from the interviews and also the number each sub category could be associated with (i.e. any of the 28 responses could be linked to a single sub-category). The number of mentions making up a main gap were determined as follows: If a particular interview response was linked to at least one sub category of a particular main gap, that gap was scored a one mention (i.e. most gaps consisted of multiple sub-categories, however only one sub-category needed to be linked to a particular interview response. To determine the final gap mention-score all the individual gap mentions were counted. 3. An interview response can be associated with multiple different sub categories. The

author is aware that the number of mentions a certain interview response is assigned to, is more subjective than an exact science. However, as a reminder, the author wants to demonstrate the usefulness and applicability of the SERVEQUAL model to the TS SPMLE and also provide a practical case for the academic body of knowledge.

4. Once the main gaps were ranked based on the number of mentions, the next step was to determine what the underlying reasons were which resulted in a main gap being ranked high or low. The underlying reasons were none other than the sub categories for the main gaps. To determine the importance of a sub category in the overall ranking, again, the number of mentions were used as a leading indicator.

5. In the case that a main gap had several sub categories (which is the case for all the main gaps), only the top three sub categories, with the highest mentions score, were considered further in the discussion. The author is aware that this might sound random or incomplete. However, to demonstrate the usefulness of the SERVEQUAL framework

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in a manufacturing setting this method is deemed sufficient because it offers a transparent way of analysing the drivers of the main gaps.

6. The first part of the measure and analysis phase was concluded by making recommendations for improvements to current process for product quality complaints resolution based on the outcome of step 4. The recommendations for improving the process for product quality complaints resolution stemmed from reviewing academic literature relating to a particular gap or sub category. The reason why the author chooses to make recommendations based on academic literature was to offer TS SPMLE an outside in perspective for improving the current process for product quality complaints resolution.

The second part of the measure and analyse phase involved addressing sub research question 3. Based on academic literature on this topic supplemented with data from within TS SPMLE on response times for product quality complaints, a model for quantifying customer value will be set up.

Response times for customer complaints are currently logged and tracked in the enterprise resource system: Ymprove. For this part of the research, a structured data dump consisting of data from 01-01-2014 till 01-01-2016 will be used. The data contains input regarding: customers, product type, date of complaint submission, reason(s) for complaint, complaint subtype, date of complaint acceptance, date of completion of work unit analysis, and date of technical closure of the complaint amongst other. This data was useful in describing the process for establishing process model, which could quantify customer value based on the TCO framework.

2. Research Outline

In the chapters ahead the following will be discussed:

 Chapter 4 will give an overview and description of the current customer complaint process.

 Chapter 5 will provide the frameworks used in this research along with the reasons underlying the choice for these frameworks.

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 Chapter 6 will show and discuss the results of the interviews and the analysis regarding the customer complaint process.

 Chapter 7 will discuss the process for determining customer value within TS SPMLE. It will also highlight why such a model is important for TS SPMLE.

 Finally, chapter 8 will provide the recommendations based on the findings as discussed in chapters 6 and 7.

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Chapter 3 The customer complaint resolution process for technical

product quality complaints

This chapter will describe the current customer complaint process for product quality complaints as outlined in the excel document titled: 330 Process flow CTS – Technical Complaint

Handling.xls. The following sub research question will be addressed in this chapter: How is the current process for product quality complaints within TS SPMLE designed? What are the current targets (in #days) with regards to the response times for: complaint acceptance, work unit analysis, and technical closure of complaint?

The current process for product quality complaints resolution is followed to resolve issues relating to product quality within TS SPMLE. Shown in figure 5 is an extended overview of the customer complaint process as shown previously in figure 3 of this thesis report. The sections that follow explain the steps in the process in more detail.

1. Overview customer complaint resolution process

Figure 5: Extended overview of current customer complaint resolution process for product quality complaints ( (TS SPMLE CTS, 2014)).

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TS SPMLE products delivered to customers are not always according to the specifications as agreed with (or perceived by) the customer. The customer, when faced with such (perceived)

out of spec products can, and often does, submit a formal complaint about the specific product

of TS SPMLE. TS SPMLE is notified of the complaint through the customer account team. The account team consists of the following members:

 The account manager is responsible for ensuring that customer agreements are lived up to by all members (and respective departments) part of the account team.

 The CTS engineer, he/she is responsible for ensuring that all technical product aspects adhere to customer requirements. In case of a complaint, the CTS engineer is responsible to ensure the complaint is described with sufficient and substantiated information. This information can be substantiated through pictures detailing the out of spec product, samples of the product with the abnormalities observed, or (if the issues are not visible to the naked eye) a lab report detailing the problem at hand.

 Members of the commercial and supply chain departments are also part of the account team. Given the scope of this research, however, these team members are not involved in the part of the process being discussed and assessed. Therefore, these team members are not discussed further.

If the provided information by the customer is not sufficient (e.g. information is missing or the complaint form is not filled out completely) to move forward the complaint to the next stage of the process, the CTS engineer may engage with the customer to complement the missing or incomplete parts of information. Depending on the customer this step may require several iterations. Not all customers want to invest time and effort into providing useful information. They, on the other hand, do want their complaints to be resolved quickly.

Once the information provided is deemed sufficient by the CTS engineer to analyze the complaint further, the CTS engineer moves to check whether other orders for the customer may have the same issues. If this is the case, the CTS engineer requests the responsible distribution facility to postpone the processing of the particular customer order until the issues

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are resolved (for that client). The latter step is also an emergency measure to safeguard the customer from further out of spec material which could hamper their processes or facilities. If no emergency response is required or no other orders for the customer are at risk, the CTS engineer moves to the next step in the process, which is to scope the problem so that the appropriate work unit can be engaged to analyze the issues further for potential root causes. Sometimes a sample analysis procedure is launched to further substantiate the issue so that the work unit can better track the product and the issue to their specific line and process data systems.

If after consultation between the CTS engineer and the work unit engineer, the information defining the problem is deemed sufficient the customer complaint is formerly registered in the complaint system of TS SPMLE by the CTS engineer. Formerly registering the complaint in the complaint system of TS SPMLE should not require more than one (1) working day. The other actions leading up to the formal registration of the complaint can take up several days or in extreme cases several weeks.

Once the complaint has been formerly entered into the complaint management system it can, and often is, handed over to the work unit for further analysis. At this point in time the responsibility of CTS engineer for the complaint is handed over to the engineer at the work unit. The work unit should be able to analyze complaints in various ways depending on the requirements of the automotive customer. Certain automotive customers are satisfied when the feedback they receive about a particular complaint confirms that the issues originated at TS SPMLE. Other automotive customers require their analysis to provide more details along with counter measures. To be able to deliver on these requirements work units need to use predefined methods, such as practical problem solving, 8D, and A3 to determine the root cause of a complaint.

During the work unit analysis phase, the work unit goes about analyzing the complaint using the provided information and information from their own internal systems. These internal systems provide additional information such as date and time of production of the specific product.

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Furthermore, information about additional operations (for example, the amount of possible trace elements to be added) which have been conducted on the product prior to transport to the customer are also compared. By employing one of the previously mentioned tools, the work unit is often able to pinpoint the root cause of the issue.

The methods employed (e.g. 8D or A3) result in the root cause of the problem being identified. Once identified and approved by other service departments and confirmed through trials, measures are identified and implemented within the work unit processes and systems to prevent future occurrences of the issues. The root cause and the preventive measures are documented in standardized reports (part of and specific to the analysis tools mentioned previous paragraphs) and send to the CTS engineer. The work unit analysis step in the process should be conducted within seven (7) working days after the complaint has been formerly booked in the complaint system.

The CTS engineer assesses the results of the analysis and the content of the reports generated by the work units. If the findings from the work unit analysis are plausible, the CTS engineer informs the customer about the issue and the measures taken to prevent future occurrences. The complaint is technically settled and handed over to the commercial settlement team to further compensate the customer based on recommendations of the CTS engineer. Technically closing the complaint should take no longer than seven (7) working days from the moment the analysis report by the work unit is received.

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Chapter 4 Theoretical frameworks used during this research

In this chapter two separate sub research questions are addressed: Firstly; How can the current

customer complaint process for product quality complaints be assessed for possible bottlenecks?

In order to answer this question, the SERVEQUAL framework is discussed in terms of its definition, how it was used in this research, and what other frameworks were considered besides SERVEQUAL. The second sub question addressed is: What is customer value in the

context of this research and scope? This part of the chapter will focus on defining customer

value and why it is important for companies to have such a model for their business. The final part of this chapter will describe how the frameworks mentioned in this research will be combined to describe the customer value model. The customer value model described in this research will enable TS SPMLE to assess initiatives, for improving the customer complaint resolution process, in terms of maximizing value for the customer. This research is aimed to set up such a model because for a business to remain viable in the future it will have to adopt to not solely rely on its own profits but also on the profits of the customer.

1. The SERVEQUAL model

This project is aimed to improve the current customer complaint resolution process for product quality complaints within TS SPME, with regards to speed and flexibility. Speed and flexibility are both elements which are, when changed, also affect the effectiveness of a process or its outcome. For this research, it may be concluded that the responsiveness of the process for product quality complaints resolution is below what is expected from the process. There are two reasons supporting the claim made in the previous sentence of this paragraph. First, from the customer satisfaction results of 2015, for automotive customers of TS SPMLE, the results show that TS SPMLE automotive customers want TS SPMLE to improve its responsiveness to customer queries and complaints. The results have been discussed in section 4 of chapter 1. Secondly, upon analyzing the performance of the current customer complaints process for product quality complaints within TS SPMLE with regards to response times (as discussed in section 4 of chapter 1), it becomes evident that this process lacks the speed element. That the speed element is missing is evident from the fact that 68% of all automotive product quality complaints handled and resolved between 01-01-2014 and 31-12-2016 took longer than the

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norm of 15 nwd. These results further support the findings of the customer satisfaction survey and therefore support the claim that the responsiveness of the current process for product quality complaints resolution is below what is expected from this process.

Such supporting evidence with regards to flexibility cannot be made because data required to analyze flexibility (for example: available resources during the different months or weeks of a year) cannot be obtained. It is, however, clear that the current customer complaint process for product quality complaints within TS SPMLE needs to improve in order to improve the responsiveness of this process and the responsiveness of TS SPMLE. Before the process can be improved, an assessment of the current process needs to be done in order to identify areas for improvement.

The customer claims process for product quality claims will be analysed using the SERVEQUAL model published by Parasuraman, Berry, and Zeithaml in 1985 (Parasuraman, Berry, & Zeithaml (1985)). The SERVEQUAL model was developed as an assessment tool for assessing service processes by asking customers what their experience with a service (process) was versus what they expected the service (process) to deliver. The difference between those two parameters of the model resulted in the customer quality gap or short customer gap. Parasuraman, Berry, and Zeithaml (1985) further argue that the customer gap is result of short comings within the service process itself. The service process, just as is the case with the process for product quality complaints resolution within TS SPMLE, is part of the interal workings of an organization. In the opinion of the author of this research any short coming within a organization or its (services) processes will directly reflect on the organizations’ customers. This claim is supported by the results of the performance of the current process for product quality complaints within TS SPMLE. For yet unknown reasons the customer requirements or expectations with regards to timely response to complaints are not met by this process. Over the years the authors, Parasuraman, Berry, and Zeithaml, refined the SERVEQUAL model. However, in essence the model remained the same and assesses a (service) process along five dimensions or gaps. Figure 5 gives an overview of the five gaps and where in a (service) process these gaps may occur.

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Figure 6 the SERVEQUAL model (Parasuraman, Berry, & Zeithaml, 1985).

The SERVEQUAL model enables the identification of five different gaps, which are: 1. Gap 1 – the provider gap: not knowing what the customer wants or needs.

2. Gap 2 – the standards gap: not having the correct or right service designs or standards to meet customer wants or needs.

3. Gap 3 – the delivery gap: service not delivered as stated in service designs or standards. 4. Gap 4 – the communication gap: not delivering what is promised.

5. Gap 5 – the customer gap: the difference between expected and perceived service by the customer. Gap 5 is a function of gaps 1 till gap 4.

The SERVEQUAL model mostly relates to factors involving communication and control processes implemented in organizations such that employees achieve their full potential. Figure 6 gives an overview of the areas each gap of the SERVEQUAL model relates to.

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Figure 7: Areas relating to individual gaps of the SERVEQUAL model (Parasuraman, Berry, & Zeithaml, 1991).

As can be seen in figure VII, the customer gap of the SERVEQUAL model is comprised as function of the other four gaps of this model. These four gaps (i.e. provider gap, standards gap, delivery gap, and communications gap) are to be seen as internal levers of an organization which if employed properly can result in a decrease of the fifth gap. In other words an organization has four internal levers to close the gap between it service offered to customers and the expected service by customers. The orange lined rectangles, in figure VII, are the “influencing elements” or sub categories for each gap (i.e. the lack of these elements in a service organization or process for a particular gap can result in the occurrence of this gap). The arrows heading towards each gap, coming from a particular influencing element, indicates that the element influences the gap and not the other way around. To better understand how these influencing elements impact each of the gaps they represent, these elements are further elaborated below (which is largely based on the work conducted by Parasuraman, Berry, & Zeithaml (1991)).

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 Gap 1: The provider gap

o “Market research orientation (MRO): Extent to which managers make an effort to understand customers’ needs and expectations through formal and informal information-gathering activities;

o Upward Communication (UC): Extent to which top management seeks, stimulates, and facilitates the flow of information from employees at lower levels to other and same levels within the organization;

o

Level of Management (LOM): Number of managerial levels between the top

most and bottom most levels.” (Parasuraman, Berry, & Zeithaml (1991))



Gap 2: The Standards gap

o “Management Commitment to Service Quality (MCSQ): Extent to which management views service quality as a key strategic goal and allocates adequate resources to it;

o Goal-Setting (GS): Existence of a formal process for setting quality of service goals;

o Task Standardization (TS): Extent to which technology and training programs are used to standardize service tasks;

o

Perception of Feasibility (POF): Extent to which managers believe that customers’

expectations can be met.” (Parasuraman, Berry, & Zeithaml (1991))



Gap 3: The Service Delivery Gap

o “Teamwork (TEAM): Extent to which all employees pull together for a common goal;

o Employee-job Fit (EFIT): Match between the skills of employees and their jobs; o Technology-Job Fit (TFIT): The appropriateness of the tools and technology that

employees use to perform their jobs;

o Perceived Control (PC): Extent to which employees perceive that they are in control of their jobs and that they can act flexibly;

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o Supervisory Control Systems (SCS): The extent to which employees are evaluated/compensated on what they do (behavior) rather than solely on output quantity;

o Role Conflict (RC): Extent to which employees perceive that they cannot satisfy all the demands of all the individuals (internal and external customers) they must serve;

o Role Ambiguity (RA): Extent to which employees are uncertain about what

managers and supervisors expect from them and how to satisfy those expectations.” (Parasuraman, Berry, & Zeithaml (1991))

 Gap 4: The Communications Gap

o “Horizontal Communication (HC): Extent to which communication and coordination occur between different departments that have contact with and/or serve customers;

o Propensity to Overpromise (F’TO): Extent to which the firm feels pressure to promise more to customers than can be delivered.” (Parasuraman, Berry, & Zeithaml (1991))

The SERVEQUAL model was used despite availability of other relevant models for similar purposes such as ‘the customer journey’ (Verhoef, et al., 2009) or ‘customer contact points’ (Johnston & Kong, 2011). The reason being that, the author wanted to provide an outside in perspective for assessing the process for product quality complaints within TS SPMLE. Models such as ‘the customer journey’ or ‘customer contact points’ are familiar within the TS SPMLE organization. The same holds for models relating to the lean philosophy. The TS SPMLE organization is not just familiar to these models, but these models/philosophies are also emplemented and managed continously within the TS SPMLE organization. Within TS SPMLE there is a dedicated department, called bussiness excellence, for managing and educating employees about these models and philophies. In the opinion of the author the application of such models (or tools relating to these models), has not resulted in the desired performance of for example the current customer complaint resolution process for product quality complaints which uses tools such as 8D from the lean phylosophy (previously discussed in section 4 of

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chapter 1). The author is of the opinion that such a service providing process requires more than just the implementation of some lean tools. In his opinion the success of such a service process is primarily determined, for example, by understanding of the customer. Therefore, in the opinion of the author, phylosophies such as lean are not suited to understand the customer. Phylosophies such as lean are there to eliminate waste, which is something entirely different than understanding customers.

Another reason why the SERVEQUAL model was used is because to the knowledge of the author, this model for assessing service processes has not been used in a manufacturing setting before. This research therefore aimed to link such service quality systems (i.e. SERVEQUAL) to product quality systems (i.e. complaints related to product quality).

The SERVEQUAL model focusses on having the right processes, tools, and knowlegde to serve the needs of the customer. In the opinion of the author this requires the organization to think from an outside in perspective which is indispensible in the global economy of today. Furthermore, the SERVEQUAL model is specifically designed for services organizations which might result in new insights for manufacturing based service organizations, such as the Customer Technical Services organization of TS SPMLE.

2. Customer Value

According to Gülyaz & van der Veen (2015), customer value can be defined along two leading concepts, which are:

 Net value perspective: is the value perceived by the customer which is determined as the difference between the perceived benefits (tangible and non tangible) and the perceived sacrifice which can be monetary and non monetary (Gülyaz & van der Veen (2015)) .

 Longitudinal perspective: the customer perceived value has three unique phases during a transaction, namely: pre-purchase, purchase or transaction, and post-purchase or use phases (Gülyaz & van der Veen (2015)).

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Gülyaz & van der Veen (2015) propose the customer value matrix which can be used to illustrate the different dimensions along which a firm could pursue customer value along the two concepts describing customer value. A firm can use each dimension to assess how their product or service contributes to customer value generation. Customer value is measured as the difference between perceived benefits and perceived sacrifices at different stages of an transaction.

Pre-purchase Exchange Use

Searching Selection Transaction Delivery Consumption Disposal

Per ce iv e d B e n e fi ts Symbolic Value Relationship value Brand Value Utility Value Operational Attributes Product/ Service Attributes Per ce iv e d Sac ri fi ce Total Cost of Ownership Monetary Sacrifice Non-Monetary Sacrifice

Table I Customer Value Matrix.

According to Gülyaz & van der Veen (2015), the customer value matrix has various rows in which the following dimensions can be observed (the following paragraphs are direct quotes from the authors’ work):

 “Symbolic value: this value perspective relates to the beliefs about the product/service and the firm as well as relational feelings towards the firm (for example the level of trust). The symbolic value can be seen as satisfying the emotional needs of the customer and is therefore less tangible” ((Gülyaz & van der Veen (2015), p.3);

 “Utility value: refers to the functionality of the product/service (product service attributes) and also how the product/service is delivered (operational attributes). Product service attributes focus on the features of the product /service, operational attributes focus on the firm’s logistics & supply chain capabilities such as quality, speed, reliability, flexibility. Therefore, the utility value is ‘tangible’ and satisfies the more practical needs of the customer” ((Gülyaz & van der Veen (2015), p. 3);

Increasing customer value : assessing the technical customer complaints process within Tata Steel-MLE through SERVEQUAL