Beverage Equipment Distributor

Company Profile

The company installs and services beverage dispensing equipment in restaurants, country clubs, schools, convenience stores, taverns and rental halls.

Project Objective

Increase the productivity of service technicians to reduce labor costs and improve the response time of customer service calls.

Problem Analysis

  • The number of service calls made during the past six months declined from a department average of 2.3 to 1.7 per day per service technician.
  • The cost to the organization of making service calls had increased significantly during the past six months.
  • Customer complaints regarding response times for service calls increased substantially during the same timeframe.
  • Overtime expense in the service department has recently increased by 30%.

Project Approach

The initial focus of the project was to develop and implement productivity metrics to measure service technician performance. These metrics were created by direct observation (time study) of the three highest performing technicians in the department. These three technicians were selected based on their history of completing service calls in the shortest timeframe and having the fewest return service calls for the same problem.

The time studies were conducted of twelve service calls during a one month period. Each of the three highest performing technician completed four service calls. These calls were randomly selected to insure a statistically sound sampling of service calls and an accurate productivity metric. A time study engineer accompanied each technician on their service calls to insure an accurate recording of performance data. The average time required to complete these twelve service calls, including travel, was 1.2 hours. Based on a 7.5 hour work day and an additional time allowance of 15% per service call, management determined that 5.4 service calls were possible daily. Comparing this to the department’s average of 1.7 service calls per day, established the current productivity at 32%.

To increase technician productivity an incentive compensation plan was implemented in the service department. The incentive plan was designed to pay monthly bonus compensation beginning at a productivity level of 2.5 service calls per day. The level of 2.5 service calls per day was selected in that it represented a performance level 10% higher than the department’s average of 2.3 service calls achieved during the prior year. The plan provided for increased incentive compensation at 3.0, 3.5, 4.0, 4.5 and 5.0 service calls per day. The following table displays the incentive compensation schedule.

Service Calls Per DayBonus As A % Of Monthly PayService Calls Per DayBonus As A % Of Monthly Pay

A quality factor was incorporated in the incentive plan to insure a high level of customer satisfaction with service calls. The quality factor provided a penalty for return service calls for the same reason. The penalty was a reduction in the number of service calls included in the productivity calculation for each return service call. To emphasize the importance of customer satisfaction, the penalty was established at three service calls for each return call.

As a means of insuring the management of technician productivity, the incentive plan included the department’s manager. The manager’s incentive compensation was established as a multiple of 1.5 times the average productivity level of all technicians. This design element was incorporated in the incentive plan to focus the manager more heavily on improving the productivity of those technicians with the greatest opportunity for increasing performance.

Project Results

Within 60 days of the implementation of the incentive compensation plan, service calls per technician per day in the department increased by 230% from 1.7 to 3.9. This was achieved without an increase in the number of service call-backs for the same problem.

This increase reduced the department’s labor cost by 40%. Additionally, labor hours were made available for service technicians to install beverage dispensing equipment.

The volume of customer complaints regarding response times for service calls was almost eliminated. This was achieved with an improved response time to service call requests from an average of 2.5 days to next day.

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