An Alternative to Budget Slashing for Cable CPE
With the economic hardships businesses are facing today it is no surprise that businesses are looking for every method possible to reduce expenses. While the cable industry seems to be somewhat resilient against the tough times, Multiple System Operators (MSOs) must take a hard look at the internal processes for managing their business to keep both their customers and their shareholders happy.
Most cable companies are taking a hard look at each budget line item, hoping to reduce expenses without impacting the customer experience. Although flat percentage cuts across each budget line item will save the company money, it is likely to have a negative impact on the customer experience if resources are thinned too much.
Let's be honest, the customer experience is the foundation of what makes a cable company successful. Unhappy customers switch services. A recent survey by JD Powers echoes the challenges cable companies face by highlighting how satellite and phone company TV services are receiving higher customer satisfaction marks than cable companies. Read more results from the JD Powers Survey.
The challenge MSOs face is how to look for ways to decrease costs without lowering consumer satisfaction levels. To address this concern, MSOs should first do a "Process Review". The process review takes a look at each department and examines them for inefficiencies. It is important that all departments be reviewed, as traditionally Warehouse and Supply Chain for CPE have received the least attention. The focus has usually been on getting new products to the customer as fast as possible. Unfortunately, when this occurs without considering the impact on effective supply chain management, the margins are reduced.
Why is this mission critical? CPE is one of the three largest capital expenditures for a cable MSO, and slight gains in efficiency mean significant reductions in capital expenditures. One possible solution to the increase efficiency is to incorporate of a Hub and Spoke distribution model. A hub and spoke distribution model works like a centralized yet integrated logistics system where multiple centers (Hubs) receive products from many various locations, consolidate shipment, and send them directly to destinations (Spoke)
Major supply chain businesses such as Fed-Ex, UPS, Lowes, Walmart all use this type of system. Using this system may impact your savings up to 45% by reducing inventory, increasing cycle times, and a reducing transportation costs. Read more about the impact of Hub and Spoke models from Scott Hudson at the Supply Chain Resource Cooperative at North Carolina State University.
The bottom line is reducing your capital expenditures will allow you maintain or improve your margins without slashing headcount and thus lowering your customer service capabilities.
Success in the cable industry is measured by the customer experience. The MSO that finds ways to maximize the customer experience with reduced outage time and hold times will be around for a long time. Happy customers continue to spend money, but more importantly they recommend your service to other potential customers.
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