Computer Data Services (CDS) performs routine and custom information systems services for many…
Computer Data Services (CDS) performs routine and custom information systems services for many companies in a large Spanish/metropolitan area. CDS has built a reputation for high-quality customer service and job security for its employees. Quality service and customer satisfaction have been CDS’s primary subgoals – retaining a skilled and motivated workforce has been an important factor in achieving those goals. In the past, temporary downturns in business did not mean layoffs of employees, though some employees were required to perform other than their usual tasks. In anticipation of growth in business, CDS leased new equipment that, beginning in August, added €10,000 per month in operating costs. Three months ago, however, a new competitor began offering the same services to CDS customers at prices averaging 19 per cent lower than those of CDS. Rico Estrada, the company founder and president, believes that a significant price reduction is necessary to maintain the company’s market share and avoid financial ruin, but he is puzzled about how to achieve it without compromising quality, service and the goodwill of his workforce. CDS has a productivity objective of 20 accounts per employee. Estrada does not think that he can increase this productivity and still maintain both quality and flexibility to customer needs. CDS also monitors average cost per account and the number of customer satisfaction adjustments (resolutions of complaints). The average billing markup rate is 25 per cent of cost. Consider the following data from the past 6 months:
1 Discuss the trade-offs facing Rico Estrada.
2 Can you suggest solutions to his trade-off dilemma?