Sof-Optics – Background (External Factors)
Sof-Optics is a small (specialty-niche) player in a $155M contact-lens market. (Three competitors occupy 75% of this market (Bausch + Lomb (51%), American Optical (14%), Continuous Curve (10%); approximately twenty players (including Sof-Optics’ ~3%) occupy the remaining 25%.) This consumer space is already appreciable in size (~5M contact-lens wearers in 1980), and promises exponential growth in future years (only 10% of ~50M prospective lens-wearers in America have even tried soft contact lenses).
Contact-lens magnates recognize a dual-segmented product space – private practice (i.e., doctor/ophthalmologist supply) versus retail (i.e., health + beauty, pharmacy). Lost/broken lens replacement (constituting ~30% of sales) and lens supply products (roughly $50 per wearer per year) comprise strong subsidiary markets. In stark contrast to larger players’ generalist/mass-market offerings, Sof-Optics strives to differentiate itself as a higher-quality (often custom-fabricated) product supplier. This approach has borne some fruit; Sof-Optics lenses are widely perceived as having quality and standards superior to their Bausch + Lomb counterparts, granting Sof-Optics preferential reception in the specialty (doctor/ophthalmologist) lens segment.
Sof-Optics – Background (Internal Factors)
Sof-Optics, headquartered in San Francisco, was founded by ophthalmologist Carl Wagner and physicist Dr. Johan Schmidt in 1977. The corporation employs 248 staffers (including twelve customer-service agents and twenty geographically-distributed sales representatives), maintains a 50,000 sq-ft manufacturing facility (also in California), and produces ~2000 lenses (one-third of max theoretical capacity, using an advanced plastic-rod grinding/machining process) per day.
Sof-Optics fulfills two types of contact lens orders – “standard” (off-the-shelf preformed lenses, in forty variants, fitting ~75% of the human lens-wearer population) and “custom” (lenses with unique parameters). Standard lenses are shipped the next day after order, and kept in bulk (warehouse) inventory to be replenished whenever stock falls beneath a predetermined quantity. Custom lenses require 3-to-4-week manual fabrication before shipment.
Sof-Optics sold 36,214 lenses (yielding $1.3M revenues) in fiscal 1977-1978, and 211,422 lenses (yielding $5.8M revenues) in fiscal 1979-1980. Sof-Optics has not yet turned a profit in its three-year lifespan; after two rounds of financing ($10M and $3M, respectively), venture capitalists are losing patience. Customer service and dissatisfaction (see below) may be causing lost sales...
Sof-Optics – Problem Statement
The Sof-Optics telephone/order process (including but not limited to queuing, staffing, priority and capacity utilization) is a significant cause for concern. Many customers, faced with unacceptably-long wait times during mid-day peak volume, terminate (hang up or “abandon”) their orders; worse still, an as-yet indeterminate number of customers, experiencing busy (all-lines-occupied) signals, disconnect before even entering the wait-queue (“immeasurable abandon”).
Nancy Langstaff (Director of Sof-Optics Marketing) fears these excessive-wait/abandon numbers are direct contributors to lost sales (particularly lucrative doctor’s-office sales from the specialty-lens segment) and resultant diminished revenues/profits (to Bausch + Lomb or similar). MBA8530 – Final Exam – S. Skoog
Sof-Optics – Data Supporting Problem Statement
Exhibit 8 shows 81-sec avg customer wait time (approaching 127 sec during 10:00-to-2:00 peak).
It can be reasonably assumed that excessive wait time is causing customer dissatisfaction, as Sof-Optics is experiencing premature order termination.
What does this wait-time mean for Customer-Svc Reps during peak hours? Incoming calls range from 47 to 75 calls per half-hour in the 10-to-2 window; if each...