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When Competition is Bad for Business

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Usually, we think of competition as beneficial. But today’s anonymous guest post is a story from a company that shows what happens when people work at cross purposes.

I have several years of sales experience with a logistics company. My company has several branches within North America. The multiple branch system is set up to give customers the feeling that they have a local contact that knows their market and is easily accessible.

The problem occurs when the branches need to work together. The compensation system is based on the performance of the individual branch. So the more revenue produced for a branch, the more money the employees within that branch makes. If branch A has a shipment that needs to move and branch B has a carrier to move that shipment, branch A is better off trying to find another carrier so that they do not need to share the revenue on that one shipment. This makes sense if you look at this on a shipment to shipment basis. However, this creates several problems for my company:

It is incredibly inefficient.

The time spent finding another carrier to pick up the shipment is essentially wasted. Whereas utilizing the available carrier right away, the sales rep spends his/her time focusing on one shipment rather than creating new shipments and finding more customers.

It leaves my company vulnerable.

By the time branch A realizes they should have taken branch B’s carrier option, it may already be gone. This is not only frustrating in its counter-productiveness, but also comes at the cost of my company’s dime. It wastes time and money and loses the opportunity for making money from that shipment.

It turns business away.

With all the internal bickering going on, it’s easy for a carrier to be denied a shipment. This alienates the carrier and causes them to go with another logistics company in the future.

consultants talk competition

© Flickr user Baltic Development Forum

I agree with the notion that company systems can get in the way of customer service. In my experience, I feel as if the issues in my company could all be fixed if branch A had an incentive to make a decision based on what was best for the company as a whole as opposed to their individual branch. The compensation system has gotten in the way of customer service, vendor service, and in many cases company profit.

If the goal of my company is to grow revenue this dilemma is getting in the way. The best way to grow sustainable gross revenue is to grow volume as efficiently as possible.  To do this you need to allocate time correctly. Assigning carriers to shipments as quickly as possible frees up more time to get more shipments from new and existing customers. Not to mention it also allows for more time to gather carrier capacity and assign that capacity to more of my company’s shipments.

In the end, this is the best way to grow revenue and is something my company is very able to do. We just need to get out of each others way.

Thanks to our anonymous guest blogger for this insightful post!

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