(Failure in new customer approach in tan cang shipping’s reffer service)

8 Freight Price for transporting container by vessel 9 Plugging Fee Fee charge for plugging electronic of reefer container on terminal, on vessel 10 OPS Operation Service in Terminal 12

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Thi Huong Giang Nguyen

(FAILURE IN NEW CUSTOMER APPROACH IN TAN CANG SHIPPING’S

REFFER SERVICE)

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City – Year 2018

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Thi Huong Giang Nguyen

(FAILURE IN NEW CUSTOMER APPROACH IN TAN CANG SHIPPING’S

REFFER SERVICE)

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: Trần Hà Minh Quân

Ho Chi Minh City – Year 2018

Table of Content

1 Executive summary 5

2 Background information 6

3 Methodology 8

4 Problem Identification 9

4.1 Situation analysis 9

4.2 Symptoms 11

4.3 Potential problems……… 13

4.4 Central problem 16

Figure 1: Initial cause – effected map .16

4.5 Potential root causes 17

4.6 Central root cause 20

Figure 2: Cause – effected map .21

5 Problem Solving 22

6 Action Plan 23

References 27

Appendix 01: Interviewees Information 29

Appendix 02: Interview guides 30

Interview Guide: Customers using referred container service 30

Interview Guide: Vice Director 30

Appendix 03: Questionnaire ……… 32

Appendix 04: Transcript ……… 33

Appendix 05: Estimated output/month for 40RH of TCS’s dry container customers…….38

Professional terminology and abbreviation:

No Professional terminology

1 20GP 20 feet general dry container

2 40HQ 40 feet high cube dry container

3 45RH 45 feet high cube reefer container

4 Teus The production of liner shipping and slot on

vessel 20GP = 1 TUES, 40HQ=40RH=2 Tues

5 Depot The yard contains empty container

6 Shipside

The truck go to nearby the vessel to receive container directly does not drop container on terminal yard

7 Closing Time The time which vessel will stop loading

container to prepare for departing

8 Freight Price for transporting container by vessel

9 Plugging Fee Fee charge for plugging electronic of reefer

container on terminal, on vessel

10 OPS Operation Service in Terminal

12 TCS Tan Cang Shipping Joint Stock Company

1 Executive Summary

In the beginning of 2017, Tan Cang Shipping expanded its service to reefer

service After 7 months of operation, the company realized that the operation of TCS’s reefer container service was not effective because the revenue could not be

as expected One of the potential problems leaded to that system – failure in new customer approach was selected to analysis deeply basing on in-depth interview outcomes, market information and business report

The purpose of this thesis is to use literature review, in-depth interview and

survey in order to determine factors that influence sale organization effectiveness, which helps to identify why there is failure in new customer’s approach The cause – effected map is the drawn to find out the root cause

The thesis intents to use 4 groups of factors affected to sale organization

effectiveness to TCS’s reefer service The result shows that most factors have faced trouble in some indicators In particular, Evaluating sale service and

Rewarding are the two most noticeable indicators because of their significant influence to sale performance Setting sale performance measurement then is chosen to as problem solving for the company’s current situation

2 Background information

Tan Cang Shipping Joint Stock Company (or Tan Cang Shipping – TCS) was

established on 28.11.2013 by Saigon Newport Corporation, to develop maritime transport service The beginning mission of Tan Cang Shipping is developing the transport services of Sai Gon New Port Corporation while their vision is "Leading in quality of service, customer oriented; Advanced management, professional and high quality in human resources; Military discipline, corporate culture, community

responsibility " After almost 4 years of operation, strategic direction is to develop sustainable production and business based on three pillars: Port Operation, Logistic Services and Sea Transport Despite its short time of operation, the company worked quite well, completed all the missions and developed Tan Cang Shipping becomes a prestige brand, having a strong position in the shipping industry in Vietnam

nowadays

With the motto "Coming to Saigon New Port, coming to one of the top quality

services", Tan Cang Shipping always tries to provide their customers best quality shipping service To the Sea Transport Service, Tan Cang Shipping provides

customers with domestic transport services by sea line including main routes: Ho Chi Minh - Da Nang - Hai Phong and opposite or Ho Chi Minh - Hai Phong and

opposite To Logistics, they provides a full range of professional logistics services such as freight forwarding, customs clearance services, warehousing services, And

to Shipping Agent, we now are acting as an agent for vessels to import and export in domestic ports as well as international port in Vietnam In addition, we are ready to provide ancillary services such as customs clearance, fresh water supply, fuel,

crewmembers supplying and other support services when the customer needs

Besides developing shipping service, Tan Cang Shipping also focus on hiring and training their employees With the core value: "Satisfaction, Trust and Long-term commitment of our customers", all the employees of Tan Cang Shipping are always enthusiastic, hardworking, having responsibility with work and more experience to

solve customer’s requirements quickly in all situations happened during

transportation Moreover, Tan Cang Shipping usually has the policies of supporting and consultation so that they can make their customers feel satisfaction when they choosing their service and want to build a long-term stable cooperation

The organizational structure of Tan Cang Shipping consists of 4 departments:

3 Methodology

This thesis was developed and supported by both primary and secondary data with particular following methods and resources:

Business reports: TCS's business performance report for dry service and reefer

service in 2017 checked in order to analyze how TCS achieve the target

revenue as well as how each trip follows the golden structure The report on reefer container’s revenue in 2017 be classified by customer’s name and trip

In-depth interview: From the results of data analysis in business report,

classify the customer using TCS services into 3 focus-group, build an interview guide and in- depth interview for each group and TCS’s Vice Director

Survey: 10 questions was designed for sale team with 5-point scale and based

on standards of procedures of control system

Secondary Research: Online research in Viet Nam shipping line market as

well as interview TCS’s customers to understand refer container market size

Literature review: Classical theory of shipping line operation and

management Also, contents relevant to sale management effectiveness are applied to estimate how TCS performs and how to improve the current

situation

4 Problem Identification

4.1 Situation analysis

Under Sea Transport field, TCS provides customers with domestic transport services

by sea line including main routes with one-way or round trip from Ho Chi Minh - Da Nang - Hai Phong and Ho Chi Minh - Hai Phong There are two main categories of container, which are dry and reefer containers

In the liner industry, the twenty- foot equivalent unit (often TEU) is the unit of

measurement of cargo, often used to describe the capacity of container shops and container terminals The standard intermodal container is designed as 20 feet long and

8 feet wide Additionally, there is a standard container with the same width but a doubled length of 40 feet called 40-foot container, which equals two TEU For more example, 1 container 40 feet = 2 containers 20 feet = 2 TEUS

TCS’s dry containers service has been exploited quite well since the day company has opened with two types: 20GP (20 feet) and 40HQ (40feet) It is considered as core service of the company, which operated 4 vessels per week with 4 routines from South

to North and reverse trip (Table 1) Besides TCS, there are other popular liners in Vietnam Domestic Shipping industry such as Hai An, GLS, Germadept, Vinafco, Bien Dong, Vosco, Viet Sun, … In general, TCS and Hai An currently keep significant output in comparing to others

After 4 years of operation, TCS has gained great performance and customers’ trust, Broad of Director decided to expand its service and reefer container service is a

potential field to develop in the near future Therefore, in early 2017, TCS launched reefer container service, which mainly transported 45RH (45 feet) with two following objectives:

• Diversifying TCS’s service: Currently, most freight forwarders – TCS’s

customers are looking for both dry and reefer container service Thus, TCS

want to offer variety of service choices to customers, which is not only dry container service but also reefer container field

• Achieving opportunity costs: as domestic shipping lines do not own empty reefer containers, customers who are owners of reefer containers have to pay for all the fee occurred Reefer service is more cost effective in comparing to dry service In details, dry service incurs many costs for the company such as repairing, stock in yard, cleaning While empty reefer containers are owned by the customer (domestic liner does not own empty reefer containers), so that customers will pay all of these fees Regarding the freight, 1 reefer container cost 10 million VND while the dry one is 7 million VND To calculate the opportunity profit of transport a reefer container, TCS will gain 3 million VND from difference freight while 40HQ and 40RH is cover similar slot (2 TUES), TCS will not pay the clean (200.000 VND) and storage fee (100.000 VND/ day) because 40RH are customer’s owner

Currently, there are nearly 20 customers, who used TCS’s dry container service, also

has demand on reefer container service (see Appendix 05 Source: Marketing

Department Report, December, 2016) TCS expects to attract 20-30% of this total

number

TCS has 4 vessels with different loading capacity, Tan Cang Foundation (TCFD), Tan

Cang Victory (TCVR), Tan Cang Pioneer (TCPNand Tan Cang Glory (TCGR) (see

Table 1) With limited capacity and different freight of 20GP (3 million VND), 40HQ

(7 million VND), 40RH (10 million VND)

Table 1: Tan Cang Shipping Vessels information

In order to proceed reefer service, the operators and sales departments were based on

the actual situation, TCS’s infrastructure conditions and freight rate to calculate a

“golden structure” as the benchmark for comparison This is an effective structure to

ensure the feasibility, maritime safety and maximizing profit

Table 2: Golder Structure of TCS’s vessels

As a new service, comparing revenue each month to identify how effective the new service is not accurate The output and service performance do not stable Thus, it can only be evaluated objectively based on expectations of the company The golden is the optimum structure of the company with low cost and high profitability, which in fact are based on current company’s situation, structure of ships

and estimated output attract to TCS’s current customers (see Appendix 05)

Comparing months and months is not accurate due to the new service, the output is not stable, so it can only be evaluated based on expectations of the company

4.2 Situation analysis

After putting into operation for the first 7 months in 2017, the company realized that

vessels could not achieved “gold structure” and the total revenue is not as expectation

Under expected revenue for reefer service

10.000.000 3.000.000 7.000.000

Based on the current freight rate, in comparing the optimal revenue for each trip with the actual data from January to July 2017, it is figured out that 95% of the transfer below the expected level, only 5% achieved as equal or more than expected

For more detail, 5% achieved the expected is on March, after Lunar New Year, when the market in in the peak But only 5/ 16 routes on March achieved, while the market is in

the peak on March

Chart 1: Revenue and target revenues by vessel in the beginning of 2017

For detailed analysis, for 20GP and 40HQ dry container, it is easy to see that dry sales

nearly achieve the expected level, especially some trips are more remarkable

Chart 2: Revenue and target revenues by Dry container in the beginning of 2017

For revenue of reefer container, the output was completely below expected and unstable

on each ship Therefore, symptom was identified as the operation of TCS’s reefer

container is not effective

Chart 3: Revenue and target revenues by Reefer container in the beginning of 2017

Additionally, from market information, the monthly output of reefer container is around 400-500 containers, mainly for fruits, seafood, tapioca, coconut milk, ice cream

However, the output of TCS is lower The least is 12 containers / month, the highest is

146 containers / month (see Table 3) in comparing to Hai An Liner, who also has 4

vessel similar with TCS, but each vessel they have 200-300 containers 40RH

Table 3 The sale volume of 40RH TCS from Jan 2017 to July 2017

3.1 Potential problems

Currently, the reefer container market has 18 companies transported route North- South According to marketing report, there was 15 companies have used TCS’s reefer service Standing on business metrics analysis, TCS’s customers can be

group into three main groups (see Table 4 Source: TCS’s Business Report, June

2017):

- Key account group: only 2 customers sign the contract with fixed slot on each trip and given more slots on TCS than other liners So that they have gained more promotion from TCS’s policies of contracted-customers such as lower freight, free electronic fee, receive their container in the peak season,…

- Regular customer group: 5 customers who have more than 1% of total quantity

in 7 months, and they book in more than 3 consecutive trips, but they did not sign the contract with fixed slot so that they have not gain more promotion from

TCS’s policies We called them are Regular customers, who are potential to become key accounts

- New customer group: this group is divided in two sub-group such as irregular customers and unreached customers In detail, there are 8 out of 18 popular companies in reefer market who only used TCS’s service for 1-2 times They just choose TCS when they have emergency reefer container need to be

transported immediately while TCS’s shipping schedule is suitable On the other hand, unreached group which contains 3 out of 18 popular companies have heard about TCS’s reefer service but have never used

Table 4: List of 18 biggest companies in reefer container market

Type of customer Customer’s name How to they knew TCS

Number of 40RH in 7 months (79 routes)

Quantity in 7 month/ total quality

VINACONNECT Director introduced 143 28,77%

REGULAR

CUSTOMERS

HAI DANG PHAT TCS’s dry service shift 22 4,43%

NEW CUSTOMERS

- irregular customers

KIM THANH SINH TCS’s dry service shift 1 0,20%

Source: TCS’s business report

A qualitative research method, which emphasizes the socially constructed nature of reality, was conducted as in-depth interview to record, analyze and attempt uncover the deeper insights about customer’s experience and their point of view toward TCS’s reefer service This group consists of 3 customers represented to 3 main categorizes, who use this TCS’s new service permanently, regularly and irregularly The findings then could be divided in two points as follows:

Low customer satisfaction of regular customers group

Currently, there are just only 2 customers standing as TCS’s key account group

Moreover, the key accounts of TCS are satisfied with TCS’s service and they are

giving more slots in TCS than in the other liners The regular customers, who are

not satisfy with TCS’s service, policies, freight and support They use TCS’s

service to keep the relationship for peak season They have no plan to shift more

volume from other liners to TCS Therefore, it seems like this customer group

does not intent to increase the volume

According to the interview result, while being ask “do you intend to increase slot

in the future”, both regular group and new customer group thought that their

current regular shipping line is quite well, thus no plan to switch to TCS (see

Appendix 04) There is only key account agreed to increase their volume if they

have more contract and shift more in the future

Failure in new customer approach

There are 4 over 18 customers, who have known about TCS’s reefer service by

market information (see Table 4) To understand customer’s insight about TCS’s

service, the elements affect to their decision to find out which TCS missed, we

conducted an in-depth interview on focus group As reported by interviewee’s

feedback, both key account and new customer were agreed that they know about

TCS through transport market information Especially, Ms Le Thi Ngoc Anh –

GL Viet Nam (new customer) said that she did not see anyone come to introduce

about this TCS’s new service (see Appendix 04) GL Viet Nam decided to use

TCS’s service because in the high season other regular shipping lines were almost

full There is just only the regular customer knew TCS by the company’s staff

The new customers group has been known TCS by market’s information instead

of marketing activities of TCS or sales team

3.2 Central problem

In the high season, the new customers group tends to voluntarily use the service when

they have emergency good to transport as well as TCS’ shipping schedule is suitable

instead of waiting for the offer However, they did not have plan to use TCS’s reefer

service permanently or shift a substantial proportion output in order to sign a fixed

contract with TCS Additionally, there are still some well-known customers in the

market that have not used TCS’s reefer service (see Table 4) Related to TCS’s reefer

service field, 3 unreached customers included TTO, Nhat Phuong, Tiep Van Xanh seem

to have large influence and significant volume in the market

TTO has the lowest output 100 containers/month and the highest output 300 containers/ month One of current challenges of 70% customers choosing Hai An is difficult to book this line with high output at the same time therefore customers have to divide their

output to other lines in the peak season TTO’s main products are seafood, frozen food, coconut water This company is well- known as having the most reefer cargo shipping

by sea because TTO itself, which is not only the transport company but also the trading company, invests in the fields of food and seafood According to TTO side, this

company has not used TCS’s service because they did not know who to work with Also,

a big company like TTO is accustomed to being invited by others, they would not

actively look for other transport partner unless there are any incentives or great benefit to them

Nhat Phuong has smaller scale than TTO and HNC with production around 50-100 containers/month, which mainly went through Hai An, the rest was splited into other

lines They also have not book through TCS because of unknown any direct contact Nhat Phuong’s structure is similar HDP’s, a forwarder merely collect goods

In general, the common characteristic of these two unreachable customers is that they have signed seafood and foodstuff contracts of big companies such as Vissan, Camimex, Seaprodex and Kisimex so that their volume is constant throughout the year

Ultimately, there are two main potential problems leaded to TCS performs under

expected revenue: low customer satisfaction of regular customers group and failure in

new customer approach in reefer service (see Figure 1)

It is undeniable that acquiring a new customer would cost from 5-7 times more

expensive than remain existing one Also, consider research done by Harvard School of

Business that shows increasing customer retention rates by 5% would increase profit by

25-95% However, the hardest thing to start not only a new business but also new

service is to look for the first customers As there is no customer, the service would not

exist It clearly shows that TCS could not reach potential customers even acquiring new

customers is extremely important New customers increase the amounts of sales and

companies get more endorsement which will help to accelerate the cycle of money for

the companies Thus, failure in new customer approach is focused as central problem to

analyze deeply in this thesis

Figure 1: Initial cause – effective map for reefer service in Tan Cang Shipping (TCS)

3.4 Potential root causes

As a central problem, failure in new customer approach was found out by two potential root

tends to only use the service in high season when other regular shipping lines were almost full

The lack of updating customer’s reefer service information leads to questioning the

effectiveness of sale team

Nigel F Piercy, David W.Cravens & Neild A.Morgan(10) have said sale volume is the

most frequently used criteria to measure sale organization effectiveness Hence, to

identify why there is failure in new customer approach, sale organization effectiveness is

considered to deepen Effectiveness is a brief evaluation of sale organization’s outcome

and can be defined for either entire organization or smaller units such as regions or

district It is related by sale management control system, sale territory design and

salesforce performance However, on finding research literature, sale territory and

salesforce performance have contributed to the sale effectiveness, but do not completely

specify (Nigel F Piercy, David W.Cravens & Neild A.Morgan 10) This thesis

concentrates on sale organization management under sale management control system

direction to discover thoroughly as its influence on sale volume is strongly believed

Sales management is the process of developing a sales force, coordinating sales operations, and implementing sales techniques that allow a business to consistently hit, and even surpass, its sales targets Therefore, to manage sale effectiveness, the organization should have the

reasonable policy in sale incentives and discover sales best practices, which motivate and lead

an effective sales team (Eric Longino4) If your business brings in any revenue, the sales

management strategy is absolutely necessary When it comes to boost sales performance for every scale of operation, regardless of industry, the secret to success is always the precise sales management process

Understand effectiveness sale management from both perspective of sale manager and

salesperson is extremely crucial while running business In order to measure the effectiveness level, the businesses need to have system of sale management control It was divided into two separate dimensions: outcome- based system evaluated whole process outcome via sales and profit results and behavior- based system assessed individual stages in whole process In detail, Anderson & Oliver (1) believed that sale managers would less involve directly with sales team if the sale control system are more outcome-based as the main sale manager’s control device is the compensation system On the other hands, in reality sale managers should actively involve

with salespeople, work with them and try as much as them can to improve sales team’s

performance

Anderson & Oliver(1) described that sale management control system as a set of procedures, which contain supervision, guide, evaluation and compensation, accepted in 1987 by Journal of Marketing

• Monitoring: supervising activities in progress to make sure they are on-track toward reaching its objectives and to guide management decisions Monitoring usually focuses

on processes such as time spend with salespeople, day-to-day activities, observing performance of sales team

• Directing: guidance or supervision of action in order to ensure people working under the direction Training people actively, discussing about the performance evaluations or assisting employees improve their abilities represents for this stage

• Evaluating: the assessment of an activity or project, focused on an expected and achieved accomplishments, examining the results to determine the relevance, effective, efficiency and the contributions of the interventions to the results achieved In this case study, it relates to profit contributed by each salesperson, number of sale calls, sale results

• Rewarding: providing satisfaction or bringing benefits for employees which is considered

as motivation to change employee’s behaviors To identify whether the business applies this step in its management control system, there are some questions we should clarify such as incentive compensation, non- incentive compensation and performance

feedback

Basing on this concept and adding on an in-depth interview with Vice Director, who

currently has main responsibility and authority in TCS’s sale activities, the survey

was then designed for sale team to clarify how sale management applied in TCS and

whether sale management control system is effective or not The extent to which sale

management control was measured by series of questions (5 point scale from never to always) The questions is set in the survey based on criteria to be assessed under four