The problem of poor sales activities at ul vs việt nam laboratory

Abbreviation UL: Underwriter Laboratories EVP: Executive Vice President HVACR: Heating, Ventilation and Air Conditioning OCT: Over – the – Counter VS: Verification Services CPLP: Consume

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City – Year 2021

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: Dr Đoàn Anh Tuấn

Ho Chi Minh City – Year 2021

Abbreviation

UL: Underwriter Laboratories

EVP: Executive Vice President

HVACR: Heating, Ventilation and Air Conditioning

OCT: Over – the – Counter

VS: Verification Services

CPLP: Consumers Products Lean Process

P&L: Profit and Lost

KPI: Key Performance Indicator

KAM: Key Account Manager

LMS: Learning Management System

EHS: Environmental, Health and Safety

POI: Point of Influence

POS: Point of Sales

SG&A: Sales, General and Admins

FY: Full Year

YTD: Year to Date

CoR: Cost of Revenue

TIC: Testing, Inspection and Certification

RFQ: Request for Quotation

RFP: Request for Proposal

ERP: Enterprise resource planning systems

CapEx: Capital Expense

B2B: Business to Business

SBRM: scenario-based Road-mapping method

MSD: Microsoft Dynamics

SOPs: Standard Operating Procedures

TA: Talent Acquisition

List of Figures

Figure 1: UL Global Execute Team O-Chart 11

Figure 2: Operation Process of Testing 13

Figure 3: Organization Chart of UL VS Viet Nam Laboratory 14

Figure 5: Revenue Trend Per Year– K’USD Statistic 17

Figure 4: Revenue Statistic 2018-2020 (K’USD) 17

Figure 6: Total Revenue Per Year– K’USD Statistic 18

Figure 8: Total Expense trend by monthly 19

Figure 7: Total Expense per year (K’USD) 19

Figure 9: Total P&L by year – K’USD 20

Figure 10: Total P&L by year – % 20

Figure 11: Purchasing Process 8

Figure 12: Purchasing Information fields 9

Figure 13: Purchasing Information fields 9

Figure 14: Preliminary Cause and Effect Tree 10

Figure 15: General Sales Process of TIC industrial 11

Figure 16: The Process Model of Customer Journey and Experience for re-purchases 14

Figure 17: Updated cause-effect map 18

Figure 18: Sales Team Organization Chart of ULVS Vietnam Laboratory 18

Figure 19: Customer Services Team Organization Chart of ULVS Vietnam Laboratory 19

Figure 20: Research/ Measurement Model 20

Figure 21: Scenario – based road mapping method diagram 21

Figure 22: The consequences of sales training 22

Figure 23: Fish bone analysis diagram of poor sales activities 23

Figure 25: The sales process framework of B2B customer reacquisition efforts 25

Figure 26: Approval hiring request process 27

Figure 27: 2020 Revenue updated and P&L with revenue from customer does not recognize added (K’USD) 29

Figure 28: Hiring Process 32

List of Tables

Table 1: Monthly Revenue Trend – K’USD Statistic 17

Table 2: Monthly Expense Trend – K’USD 18

Table 3: P&L Trend by monthly – K’USD 19

Table 4: Customer database 3

Table 5: Total Cost of Revenue in detail 2019 and 2020 – K’USD 6

Table 6: Total SG&A Cost in detail 2019 and 2020 –K’USD 6

Table 7: Cost Breakdown contribution rate 7

Table 8: Cost Breakdown contribution rate 7

Table 9: Random pickup data of purchasing with cost allocation 8

Table 10: Revenue breakdown of customer which does not recognize in Vietnam (K’USD) 28

Table 11: Revenue breakdown if include revenue from customer not recognized (K’USD) 28

Table 12: 2020 P&L updated if include revenue from customer not recognized (K’USD) 29

Table 13: Alternative Comparison Table 33

Table 14: Comparison Cost of Solution - USD 33

Table 15: Master Plan of Project with detail timeline and activities 38

Table 16: Network Diagram of Master Plan 39

Acknowledgment

I’d like to say thanks and express appreciation to all of my friends, colleagues at the workplace, ex-colleagues, classmates and lecturers who supported me during this Master Business Administration course as well as giving me the ideas, opinions and contribution for this thesis study

I also would like to send my thankfulness and special appreciation to my supervisor

Dr Doan Anh Tuan, who has been very helpful on the advisory, motivation, guidance, encouragement, instruction and monitoring process of this thesis writing

I am so glad to give my sincere gratitude’s Dr Doan Anh Tuan for all his support, encouragement, valuable suggestions and precious advice throughout the period of this study

In addition, my sincere thankfulness to my family for their supportive, encouragement and motivation led me to join and finish this course

NOTICE: Mutual of Non-Disclosure Agreement The company information provided is confidential All of the information, financial data, and reports might be used for study purposes ONLY, you are not allowed to publicize or share these outside of the class

Nguyen Trung Dung

Executive Summary

The Testing, Inspection and Certification (TIC) industry is the type of business to provide TIC service to customers who need their products meet or exceed the expectations about the product’s quality of their buyers, end users, required standards, global/ regional/ national regulation, and/ or market demands

Testing is the process to examine characteristics/ specifications of the products by using international/ national standard methods or in-house test method to evaluate the performance quality/ safety of products depending on the market demand, customer’s needs, regulatory or verify against with the claims with the purpose of make sure the quality

of products meet or exceed with expectation of international/ national markets regulatory and/ or commit to customers

Inspection is a process that involves checking, examining and assessing production processes to make sure the quality and quantity of products before leaving the company Basically, there are three types of quality inspection: pre-production, in-line, and final

Certification is a process to demonstrate products, processes, systems and/ or services that comply with international/ national regulations to certify them

TIC service providers is the business organization with the revenue and P&L figure

is the performance measures tools for the success The sale activities are the key factor to enhanced revenue growth of the organization which contributed to P&L performance This paper provides the whole process of solving the problem of poor sales activities of the laboratory in the TIC industry, the paper provides the way to identify symptoms/ potential/ main problem, validate problem, potential causes/ main cause and how to validate them depend on nature business context, real data of the specific organization and literature research

Basing on the validated cause, the solutions proposed in order of solving the problem

of the firm and fulfillment with requirement of the company about the business, currently resources, budget, and so on

1 COMPANY OVERVIEW

1.1 UL Global

UL stands for Underwriters Laboratories, they are global safety science leaders, and

UL provides the expertise, insights and services necessary to solve critical business challenges They help their customers achieve their safety, security and sustainability goals, meet quality and performance expectations, manage risk and achieve regulatory compliance (https://www.ul.com/about) (1)

UL’s mission is working for a safer world Below principles drive every decision that they make (https://www.ul.com/about/mission) (2):

 To promote safe, secure and sustainable living and working environments for people by the application of science, hazard-based safety engineering and data acumen

 To support the production and use of products which are physically and environmentally safe and to apply our efforts to prevent or reduce loss of life and property

 To advance safety science through research and investigation

 To concentrate our efforts and resources on public safety in those areas where

we can make valuable contributions

 To work with integrity and focus on quality to enhance the trust conveyed by our certification marks and services

 To charge fair prices that allow us to meet our obligations, sustain our growth, and invest in safety science and education

 To invest in our people and to encourage our people to invest in themselves

 To be a good example of corporate citizenship and social responsibility They focusing to below industries for the business:

1) Automotive and Mobility 1) Appliances

2) Building and Construction 2) Batteries

3) Chemicals and Materials 3) Beauty and Personal Care

Industries Products and Components

5) Financial Services and Payments 5) Consumer Packaged Goods

6) Government Services 6) Furniture

7) Healthcare and Life Sciences 7) General Merchandise

8) Industrial Products and Systems 8) HVACR

9) Life Safety and Security 9) Household and Industrial Cleaners

11) Technology and Electronics 11) Medical Devices

12) OTC and Dietary Supplements 13) Textiles, Apparel and Footwear 14) Toys and Children's Products 15) Water and Plumbing

UL provides below services for above industries, products and components:

1) Certification

2) Testing

3) Advisory

4) Auditing and Inspection

5) Learning and Development

6) Verification

Other than with above services, UL also provides the Digital application platform and solutions such as:

Digital Applications platform:

 Compliance LMS for Life Sciences

 Global EHS Training

 Materials and Ingredients Search Engine

 Occupational Health Compliance

 Simplified CO2 Reporting

 Sustainability Management

 Environmental Health and Safety

 Fire Safety/ Functional Safety

 Global Market Access

 Hazardous Locations

 Legal and Regulatory

 Supply Chain Assessment

 Sustainability and Environment

In order to manage and operate the business The UL executive team is committed group leaders with extensive experience and capabilities Based around the world, they help guide and lead the success of UL global The executive team is outlined as below:

Figure 1: UL Global Execute Team O-Chart

Source: (1)

The executive team leads UL global strategies, policies, management, and planning

to drives core value of UL with their own executive’s area, following with executive team

President and CEO

EVP and Chief Human

Resources Officer

EVP and Chief Legal Officer

EVP and President,

Enterprise and Advisory

EVP and Chief

TIC

UL also has a senior leadership team with responsible to lead UL presence at regions level and with specific support area such as marketing, information technology, digitals, and so on.

1.2 UL VS Viet Nam Co., Ltd

1.2.1 Overview

UL established a brand in Viet Nam under legal entity UL VS Viet Nam Co., Ltd in

2007 and operated as a representation office with the purpose of better serving customers, extending the footprint and paving the way for future development

They officially operate as a business unit from 2011 with social audit, inspection, follow up service and factories audit activities at the beginning

In 2015, the Consumer and Retail Services management team, one of the divisions

of retails and industry business units, decided to build the laboratory in Viet Nam to provide testing service locally in order to better serve current customers in Viet Nam

The consumer laboratory in Viet Nam focuses on developing the testing capabilities for consumer lines such as Garment/ Textiles, Footwear/ Leathers, Toys/ Children's products and Hardlines The products covered for these consumer lines are included but not limited to:

Figure 2: Operation Process of Testing

Source: Data interview collected

The whole process started from the samples received and ended at billing/ invoicing

to customers As the interview with Operations Manager “what is the key success of process?” he said “the key success of operation process is report lead time, report accuracy and on time delivery”

Sample

Receiving

Test Assignment

Review Testing Results

Release testing report

Testing

Test Report Review

Billing/

Invoicing

Test Report Generation

1.2.2 Organization Chart

Referring to Quality Manual of consumer laboratory, the organization chart of the lab as below:

Figure 3: Organization Chart of UL VS Viet Nam Laboratory

Source: Quality Manual of UL VS Vietnam Laboratory

According to the role and responsibility mentioned in the function department

responsibility:

Operations Manager is responsible for Profit and Loss (P&L) management for the whole laboratory He/ she is responsible for the whole operating process in the lab, leading the working as desired codification, procedures, and alignment with regional/ global goals

as well as adhering to the core value of UL globally He/ she directly reports to the regional manager and dotted line reports to the country manager who is responsible for the locally legal entity Operations manager is also responsible for leading local business strategy as well as looking for business development plans

Sales team is responsible for selling testing services, outreach vendors/ suppliers, and looking for new customers Sales team directly reports to the regional commercial team and the dotted line reports to the operation manager for daily activities as well as sales performance based on the target

Operations Director

Operations Manager

Chemical Testing Soft-lines testing

Customer Services

Local Sales Team

Testing Department

Test

Assignment

Regional Sales Manager

Quality Assurance Regional Quality Manager

Administrative Team

Report Generation

Footwear Testing Hard-lines testing

The QA team is responsible for maintaining the operating quality management system and plans for the internal quality assessment Monitor the service implementation process, support the operation process in all activities which are related to the quality management system, consolidate the statistical data, the phenomena which mismatch in the process of implementation services

The Test Assignment team is responsible for the login project and assigns test packages according to test requests from customers to the system

The Customer service team contacts, dealing directly with customers about the company’s activities and services Support for customer maximum utility related client testing sample Provide the most satisfaction for customer related services provided Monitoring and regular update to the client progress and testing sample status They are also responsible for booking orders to systems and follow up payment status with customers

Administrative team is responsible for billing the testing fees, invoicing process, customers visit activities and other admin works

Report team is responsible for report generation from testing results of testing team, review the testing reports to fulfillment with customer’s requirement, market demand, and customer information before passing to customer service team to release testing report to customers

The Testing department is responsible for developing and maintaining staff competencies, including training/ updating the sales team on the related services Ensure the service delivery in compliance with laboratory policy and procedures Support sales/ customer service team in strengthening customer relationship, customer care activities to enhance their product quality Provide technical recommendation/ advice for the sales team related to quotation, tender and so on Monitor maintenance and calibration of equipment, inventory controlling

1.2.3 Company Context

According to the financial summary of the year 2020, an annual business management meeting will be reviewed in January 2021 with the purpose of reviewing the

business results for the whole year of 2020 and looking for improvement opportunities as well as setting up a plan and action plan for a year 2021 Operations Manager mentioned

that “Our laboratory revenue result is ahead with an adjusted budget plan 18.3% However, generally still not meeting the budget from the beginning of year (31.3%), besides the P&L

is still lost continuously 3 years from (58%) to (24%), having said that we are losing money and our laboratory business performance is totally not effective So, our key performance

of this year 2021 is to make our laboratory business profitable while the other quality KPI and/ or integrity/ ethics and compliance would be aligned with global policies to support our UL global mission and vision”

Referring to the output of the annual business management meeting, there are two potential symptoms: Low Revenue and Not Profitable where the business results of UL VS Viet Nam laboratory is not effective Therefore, this thesis is diagnosed and analyzed in detail then provides the action plan to help the business of the laboratory better and more effectively

2.1 Symptom 1: Low Revenue Growth Rate

Referring to the December 2020 financial summary and revenue trend from 2018 to

2020, the revenue of 2019 is 48.6% growth compared with 2018 but at the end 2020, it was declined (10.7%) compared with 2019 Meaning that the growth rate of revenue is not logical and tends to decline

Below are compared revenue data of three period fiscal year 2018, 2019 and 2020 The data comparison showed growth rate of 2019 compared with 2020, real revenue among the year, and real 2020 compared with target revenue in 2020

The analysis illustrated as total revenue of the year and breakdown by monthly revenue level

The breakdown of monthly revenue as below:

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018_FY 515 436 393 425 374 342 183 370 318 358 466 396 2019_FY 468 271 449 518 646 627 637 676 560 471 639 833

2020_Target 530 645 707 768 795 804 821 804 742 724 751 742 2020_FY 581 488 507 452 250 420 418 368 578 631 574 800

Table 1: Monthly Revenue Trend – K’USD Statistic

Source: UL Vietnam Laboratory Financial Summary 2019&2020

The chart of monthly revenue illustrated:

Figure 4: Revenue Trend Per Year– K’USD Statistic

Source: UL Vietnam Laboratory Financial Summary 2019&2020

The total revenue trend and growth rate along 2018 to 2020:

Figure 5: Revenue Statistic 2018-2020 (K’USD)

Source: UL Vietnam Laboratory Financial Summary 2019&2020

As further checked with Operations Manager “Would you please help to elaborate more about the target revenue in 2020?” He said “I just joined the organization from March

Revenue Trend (2018-2020) - '000 USD

2018_FY 2019_FY 2020_Target 2020_FY

2020 so the revenue target was set up by the previous management team The target is 30% growth compared with what was actually delivered in 2019”

The total revenue compare with target illustrated as below:

Figure 6: Total Revenue Per Year– K’USD Statistic

Source: UL Vietnam Laboratory Financial Summary 2019&2020

As revenue trends per month and total revenue per year with the statistic of revenue growth rate we can see that revenue does not meet the target and even declined once compared with previous year as significant for further investigation

2.2 Symptom 2: Not Profitable

According to an interview with the Operations Manager who is responsible for P&L

management of UL VS Vietnam laboratory “what is your laboratory profit level?”, he said

“our laboratory is still losing money, meaning that we are not profitable from 2018 till now but it is getting better year by year”

Also according to financial summary, the breakdown of total expense and P&L by monthly showing as below:

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018_FY 432 516 644 607 715 675 413 626 660 666 640 652

2019_FY 622 670 714 807 826 848 804 768 637 876 773 801

2020_FY 903 466 510 604 688 695 563 453 625 618 695 728

Table 2: Monthly Expense Trend – K’USD

Source: UL Vietnam Laboratory Financial Summary 2019&2020

Total Revenue (2018-2019-2020) - '000 USD

The total breakdown by month expense illustrated as below:

Figure 7: Total Expense trend by monthly

Source: UL Vietnam Laboratory Financial Summary 2019&2020

So, therefore the total expense data for three years continuously as financial summary showing as below:

Figure 8: Total Expense per year (K’USD)

Source: UL Vietnam Laboratory Financial Summary 2019&2020

P&L data breakdown by month over the 2018 to 2020

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018_FY 83 (80) (251) (182) (341) (333) (230) (256) (342) (308) (174) (256)

2019_FY (154) (399) (265) (288) (180) (221) (167) (92) (76) (405) (134) 33

2020_FY (322) 21 (3) (152) (438) (275) (145) (85) (47) 13 (122) 73

Table 3: P&L Trend by monthly – K’USD

Source: UL Vietnam Laboratory Financial Summary 2019&2020

Total P&L data breakdown by year over the 2018 to 2019

Total Expense Trend

2018_FY 2019_FY 2020_FY

2018_FY 2019_FY 2020_FY Sum 7,245 9,146 7,548

Figure 9: Total P&L by year – K’USD Figure 10: Total P&L by year – %

Source: UL Vietnam Laboratory Financial Summary 2019&2020

As the data collection provided, the UL VS Vietnam laboratory is not profit in continuously three years meaning that the business is not successful According to (3), the overview of business is required to make a profits Having said that the UL VS Vietnam laboratory not meet with basic requirement of business and this is may come from not good business model, costs management, superior technology and products, excellent people, not good governance, and/ or not properly leadership and so on

So, referring to the Operations manager statement and financial summary of three continuous fiscal years we can find that UL VN Vietnam laboratory not profitable is a significant key indicator that needs further investigation too

3 PROBLEM IDENTIFICATION

3.1 Potential Problem

3.1.1 Poor Sales Activities

According to (4), the sales activities are all the actions that salesperson works on daily basic which included but not limited to such as practices, tactics to moving forward with prospects and customers through the firm’s process All these activities lead to win business or got the agreement from customers to enhance for the sales goals meet with target

Mr Philip Nguyen, operations manager is principal supportive to assign key team leaders of UL VS Vietnam laboratory to investigate to find out potential problems which may lead to low revenue and not profitable symptoms His mentioned in the intake meeting

“there are several major reasons which may made our laboratory business not meet with target that I supposed, first one is the effect of COVID-19 pandemic crisis which significant impact to supply chain and market demand due to lockdown, second one is sales performance is not good, third one is customers lost/ declined on revenue and the last one due to we have not identified target customers” In further exploration with him, he said

“the inefficiency of customer outreach is the reason for low sales performance and poor customer experience is the reason for lost customers, these ones are consequences of low revenue”

According to (5) sales performance of the salespersons and/ or sales organization based on what they produced/ delivered (ex Sales outcomes) as well as what they have done (ex Sales behavior) while the importance is sales outputs which include generation

of sales units, new accounts, market share, revenue profitability and so on And (6) also mentioned that the individual sales l sales employees were assessed based on a comparison

of actual sales to established sales goals, meaning that the sales performance depended on the sales outcomes compared with sales goals (target revenue)

By the (7), one of the factor that impact to revenue stability is revenue diversification, and the level of diversification appears to be a critically important for the forecast of expected revenue, so as the operation managers mentioned the customers outreach process so inefficiency, the customers outreach efficiency is they key that make the firm diversification in revenue and is the one of the influence significant effect to sales performance

According to an interview with the operations manager, he mentioned that “They had lost/ declined customers in 2020 and they also gained new customers too but unfortunately that the quantity of new customers has not reflected the revenue lost/ declined” Referring to the sales map of UL VS laboratory in 2020, the details of quantity

new customers gained, and the customers lost/ declined corresponding with revenue as below:

Total Customer in 2020 293 /

Table 4: Customer database

Source: Sales Map 12_2020

We can see that the total quantity of customers lost (it mean the customers already lost and there is no revenue from them so far in 2020) and customers declined revenue (it mean the customers still exist but their revenue in 2020 are lower than with 2019) in 2020

is 158 customers while the quantity of new customers is 201 However, the revenue from new customers is not covered for lost and declined, so this amount (1,378KUS$) has a significant effect on revenue

Per interview with Mr Nhut Phan, who is customer service leader responsible for controlling and managing customer’s database, customer facing, receiving and feedback customer requests He is well known about customers’ needs and customer satisfaction, he

said that “our customer services team is responsible for all the activities which related to customers experience and also working as inbound salesman to retain existing customers”

Referring to (8), the customer experience is a set of interactions between a customer and a company’s representative in multidimensional and difference levels such as emotional, rational, sensorial physical and spiritual The customers experience enhanced the customer’s expectation with the company to increase the competitive advantage as well

as keep them stay with the company

According to (9) the poor customer service is one of the factors that drive customer’s satisfaction, while the dissatisfaction study also found if 100 people had a terrible experience with customers, a firm tends to lose between 32 and 36 current or potential customers The (10) also concluded that dissatisfied customer service also influenced them

to continue to purchase products or services from their existing service providers

As the operation manager said “our commercial team is responsible for sales, business development The sales process is quite complicated and there are many roles in

the commercial team such as Global Sales, Global KAM, Regional Sales, Region KAM In Vietnam, we don’t have KAM and only have local sales” The Sales Executive also mentioned that “we are working based on POI (Point of Influence) and POS (Point of Sales) POI, means the salesman who is directly working with buyers and/ or retailers to get nomination, laboratory third party testing approval POS, means salesman who are working with vendors/ agents/ and supplier’s levels” Nowadays, the quantity of exclusive

program is reduced due to transparency and competitiveness of the market Therefore, the local salesman is very important to get customer boards and get vendors/ agents/ and suppliers to share with competitors and it makes a significant impact on the revenue generation

As interviewed with Ms Scarlet Phan, sales executive who is leading all sales activities of UL VS Vietnam laboratory as well as responsible for revenue of business along with operations manager She well known about nature of sales/ business nature,

competitor’s information and market overview, she said “currently sales activities quiet poor due to overloaded of outbound and inbound salesman, the huge quantity requirement and tasks was occupied full time of daily time so we have not conduct or implementation activities to outreach customers”

Referring to the (11) there are totally 170 sales activities among the 29 products service and 11 services industry categories In the deep interview with Ms Scarlet Nguyen,

sales executive of UL VN Laboratory, mentions “the successful rate of customer outreach affected by the sales activities that we can bring new customers on board” So, the sales

activities are affected by the efficiency of the customer outreach process

Final confirm with operations manager, he said “the poor sales activities is one of the potential problems of our laboratory and those activities will bring new customers to

us as well as help us to keep the existing customers”

3.1.2 Wrong Cost Allocation

As clause 2.2, the UL VS Vietnam laboratory is not profitable with P&L is minus

24.4%, and as the interviewed with operation manager “there are two main reason made the laboratory not profitable, the first one is revenue lower than with target so it is not

covered for expenses and the second ones is overhead cost”, per his initial investigation

“As my checking in details of expense details, I found that the cost allocation is significant affected Example: there are some maintenance, assets cost was booked into the materials costs and especially that there is some cost from another department was booked under cost center of UL VS Vietnam laboratory”

As the results of profit and lost data, the cost structure is divided into two main cost centers which is Cost of Revenue and SG&A The cost of revenue is covered for all the costs related to operation such as salary and incentives, fringes, materials, maintenance, depreciation, and so on The cost of SG&A is covered for all the costs related to sales, general and admins activities

The global account code, account category and grouping was found according to the

UL global financial system

The total cost for operation in details as below

COR Maint & Rep-Furn&Equip 53 64 (11) -17.3%

COR Postage Freight & Carrier Charges 267 290 (24) -8.2%

Cost in Details 2020 FY 2019 FY 2020 vs 2019

Table 5: Total Cost of Revenue in detail 2019 and 2020 – K’USD

Source: Financial Summary of ULVS Vietnam lab 2020

The total SG&A cost in detail as below

Table 6: Total SG&A Cost in detail 2019 and 2020 –K’USD

Source: Financial Summary of ULVS Vietnam lab 2020 Regarding to SG&A cost, the operations manager said “only travel cost has problems due to previous management spending a lot of money in travel activities, the other cost is lower due to salesman quantity” So, the operation costs will further analysis to find

the issues

Referring to the costs of revenue table costs we can find that almost the cost is lower than with 2019, it is a good picture of saving cost However, there are some variable costs that have big differences such as Recoveries & Transfers, maintenance, materials and supply, and miscellaneous expenses are not logical with revenue and/ or actual operation activities

Also, the operations cost is not logical with revenue As interviewed with testing

leaders about the maintenance, materials and supply cost, they said “they are not clear about the account code, account category and grouping so they are not aware about the costs allocation so that there are some illogical things happening”

According to cost breakdown contribution rate of operation costs as below:

Table 7: Cost Breakdown contribution rate

Source: Financial Summary of UL VS Vietnam Laboratory 2020

We can see that the cost of other expenses is a high rate contribution with 14.5% and also as mentioned in above the cost is not logical with revenue and 2019 base data

Items Cost Allocation

Amount (K'USD) Rate

Amount (K'USD) Rate

Amount (K'USD) %

4 COR Materials Supplies 484 44.2% 1,036 65.1% (553) -53.3%

5 COR Maint & Rep-Furn&Equip 53 4.9% 64 4.0% (11) -17.3%

8 COR Postage Freight & Carrier 267 24.4% 290 18.3% (24) -8.2%

Table 8: Cost Breakdown contribution rate

Source: Financial Summary of UL VS Vietnam Laboratory 2020

It is clear from the picture shown above that the cost of materials supplies is the biggest portion of this cost allocation and not logical with revenue (revenue declined 10.6%

but the cost decreased 53.3%) As further checked with the operations manager, he said

“the costs trend is quite illogical and not reflected in the revenue generated.”

Base on the interviewed results with testing leaders who are leading the team to purchase the materials for testing, the purchase process showing as below:

Figure 11: Purchasing Process

Source: Data collected

As random pickup for further confirm some month that has the high material supplies expense from summary expenses of UL VS Vietnam laboratory with the justification of reason to purchase, the results showing as below:

Maint & Furn&Equip

Rep-53

2 Jan-2020 1180000927 17 Buffing machine, Steel cover and

vacuum cleaner system

Maint & Furn&Equip

Rep-3 May-2020 1180001027 66 Buy Computer for Office 108 Not under

Laboratory 42

4 Jun-2020 1180000935 73 Buy the Datacolor Machine 111 Asset

Depreciation 38

Table 9: Random pickup data of purchasing with cost allocation

Source: Summary Expense of UL VS Vietnam

The correct cost allocation was verified and confirmed by the operations manager

So we can see that the wrong cost allocated was affected to the total expenses cost

Create the Purchase Requisition via ERP system

Approval 1

Approval 2

Requestor send PO to Supplier

Follow up Goods/

Services Delivery Make the payment request

Further interviewed with testing leaders, they mentioned that “they didn’t know about the cost center and they just select the materials supplies category when they do the purchase requisition” and also base on the snapshot of the information fields required when

made the purchase requisition, the field of category is mandatory while there is the field for CapEx number as well

Figure 12: Purchasing Information fields

Source: Data collected

The field “Category” is required to fill with a drop down function but the requestors just selected the materials and supplies category only

Figure 13: Purchasing Information fields

Source: Data collected

There are the fields for CARF number and Charge account for filling but the requestors ignored it

As the information obtained, the wrong cost allocation is the potential of overhead

costs which is not profitable and needs further investigation as well

After further interview with the team and referred to the literature review, the Preliminary Cause and Effect Tree was identified with two main potential problems: Poor Sales Activities and Wrong Cost Allocation which showed as below Preliminary Cause and Effect Tree:

Figure 14: Preliminary Cause and Effect Tree

Source: Data collected

3.2 Problem Validation

As for the potential problems in section 3.1, the main problem will validate based

on the perspective of principal and stakeholders of key roles and responsibility of the team such as sales, customer services, testing and admin in the UL VS Vietnam laboratory

3.2.1 Poor Sales Activities

As interviewed with Operations Manager, the general nature of the sales process of TIC industrial is shown below, and it may have a little bit of difference among service providers depending on outreach and approach strategies He also mentioned about the sales

team situation as “our sales team has problem on the headcount from February 2020, from beginning of year we have 04 salesman to cover for North, South Vietnam and Cambodia with 01 sales manager Sales manager left of February 2020 but there is no backfill, the

Poor Sales

Activities

Inefficient Customers Outreach

Low Sales Performance

Wrong Cost

Allocation

Poor Customers Services

Customer Lost

Overhead Cost

Low Revenue Growth Rate

Not Profitable

senior sales executive in North Vietnam also left on July and the sales executive in South Vietnam also left on September The backfill for senior sales executive in North Vietnam only on board for backfill from November 2020 and the backfill for South Vietnam on board

on February 2021 So, we are really facing with sales problem”

Figure 15: General Sales Process of TIC industrial

Source: Data interview collected

There are two customer segments, first one is buyers/ retailers nominated as third party testing – meaning that if any vendors/ suppliers supply the products/ goods under that buyers/ retailers then they have to submit the products/ goods to the nominated third party testing for process, the second one is local or self-reference customers – meaning that their buyers/ retailers not required for nominated third party testing so they can select service

Local Customers/ Self Reference

Proposal Quotation/ Offers

Follow up with Orders

provider by themselves depending on the pricing and services commitment, the another type customers is self-reference which for the purpose of marketing and/ or to verify their product to meet with market demand or specific potential buyers/ retails or not, or use it for

the purpose declare their own products quality As the sales executive said, “the revenue contribution rate of these two customer segments is 80/20”

As for the conversation with sales executive Ms Scarlet “we have 04 products service in the laboratory: Textile/ Garment, Toys/ Hardline, Footwear/ Leather and Chemical but our sales team only have 03 people which cover for North/ South Vietnam and Cambodia”

Referring to the sales process mentioned above, it seems to be simple activities but according to (11), there are 170 sales activities among the industry to make successful selling products or services As interviewed with the operations manager, the salesman

activities of TIC industrial including but not limited to “make the sales presentation plan, plan selling activities, call on new accounts, provide feedback, prepare the quotation, send quotation, make closure and obtain order, monitor competitors’ service, manage customer’s orders, looking new opportunities with existing customers, forecast, customers visit, approach new customers, study on customer’s needs, train the customers to use services/ products, after sales conference, research on customer’s business … and so on”

These activities are the most important on the customers outreach successful rate and broaden customer’s database in both dimension non-exclusive and local/ self-reference tests

As Ms Scarlet Phan just joined the UL VS Vietnam laboratory from February 2021

so she has not been involved in any sales activities in 2020 so the operations manager said

“in 2020, the sales activities are poor due to the COVID 19 restriction and social distancing The other hand, we do not have enough salesmen to do these activities Our salesman situation in 2020 is very unstable At the beginning of the year we had 03 sales plus one sales manager, the sales manager left but without backfill then another sales executive in North Vietnam resigned in August and another sales executive in South

Vietnam also left in September" So, the poor sales activities are significant for the

efficiency of customer outreach which lead to low customer growth

As for the interview with Mr Nhut Phan, Customer service leader “we have around

400 customers where the top 20 contribute around 90% of revenue” Customer services has

the main responsibility on the customers facing to understand what customer needs, receiving and feedback customer requests, creating orders on ERP system, booking orders, sending testing reports to customers, following with payments status, and so on

At this moment, customer service has only one person and another one temporary person who comes from chemical labs

Referring to (12), the current economic environment, attracting new customers is becoming more challenging and difficult, so the firm should be looking within their current business to understand the behavior of their existing customers Existing customers can be our greatest advocates for future sales, so we should make them feel special and so important by ways the service provides quality

According to (13), the customer interaction/ communication/ feedback are a critical part of the service experience of the customer and it might have a significant impact on both dimension of organization performance and customer satisfaction Mr Nhut Phan, Customer Service team leader regarding to the customer satisfaction, he mentioned that

“only me, unable to handling for all request of customer from testing request to booking orders into the system, so he always late response with customer inquiries” while, the company has procedure about this tasks as Ms Alice, Quality Assurance mentioned “we have the procedure about the customer feedback, all the customer inquiries via phone or email must be first reply within 4 hours and complete reply within 24 hours”

Based on (14), customer experience is defined “The customer experience is a multidimensional construct that involves many factors such as cognitive, emotional, behavioral, sensorial and social responses to an organization offering during the customer’s purchasing process as below chart

Figure 16: The Process Model of Customer Journey and Experience for re-purchases

Source: (14)

Pre-purchase: The first stage is pre-purchase: includes all aspects of the customer’s

interaction with the brand, environment, and category before a purchase process

Purchase: The second stage is purchase: includes all customer interactions with the

organization brand and its environment during the purchase event itself It is characterized

by behaviors such as selection/choice, ordering, and payment process

Post-purchase: The third stage is post-purchase: includes customer interactions

with the organization brand and its environment following the actual purchase process This stage includes behaviors such as consumption, usage, needs, post-purchase engagement, and service requests.

Having said that, the customer journey is an unbroken chain cycle of decision making to continuous order from the current supply chain

Therefore, customer experience is very important for a customer's decision on the purchase journey to select the laboratory for testing their products As interviewed Mr Nhut

Phan about the customer experience, he said “the customer experience activities are not only based on traditional telephone support I also do the support via many tools such as emails, website, text message via chat application, and social media too And not only

answer the customers question, I need to give them the turnaround time for their submission and make it happen via connecting with laboratory operations to push them to release the testing results”

And also as (15) wrote “89% of firms now expect to complete the mostly on the basic

of customer experience’

So, in conclusion, customer experience which is handled by customer’s service now

is very important and has a big impact on the revenue generation for the firms

The operations manager confirmed that “Yes, the sales activities are poor to make the engagement of existing and new customers as well The poor sales activities is happening in both side of inbound and outbound sales”

Regarding to customer perspective, operations manager claims he has surveyed several customers via the phone about the state of the laboratory's service and they responded that the customer service has slow or has no feedback them on the request for quotes, proposal, test requests, or advice on test as well as the status of the test report In particular, some customers also reported that they did not know that UL's testing laboratory has the testing capacity for their products and they did not know that UL testing laboratory

is designated as one of the testing laboratories for testing for their product too

Therefore, the poor sales activities is one of the problems of UL VS Vietnam laboratory

3.2.2 Wrong Cost Allocation

According to (16), there three main purpose of cost allocation:

1) To get the desired motivation

2) For calculation income and property valuations

3) To justify expenses or get the refunds.

The first purpose of cost allocation focuses on specifying planning and control uses for allocation, so it is more related to budgeting the costs and direct impact to the P&L performance The wrong cost allocation can lead to the organization business cannot make profitable because depreciation, justification of fixed or variable cost So, when it happens

then we can’t identification the specific costs objects which drive business and decision made, especially on the saving costs project and products/ service prices set up

(16) Also listed out three basic types of cost allocations:

1) Allocation of joint costs to the appropriate responsibility centers The costs that

used combination by more than one business unit and allocated base on the

costs-driver activities in the business unit

2) Reallocation of costs from one responsibility center to another The costs of one

business unit provides products/ services to customers and the costs are transferred along with the products/ services

3) Allocation of costs/ expenses of an individual organizational unit to its outputs

of services and/ or products The cost/ expenses combination with the above two types

As the conclusion of (17), the cost allocation helped company executives find the major cost, increase the managerial efficiencies and effectiveness, and increase firms’ revenue The cost allocation has a significant effect on overall firms’ performance

As further confirmation with the operations manager, he agreed that wrong cost allocation is another problem of UL VS Vietnam laboratory

3.2.3 Important of Main Problem

According to (18), the main problem are the main thing that most important in the several problems in the specific situation and this problem directly leads the description of the issue that business organization facing Their consequence can be include the loss money, business, poor performance, low productivity, loss resources, competitive advantage, and so on

Refer to 3.2.1, we can see that the sales activities are very important for the successfulness of the company According to (19) sales force activities lead customer results Salespeople’s activities are typically organized into a sales process that includes: lead generation, solution development, proposal presentation, negotiation, needs analysis, customer service, and account maintenance and expansion Salespeople in both outbound and inbound execute the sales force activities As further interviewed with Ms Scarlet Phan,