The company lost facilities and equipment due to a tsunami, so cost reduction is needed to increase capacity. The summary recommends: 1) Introducing a website and social media to provide reliable data about product safety and better customer service, while canceling unmeasurable TV commercials. 2) Eliminating $129,520 per year in costs by canceling international calls ($12,900), reducing business trips ($46,620), and the TV commercial ($70,000). 3) Improving the seven factors of service quality to reduce long-term customer service costs.

1. Cost Reduction Process and Project
MGT 603
Koichi Tachiya

2. Points Describing the Organization
• Business in Japan, South Korea, Taiwan, and
Thailand.
• 300 workers.
• Located in Fukushima, which has a broken
nuclear power plant.
• Purchased a machine that checks contamination
on its products, so it sells only safe food.

3. An Initial Problem
The company lost some facilities and some
equipment by tsunami, so the cost reduction is
necessary for the company to start increasing its
capacity. I recommend implementing some process
and projects to reduces $129,520/year. The
company will decrease the costs and increase its
capacity, performance of workers and sales
eventually.
Operations issue
Unnecessary activities on services are implemented,
but necessary activities are not implemented in
their operation system for a long while.

4. Analyze by a fishbone diagram
Customer
Satisfaction
Products
Inventory
Forecast
Receiving
Order
Safety
Services
Email
Website
TV
commercial
Social
Media
What needs correction
• Customer services that explain the
products are safe.
• Introducing technologies: email,
website and social medias.
• Cancel the TV commercial
• Hiring or outsourcing workers who
can develop and manage a
website and social medias.

5. Financial Comparison
Before earthquake and tsunami(2010)
Sales $2,000,000
Amounts of Returns $2,000
Ratio of Them 0.001
After earthquake and tsunami(2012)
Sales $1,100,000
Amounts of Returns $15,000
Ratio of Them 0.013
All products have been safe, but the sales are affected by word of
mouth, and weak customer service. Therefore, when the quality of
customer service improves, the sales also increase and amounts of
returns decrease.

6. Question
How do you eliminate costs?
Process
Seven Service Quality Factors
Project
Canceling TV commercial
Building a website and social medias
Stopping international call
Decreasing # of business trips
Using Skype for calling and meeting

7. Seven Service Quality Factors
“Improving quality means reducing costs” (Dr. W. Edwards)
• Reliability: data of contamination.
• Responsiveness: willingness to assist customers.
• Competence: knowledge and skills of customer service.
• Access: the ease of contacting the company.
• Courtesy: politeness, respect and friendliness
• Communication: languages such as Korean and English.
• Credibility: the companies' trustworthiness, believability
and honesty.

8. Service Blueprint
Customer Service
Meetings
Meetings Overseas International Call
TV Commercial
Guidelines/Strategies
Visible by customers
Invisible by customers
$12,900 /year$46,620/Year
$70,000/year
Total costs: $129,520/year can be reduced

9. Costs of business trips overseas
Expenses Costs par month
Transportations $1,200
Hotel $1,800
Social Expenses $1,170
Labor $3,600
Total Costs $7,7000/month
$46,620/6monthes
$93,240/year

10. Costs Reduction on Service
6workers × $2 × 45min = $540/month
$540 × 12 months = $6450/year
That costs are charged to both, so
$6450 × 2 people = $12,900 /year
Therefore, I recommend using Skype because it is free
# of workers who call from
Japan to Korea.
6 workers
Cost of calling from Japan to
Korea.
is＄2/min
The average time of calling by
each workers.
45 minutes/month.

11. TV Commercial vs. Website
TV
Commercial
Website
•TV commercial is not really
measurable, so we cannot
calculate its effectiveness exactly.
•Website has more information
and data. TV commercial has just
15 seconds.
•The company generates
$12,900/year by canceling the TV
commercial, so it can introduce a
website that costs $1,000 as a
production fee and $50 per
month for maintaining.

12. Schedule
9/16/13 Mon 9/12 Thu 9/12 Thu 9/23 Mon
Canceling TV
commercial
Adding coworkers’ Skype
IDs and Skype IDs for the
virtual meeting
Deciding which
meeting style should
be used for the next
month meeting
Building a website by
outsourcing
9/27 Fri 10/1 Tue 12/23 Mon 12/27 Fri
Decide participants of
improving service
quality factors (SQF)
First meeting for SQF
(Every Tuesday)
Completion date of
the website
Evaluation for the
calling and virtual
meeting by Skype
2/3/14 Mon 3/28 Fri 5/5 Mon 6/27 Fri
Evaluation the
website and SQF
Evaluation for the calling
and virtual meeting by
Skype
Evaluation and
adjust the website
and SQF
Evaluation/adjust the
calling and virtual
meeting by Skype
8/4 Mon 9/26 Fri 11/3 Mon 12/26 Fri
Evaluation and adjust
the website and SQF
Evaluation/adjust the
calling and virtual
meeting by Skype
Evaluation and
adjust the website
and SQF
Evaluation/adjust the
calling and virtual
meeting by Skype

13. Recommendations
• Introduce email, website and social medias to inform reliable data about
contamination, and to be easily accessed by customers.
• Reduce costs: $70,000/year by canceling TV commercial because website
is better than TV commercial on cost effectiveness.
• improve the seven service quality factors to reduce costs of customer
service in the long term.
• Reduce costs: international calling by $12,900/year.
• Reduce costs: unnecessary business trips: $46,620/year.
• Total costs that the company can reduces are $129,520/year