Challenge
In 1995, CEMEX, the world’s 3rd largest cement producer with over $2.6 billion in sales, set out to change the value of their product - cement - from a commodity to a differentiated offer. Traditionally, the benefits from different cement manufacturers are considered essentially the same because of the little variation in the physical attributes of the product. In developed regions of the world, such as Western Europe and the US, cement is mostly sold in bulk and competition is based on price. However, as Cemex began to a establish a global presence and these players, in turn, made entries into its home market, it sought to change the rules of the game through developing innovative, differentiated offers.

In the midst of a general restructuring and modernization of its operations, CEMEX identified its sales of ready-mix concrete to its large and medium-scale users (governments, large commercial enterprises, and small contractors) as a perfect opportunity for innovation. The local strains of inclement weather, unpredictable traffic, labor disruptions, and arbitrary government inspections resulted in a 50% last minute change rate in customer order, making delivery of this highly perishable product an extremely difficult tough business. Literally drowning in a sea of last minute changed orders, the central dispatch center of the Ready Mix division needed to create an offer that would take the everyday chaos of Mexico’s construction sites as an opportunity to “WOW” its customers. BDA was retained to help them do this.

BDA’s Strategy
BDA realized that to generate a sustainable competitive advantage, Cemex had to reinvent the ready mix delivery business by shifting the focus from merely delivering the commodity product to impeccable service that resolved their customers’ value-conflicts. Customers at construction sites appreciated three principle attributes of their buying experience that seemed to be irreconcilable: low prices, timely delivery, and flexibility in allowing for order changes. Both Cemex and their customers had become resigned to the fact that local conditions and the resulting order changes drove up the inefficiency and cost of the ready-mix cement delivery.

At the heart of BDA’s strategy was the approach of capitalizing on the local conditions of chaos to produce an unprecedented and conflict resolving customer experience. The entire delivery organization had to be realigned towards listening to and serving customers’ changing concerns effectively. In this effort, technology could prove a great enabler in maintaining flexibility, but the key to success would be in shifting attitudes and practices within the organization towards customer service and a commitment to producing an impeccable customer experience.

BDA’s Intervention
In order to find genuinely innovative answers to central dispatch’s recurring problems, the BDA team first gained an in-depth understanding of customers’ concerns by listening to the daily complications they necessarily face and identifying the value-conflict that if resolved would bring the most value to all. The
value-conflict identified in CEMEX’s customers was expressed as a resignation of not being able to both lower their frustratingly high cost of construction and maintain the flexibility to make last minute scheduling changes. Customers were resigned to the fact that they faced an enormous number of contingencies, including the weather, laborers arriving late and early, and other subcontractors not finishing on time. These factors impeded their ability to plan well and stay within their budgets. Once we identified the most persistent resignation in the industry - that ready-mix could not be delivered conveniently given current conditions in construction - we set about designing an offer that would resolve it and produce significant added value to all.

BDA designed an offer in which Cemex would bring its customers greater certainty in their lives by making a promise to deliver a top quality product within 20 minutes of schedule, or a discount of approximately 5%, much like Domino’s Pizza or FedEx. The system works by treating the delivery trucks as emergency vehicles, like police cars. BDA trained the ready-mix team to model its dispatch center after a crisis support business. Through trips to 911 operators, emergency room staff and other crisis support teams, the ready-mix team was able to adopt new practices important to the new offer. When ready-mix managers were encouraged to look at their business processes in terms of requests from and promises to customers, they came to see more and more opportunities to modify practices so that trucks could get to sites within twenty minutes of a request.

Results
Before long, the response was enormous. In one region where a pilot study was done, the return on investment was 700%. Cemex is now seen as the most reliable provider of ready mix cement, and order changes and same day delivery are standard service that customers have come to expect. Daily deliveries per truck increased from an average of four to ten. Reliability has also been improved dramatically: 97.63% of deliveries are now delivered within ten minutes of the promised hour, as compared with a current rate of 34.4% in Cemex’s low tech operations. Most importantly, this offer marked the beginning of a new relationship CEMEX is developing with these builders who value being treated as crisis workers facing constant disruptions.

I've seen a lot of companies undergoing change, but nothing so dramatic as the operating turnaround at CEMEX.
Thomas Petzinger Jr, The Wall Street Journal.-

In its Venezuelan operation, which is described as low-tech, CEMEX achieved an ontime delivery rate of just over 33% in the first half of March 1996 (nearly 60% were delivered "ahead" of time). The Guadalajara operation achieved a 98% on-time delivery rate, as Wired magazine reported in July 1997. In essence, CEMEX treats its trucks like taxicabs by dispatching the closest vehicle to the most immediate need Best Practices, Building Your Business with Customer-focused Solutions, Robert Hiebeler, Thomas B. Kelly, and Charles Ketteman of Arthur Andersen. Book is published by Simon & Schuster.