Nutrisystem 2010 Annual Report Download - page 13

We seek to hire counselors with backgrounds in psychology, sociology, nutrition, dietetics or other health-
related fields and with suitable temperaments to speak with our customers. Counselors are trained in our meal
plan, our Internet chat service, email, motivational techniques and customer service problem solving. Sales
agents are well-versed in explaining our program and working with our customers to determine the program that
would best fit their needs in helping them reach their weight loss goals.
Customer Service
As of December 31, 2010, we employed approximately 112 customer service representatives. Customer
service representatives are trained to handle in-bound calls and emails from customers who have questions or
problems with an order after the sale transaction is completed. Typical customer inquiries relate to the arrival
date of their order shipment, reporting of missing or damaged items and credits and exchanges. For email
inquiries, we have a software system that scans the customer’s email message for key words and automatically
supplies the representative with a form response that is reviewed, edited and sent back to the customer. Customer
service representatives are paid an hourly wage.
Fulfillment
We operate an integrated order receipt, billing, picking, shipping and delivery tracking system comprised of
proprietary and third party components. This system integrates the front end, or website customer interface, with
order processing and shipping, and allows Internet customers to access shippers’ order tracking numbers online.
Our computer-assisted picking system allows for virtually paperless order picking in all warehouse facilities.
We operate an integrated network of distribution facilities. In 2009 and 2010, we embarked on several key
initiatives within our supply chain, including the installation of new material handling equipment and a new
warehouse management system. These initiatives resulted in realized cost improvements, enhanced vendor
productivity and warehouse efficiencies, and they helped increase key metrics supporting customer
satisfaction. In addition, these initiatives resulted in improved inventory management and allowed for us to
reduce our overall warehouse footprint. We currently utilize two outsourced distribution facilities – one located
in Chambersburg, Pennsylvania and the other in Sparks, Nevada. During 2010, 100% of our fulfillment was
handled by our outsourced provider.
We have a service agreement with our outside fulfillment provider, which provides for storage, handling and
other services, including pricing and minimum space commitments. The current contract expires on
December 17, 2014, but may be terminated sooner upon 180 days written notice. We believe that other outside
fulfillment providers could be utilized if needed and we continually evaluate the need for secondary fulfillment
services.
We continue to partner with our fulfillment provider to reduce the warehouse order turn-around time for
processing and shipping orders. In 2010, approximately 99% of all direct customer initial orders were shipped
within two business days of the date the order was received. In addition, we can ship to approximately 99% of
the domestic population within five business days using standard ground transportation. In 2010, we made capital
investments in new material handling equipment and a new warehouse management system to target
improvements in productivity, cost, quality and service.
Direct customers are not charged for their orders until the ordered product is shipped. We do not charge
customers for shipping and handling on Auto-Delivery food orders provided customers take receipt of their
second order. If a customer cancels before receipt of a second order or postpones his or her second order for more
than 30 days, the customer will be charged for shipping and the difference in pricing for an Auto-Delivery order
versus a non Auto-Delivery order.
9