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Lean Sales - Profitable growth through the application of Lean Management in Sales

Date: / Category: News China

Jan Haug, Manager, STAUFEN.SHANGHAI

Basics of Lean in indirect areas

Lean Management in indirect areas (non-production environments) focuses – like the application of Lean in production areas - on the reduction and elimination of waste with the objective to reduce the lead time of an end-to-end process. However, the challenges which need to be overcome are slightly different. Processes in indirect areas are mostly determined by different participating functions, changes of responsibilities and multiple interfaces. This leads to interrupted flow, transition times between the process steps and thus, to long lead times of the overall process, which contradicts with the above-mentioned objective. 

Figure 1. Example from mechanical engineering: order fulfillment process for customer orders

In the example of the order fulfillment process (OFP) as shown above, Lean Sales is crucial during the phase of “order generation” for a smooth order fulfillment and thus the whole end-to-end process. The synchronization of sales and production activities is the prerequisite for disturbance-free processes. On the one hand, sales engineers can only forward the actual lead times to the customers, when they know it. On the other hand, the producing plants must prepare for the prospective demand, so that the capacities can be managed accordingly. Furthermore, the guarantee of the needed information quality and a Lean sales process have both a positive impact on the throughput time of the whole OFP. When all necessary information is available and is clarified sufficiently with the customer, redundant iterations can be avoided and with that, a higher number of orders can be processed with the same resources. Therefore, the implementation of Lean Sales enables high financial savings.

 

Waste & value-adding activities in Lean Sales 

Several sources of waste exist in sales: for example, the inefficient use of resources, losses of orders and unused potentials (price, discounts) within the sales process, as well as time spent for unnecessary administrative tasks, travels, waiting and inefficient market coverage related to the operations of external sales forces. 

In general, above mentioned kinds of waste can be divided into “internally caused” or “externally caused”. Examples for the internally-caused waste would be double work, paper and digital versions of the same information, and the over flow of emails in the internal and external communication. Externally-caused waste could be for example incorrect information from customers, which eventually leads to double work. Another common issue is the waiting time for customer responses, as during these waiting times the sales department is reliant on further feedback to take actions. 

As mentioned above, a high amount of waste in the downstream process is already caused during “order generation”, so it is crucial to anticipate waste right at the beginning. 

Likewise, there are value-adding activities in sales, which should be maximized: value-adding needs to be seen from the customer’s perspective. It includes the development of solutions for the customer, support in product comparisons, a better purchase experience for customers, assistance and service and certainly also the follow-up of order fulfillment and logistics to be able to inform the customer about the current state of his order. Additionally, the activities to improve the customer relationship can be considered as value-adding. In general, value creation in sales takes place at the customer site.

 

Visit planning as an example of waste reduction in Lean Sales

With the use of structured planning it is possible, to reduce the travelling time and related costs. In the graphics belong, several ways of route planning are described. The first picture shows an unstructured travel plan, which includes several independent routes within the sales district, each starting from the home of the sales engineer. The second and third picture show two possible ways to structure the route planning – the external circle method and the sales sector allocation method. The route planning in the first method focuses on the shortest connections between the customers and divides the visits according to this layout. For the sales employees, this means less time at home, but shorter distances to travel. In the sales sector allocation method, the customer locations are divided into different sectors, which are visited on different days. Like in the external circle method, the travel time and costs are reduced, however, this would involve that the sales person must move to the middle of the region. 

Figure 2. Visit planning as possibility for waste reduction

 

Visual Sales Management

Visual Sales Management helps to understand the status of one’s sales department at a glance. It supports all managers (over different hierarchical levels) within a sales division with the operational leadership and with the problem-solving process. 

Through a regular communication procedure at the information board, the structured exchange of information can be improved. Performance measurement included in the Visual Sales Management, enables to recognize the need for action early on and to start and monitor the problem solving as well as the continuous improvement process. Through the improved transparency, a cascading of information to different management levels and high-frequent communication as well as an improved decision making based on facts and figures is possible. The key performance indicators are visualized, so changes and trends are easily identifiable. Hence, the display of performance indicators on the information board is crucial for decision making and also the cascading of information.

Figure 3. Sales activities with Visual Sales Management 

 

Results from former projects 

 

Figure 4. Results of former Lean Sales projects and potential support KPIs 

In a former project with Field Sales Engineers in a German SME (small and medium sized enterprises), the number of sales visits for target customers was successfully increased by 20%. At the same time, the company started to monitor the hit-rate to avoid that useless visits were made. Throughout the course of the implementation project, the hit-rate could also be increased by 22% (from 23% to 28%), which clearly shows that right priorities were set and that the sales activities were more focused and effective. The company could also increase their order intake within 6 months since the project had started and was 7% above plan at the same time and with the same number of employees in their sales department, which is a tremendous success. 

Through the application of Lean in sales, both the effectiveness as well as the efficiency of the sales activities can be increased and noticeable improvements with impact on profit and loss can be achieved. At the same time, the execution of the order fulfilment process can be influenced positively, which usually has a direct impact on the customer satisfaction.