Background
This Transportation Equipment Distributor’s CEO had a successful growth strategy that saw sales increase by 400% in just a few years. This is a remarkable sales performance. Even more remarkable was his realization of the fact that the company’s Sales and Support Process had outgrown itself.
Although he knew that this growth was causing inefficiencies in his sales process, he didn’t know how he could fix them. Sales representatives should be working with customers to add value and close deals. Instead, he saw them completing a lot of paperwork.
Lean tools were used to eliminate administrative work that was not value-added.
Lean Versus Reengineering
There are two options for redesigning a process. You can start with a blank piece of paper and create the process you desire. This idea was popularized by the book “Reengineering the Corporation” published in the 1990s. It was trendy, but it quickly died.
This approach has many flaws. The first is that the design of the new process can take too long because everyone wants to defend their turf. Re-engineering projects can take anywhere from 6 months to 2 years to complete. The second reason why the new process didn’t work was that it did not integrate with the existing information systems of the company. It’s too difficult to begin again.
Lean is simpler and more efficient than traditional methods. The Lean method maps the current process and then identifies and eliminates the non-value-added actions. The aging process is simply the new one with the removed non-value-added step. Lean projects can be completed in four weeks and provide lasting improvement.
Current State Process
Flow Mapping This diagram shows the sales process for this Distribution Company.
Making proposals
Configuring orders
Standard products can be customized to meet customer requirements (coming from the manufacturer).
Delivering
Billing
Accounting for payment and commission payments
Sales Representatives
Sales Management
Sales Support
Parts Department
Service Department
Accounting
After the Current State Process Flow Map had been completed, we examined each step and asked two questions.
Is the customer satisfied with this action?
Are Sales Reps being prevented from spending more time with customers because of this?
We consider it unnecessary or inefficient if the task is not of value to the customer or prevents Sales Representatives from selling.
These non-value-added tasks were removed from the Process Flow Map. We then created action items to eliminate or reduce their time. We then quantified each step in order to calculate how much time was being saved by the Sales Representatives as well as the Sales Manager. These are the actions items.
Sales Managers Save:
Sales Manager approves payments to vendors – Should have been handled by Accounting (13.8 hours per year saved).
Sales Manager reviews leasing information to Sales Reps. Sales Support can do this (1.7 hours per year).
The sales Manager checks the prep sheet for insufficient information. This information should be entered into an IT system and not paper. It takes 2.5 hours to save (2.5 hours annually).
Save on Sales Representatives
Sales reps are responsible for writing proposals, mailing proposals, filling vendor-option forms, bid info sheets, financing forms, mailing contracts, and updating the used equipment database. They also complete market share forms.
All this can be done through Sales Support Admin.
Sales reps prepare bids based on customer specifications manually
IT System can be used to generate a bid based upon customer specifications.
By eliminating these ten tasks, we eliminated 219.8 hours of work per Sales Representative.
Results
Eliminating Sales Representatives performing administrative work using company information systems or moving tasks over to Sales Support Administration
Each sales representative was allowed to sell an additional 5.5 weeks per year.
In the two years that followed, gross profit margins grew by 40%
The project involved identifying non-value-added tasks Sales Representatives perform and moving them to lower-paid sales support personnel. A Sales Representative was required to complete ten tasks for every customer inquiry. These were removed from their workload. Although this may not seem like a lot of steps, it created 5.5 weeks more selling time for each Sales Representative.
Sales representatives should focus on selling and not just filling out paperwork. The Lean project allowed this company’s sales representatives to spend more time talking with customers, understanding their needs, and adding value. They closed more deals with higher profit margins.
