The CEO of this Transportation Equipment Distributor had executed a successful growth strategy and in a few years grew sales 400%. This is outstanding sales performance. However, what was even more outstanding is his realization that the company had out-grown its Sales and Sales Support Process.
He knew this growth had created inefficiencies in his sales process, but didn't know how to find and eliminate them. Sales Representatives should be working with customers, adding value and closing deals. Instead, he saw them doing a lot of paperwork.
Deploying Lean Tools to find and eliminate this administrative (non-value-added) work was the answer.
Lean Versus Re-engineering There are two ways to redesign a process. One option is to start with a "clean piece of paper" and design the process you want. This was popularized in the book "Re-engineering the Corporation" in the early 1990's. It was extremely popular and then fizzled very quickly.
There are many problems with this approach. First, the new process takes too long to design because every step is debated by team members trying to protect their turf. It was not uncommon for re-engineering projects to take 6 months to 2 years to complete. Second, the newly designed process usually did not work because it didn't integrate the company's existing information systems. It is too difficult to start over.
The Lean method is much simpler and faster. We map the current process, then identify and eliminate the non-value-added steps. The new process is simply the old process with the non-value-added steps taken out. Lean projects are completed in 4 weeks and have lasting improvement.
Current State Process Flow Mapping The sales process of this Distribution Company includes:
Creating proposals
Configuring orders
Customizing standard product (coming from the manufacturer) to customer specifications
Delivering
Billing
Accounting for payment & paying commission
Sales Representatives
Sales Management
Sales Support
Parts Department
Service Department
Accounting
Once the Current State Process Flow Map was complete we looked at every step and asked two questions:
Does the customer value us doing this step?
Is it preventing Sales Representatives from spending more time with customers?
If the task does not add value to the customer, or is preventing Sales Representatives from selling, we considered it a task that should be eliminated or streamlined.
We removed these non-value-added tasks from the Process Flow Map and created action items to either eliminate them or reduce the time they require. Then we quantified each step to determine how much time we were saving the Sales Representatives and the Sales Manager. These action items are show below.
Savings for the Sales Manager:
Sales Manager approves payment to vendors - Should be handled by Accounting (13.8 hours per year saved)
Sales Manager reviews leasing information for Sales Reps - Sales Support can do this (1.7 hours per year)
Sales Manager reviews prep sheet for incomplete information - Should be entered into IT system, not paper, which requires complete information prior to saving (2.5 hours per year)
Savings for the Sales Representatives:
Sales Reps writing proposals, mailing proposal, filling out vendor-option form, bid info sheet, financing form, mailing contracts, updating used equipment database, completing market share form and proofreading proposals
All of this can be done by Sales Support Admin
Sales Reps manually prepare bid based on customer specifications
Use IT System to kick out bid based on Sales Support entering customer specifications
We eliminated 219.8 hours or work per year done by each Sales Representative by eliminating these 10 tasks.
Results
Eliminated Sales Representatives doing administrative work by using existing company information systems or moving tasks to Sales Support Admin
Each Sales Representative was given 5.5 weeks of extra selling time per year
Over the following 2 years gross profit margins increased 40%
This project entailed identifying the non value added tasks that Sales Representatives do, and eliminating them or moving them to lower paid sales support personnel. There were 10 tasks a Sales Representative had to do for each customer inquiry that were eliminated from their workload. While this doesn't sound like a significant reduction in steps, we created 5.5 weeks of additional selling time for every Sales Representative.
Sales Representatives should be selling, not doing paperwork. This Lean project freed up time for this company's Sales Representatives to spend more time with customers, understanding their needs, adding more value. The result was that they closed deals at much higher profit margins.
The 40% increase in gross profit margin, happened as sales continued to grow. This equated to a multi-million dollar increase in profit.
