Shorten the order cycle time to improve cash flow.
Lean is all about
streamlining processes to make them simpler, more transparent and easily
understood. Typically we think of Lean as being applied to manufacturing. How
can we make more stuff, in less time, using fewer resources (people, space,
materials, energy, etc.)?
Lean can be used in most any environment. My objective in using Lean with all
my clients is to shorten the order-to-cash cycle time, the time starting when a
customer calls you on the phone to place an order and ending when you receive
and cash the check. The shorter that cycle is, the better your cash flow and
the happier your customer. What’s not to like?
Too many companies (manufacturing, distribution and service) start the Lean
process somewhere after the sales part is all done. They streamline the
warehouse, delivery, invoicing, etc., but totally skip the quote and sales
processes - which as we all know can take a long time. If the quote process
takes too long, you may lose the customer altogether. Even if you don’t lose
him, a complicated quote and sales process will forever lengthen the time
before you can ship the material and ultimately cash the
Look at the sales process like you would any other. Follow a quote and then a
sale through the entire process and time each step along the way. How much time
is devoted to doing work on the quote or sale and how much time is due to the
quote or order waiting. I can guarantee that there’s a lot of waiting embedded
in the quote and sale processes (not minutes, but hours and even days). A
customer requests an odd valve and your guys call around to the various
suppliers - and then they wait for responses. The outside guy isn’t sure about
a technical question so he tells the customer he will get back to him. He calls
the inside guy, but the inside guy is on the phone with another customer so the
outside guys waits. Everyone looks busy doing work, but this is busy work -
calling people back two to three times, waiting for returned calls. And none of
it is getting the order any closer to going out the door.
Quoting is the hardest to get Lean because you can’t control how fast a
supplier gets back to you. You can, however, control which suppliers you use.
Suppliers that make you wait and wait for quotes should be getting less and
less of your business. It’s as simple as that.
Trying to process big orders in one big batch is another way that “waiting”
gets embedded into the system. At first blush it seems like giving partial
quotes and shipping partial orders is stupid and a nuisance - but in fact,
partial quoting/shipping is one way to prevent more useless waiting (at least
when you ship part of an order, you get to cash a part of the
Sometimes saying NO is the most powerful way to stop the
“No, we can’t quote that for
you. We don’t have it in stock, we can’t get it to you in a reasonable time
frame - we don’t want to wait and we don’t want you to wait.”
I can already hear the wails: I can’t do that!!! I will lose the sale! Yep,
you are exactly right. You will. And I am here to tell you that that’s a good
thing. Now you can devote your time on quotes youcan make and to
customers you can service in a timely fashion. Waiting isn’t only a waste, it
creates other wastes. You have to keep remembering to follow up with this or
that vendor, or check if this or that shipment has finally come in. You have to
keep all that paperwork at hand so when the vendor quote or the part finally
comes in you can act on it, ship it and send an invoice
In the perfect world you want to respond immediately to requests for quotes and
then convert quotes to sales equally fast - such that you can ship and invoice.
In short, you want to cash the check sooner rather than later. Eliminate all
the back and forth, all repeated steps (calling someone again and again), hand
offs and waiting. You’ve tried Lean elsewhere - now it is time to try it on
Lean For Sales
February 1, 2009