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Measuring a Lean Front-End

Thu, 03/09/2006 - 7:00pm
Godard Abel, CEO, Co-Founder, BigMachines, Inc.

     Lean manufacturing became an industry standard several years ago as a result of the successful implementation at Toyota and other Japanese manufacturers. A growing number of companies are now adopting these initiatives for continuous improvement and demand-driven flow manufacturing processes based on a "pull" rather than "push" philosophy.  The purpose of lean manufacturing is to eliminate waste, reduce inefficiencies and inventories, and improve on-time delivery rates.

     The success of implementing lean techniques and technology solutions for back-end production and fulfillment processes has spurred an extension of this philosophy. Manufacturers are now applying lean thinking to streamline their front-end selling processes, from opportunity to order, including automated product selection and configuration, pricing and quoting, and order processing.  By applying lean thinking and web technology, manufacturers can eliminate the delays and errors inherent in cumbersome front-end processes typically used to sell complex products.  Just as they have done on the back-end, manufacturers must eliminate front-end "waste" to remain agile and competitive in today's global economy.

     In a recent study conducted by AMR Research, a leading manufacturing industry analyst, maintaining quote and order accuracy using  manual processes is a huge challenge, and typically lead requires to high quote error rates, invalid configurations and extensive intervention by engineering and customer service resources.  Frequently, the net result is lengthy quote response times and low quote-to-order conversion rates.

     To alleviate these "pain points," manufacturers of configure-to-order (CTO) and engineer-to-order (ETO) products are turning to web-based sales solutions. The hope is to achieve the business benefits made possible by a lean front-end.

Measuring the Effectiveness of Front-End Processes

     Front-end processes can be difficult for producers of complex industrial and technology products because front-end inefficiencies directly impact the customer’s experience. Ultimately, this will resonate across the entire supply chain, affecting quality, customer service levels and ultimately, profit margins and profitability. 

     Speed, cost and quality are the most critical metrics in determing customer value. Metrics for the manufacturer include customer retention and revenue growth.  Front-end processes are typically the least optimized of any segment in the value chain, since lean thinking has not yet been rigorously applied to sales processes. 

     Applying strategic lean thinking and implementing an effective lean front-end technology solution can help streamline the entire range of opportunity-to-order processes and enable companies to realize measurable process improvements and results.

Taking a Strategic Approach to Front-End Process Optimization

     Only companies that succeed in maximizing speed, accuracy and efficiency can succeed in satisfying customers, reducing costs, and enhancing margins.  Achieving these goals demands a well-planned and intelligently implemented lean front-end strategy.

     The first step should be a careful process mapping of the front-end portion of the value stream.  This mapping helps a manufacturer understand how each existing process step contributes to, or detracts from, the overall value stream. This analysis serves to identify the source of bottlenecks, waste and delays. Ultimately, this helps companies determine how inefficient processes can be improved to eliminate waste and add value.  Typical front-end processes to be mapped should include all of the business processes required to convert a customer inquiry into an order.  The front-end processes to be analyzed can include quote and order management, product selection and configuration, application engineering, bill of material (BOM) generation, sales reporting and analytics, and channel and customer management.

     The next step is to evaluate how your current systems support the current value stream.  In the front-end process, manufacturers only deal with information flow in the form of paper and electronic documents.  Understanding how your information systems support the value stream is critical, since the limitations of the current systems often cause substantial waste. Before there is an order, there is no material flow, only information flow.

     Once the current processes and systems are understood, the manufacturer can design the optimal value stream and the systems that will best support the new processes.  This requires an understanding of how information technologies, such as web-based software, can help to eliminate wasteful process steps and mistake-proof the process. Without considering new information technology, the potential improvements are limited. 

     After the future state process and systems have been designed, a manufacturer needs to develop an implementation plan. This will include selecting a front-end technology solution with the power and scope required to support the future state processes and systems. The solution should provide a single virtual platform that provides all the knowledge, information and tools required in one place.  It should be scalable to accommodate business growth and, it should provide multifaceted functionality that encompasses the entire quote, order and product cycle. 

     Finally, given today's speed of business and new ways of doing business, selecting a web-enabled front-end solution is critical to success. Web-enabled, wireless, email, intranet/extranet and conventional EDI orders are on the rise and this trend is expected to grow over time. Building and commissioning a web-enabled order management system sooner than later is imperative for doing business. Just like purchasing a fax machine was thirty years ago.

     As many companies have learned with their back-end manufacturing and fulfillment process optimization initiatives, continuing to improve speed, quality and costs is key to remaining competitive in the global marketplace. The biggest opportunity for further improvement is in the front-end sales processes.  These can be streamlined by creating a web-based portal through which a company's internal and external sales force, as well as dealers, distributors and customers, can communicate freely in real time. Product and order status information can be made available around the clock, around the world.

     The decision to implement a lean front-end strategy entails much more than choosing a functionally rich, web-enabled software solution. The lean front-end is not just about technology, but rather a commitment to a customer-centric, value-based.   

Measuring the Success of a Lean Front-End Transformation

     Establishing metrics helps companies evaluate and ensure the success of any technology-driven process improvement initiative. This includes measuring how the software will improve the speed, efficiency and quality of operating procedures. It also includes business performance metrics, such as: How will this transformation affect the business, in terms of faster throughput, higher productivity, reduced costs, increased sales, higher profit margins and superior customer satisfaction? And, how quickly will the investment pay for itself in terms of ROI and competitive advantage?

     The most significant KPIs of a successful lean front-end transformation include reduced lead and cycle times, mistake-proof quoting and pricing, faster customer response time, higher fulfillment rates, margin improvement and revenue growth.

Lean Thinking: A Process of Continuous Improvement

     Adopting a lean philosophy across the enterprise—including critical customer-facing front-end

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