InteVal Consultores
Integrando Valor
Integrando Valor
Protecting the Flow
One of the most important processes of every company is the Orders & Sales process.
Very frequently, we have difficulties in order to fulfill the target of the monthly invoicing and have a smooth invoicing through the month. But finally we do a lot of things in order to just accomplish the invoicing goal, and very frequently jeopardizing other important KPIs, like inventory, costs, profits and even future sales.
So, if we want to have a controlled and robust Orders & Sales Process, we need a balanced management of all stages in this entire process. This “balanced management” of the entire Orders & Sales process could be apparently very difficult to control…
What are the principal variables or control points of this critical process?
Is it really possible to control it?
After several consulting projects in many industries, we have been able to conclude that we have two big stages in order to achieve a robust Orders & Sales process.
I) First of all, we need to solve what we could call ‘hygiene factors'. I mean the basic elements that allow building a proper Order & Sales process:
· A good inventory managing, by some replenishment methodology (an “alive” min/max methodology)
· A robust production managing, by some Lean Manufacturing system (like Theory of Constraints).
II) Once we have installed those building blocks, we’ll need to take control of the process. We need a dashboard, a control panel that lets us know how the Orders & Sales flow advances, and thus take the necessary measures if the flow is stuck.
But the idea is not to have our dashboard full of indicators like an airplane control panel. We need a simple dashboard. In fact, we need just two big indicators:
1.The Initial Backlog
2.The Order Entry amount
For both variables, we need to set goals, in order to know through the month if we are doing things right, or if we need to take some action and not just wait for the end of the month. The idea is to have a couple of indicators that show during the month if we are having a good flow that feeds the Orders & Sales system.
In summary:
1. We need to start the month with “enough feed”, that is, a minimum of Initial Backlog > 60% of the mid-month invoicing. That KPI used to be named “Comfort Factor”. This is checked at the beginning of the month.
2. We need a good and constant order entry during the month, especially for the first half of the month (in order to guarantee the booking). These weekly goals, for every group or kind of orders, are set up at the beginning of the month, but most important, are being tracked along the month.
The first variable, the “Comfort Factor”, is easy to measure.
For the second factor, the Order Entry, we need to know the progress, so we need a simple control tool to measure the progress of weekly orders.Obviously, we also need a tool to measure the progress of weekly invoicing.
So, in this way is very easy to know if we are getting closer to the invoice goal, both for the current month and for the next periods, or if we need to take corrective actions.
The next thing is…doing these actions! (And push for them)
If we need to get a shorter Cycle Time, i.e., a very short pipeline, and we want a constant (and good!) Exit Flow, we need a constant Enter Flow. In fact, the flow is the same.
Just the name changes along the flow: first is known as “orders”, then as “pieces”, then as “invoicing”, etc. But the flow is the same along the pipeline, so the goal is “TO PROTECT THE ENTIRE FLOW”:
One of the most important processes of every company is the Orders & Sales process.
Very frequently, we have difficulties in order to fulfill the target of the monthly invoicing and have a smooth invoicing through the month. But finally we do a lot of things in order to just accomplish the invoicing goal, and very frequently jeopardizing other important KPIs, like inventory, costs, profits and even future sales.
So, if we want to have a controlled and robust Orders & Sales Process, we need a balanced management of all stages in this entire process. This “balanced management” of the entire Orders & Sales process could be apparently very difficult to control…
What are the principal variables or control points of this critical process?
Is it really possible to control it?
After several consulting projects in many industries, we have been able to conclude that we have two big stages in order to achieve a robust Orders & Sales process.
I) First of all, we need to solve what we could call ‘hygiene factors'. I mean the basic elements that allow building a proper Order & Sales process:
· A good inventory managing, by some replenishment methodology (an “alive” min/max methodology)
· A robust production managing, by some Lean Manufacturing system (like Theory of Constraints).
II) Once we have installed those building blocks, we’ll need to take control of the process. We need a dashboard, a control panel that lets us know how the Orders & Sales flow advances, and thus take the necessary measures if the flow is stuck.
But the idea is not to have our dashboard full of indicators like an airplane control panel. We need a simple dashboard. In fact, we need just two big indicators:
1.The Initial Backlog
2.The Order Entry amount
For both variables, we need to set goals, in order to know through the month if we are doing things right, or if we need to take some action and not just wait for the end of the month. The idea is to have a couple of indicators that show during the month if we are having a good flow that feeds the Orders & Sales system.
In summary:
1. We need to start the month with “enough feed”, that is, a minimum of Initial Backlog > 60% of the mid-month invoicing. That KPI used to be named “Comfort Factor”. This is checked at the beginning of the month.
2. We need a good and constant order entry during the month, especially for the first half of the month (in order to guarantee the booking). These weekly goals, for every group or kind of orders, are set up at the beginning of the month, but most important, are being tracked along the month.
The first variable, the “Comfort Factor”, is easy to measure.
For the second factor, the Order Entry, we need to know the progress, so we need a simple control tool to measure the progress of weekly orders.Obviously, we also need a tool to measure the progress of weekly invoicing.
So, in this way is very easy to know if we are getting closer to the invoice goal, both for the current month and for the next periods, or if we need to take corrective actions.
The next thing is…doing these actions! (And push for them)
If we need to get a shorter Cycle Time, i.e., a very short pipeline, and we want a constant (and good!) Exit Flow, we need a constant Enter Flow. In fact, the flow is the same.
Just the name changes along the flow: first is known as “orders”, then as “pieces”, then as “invoicing”, etc. But the flow is the same along the pipeline, so the goal is “TO PROTECT THE ENTIRE FLOW”:
For that reason, we need to measure every week the Order Entry. And not only to reach the invoicing goals, but to have a “smooth operation”, and not extra hours every day, or all people running at the end of the month, even at the risk of the safety of the operation.
We could even go further, setting a KPI for measuring the loading rate of new Sales Orders, and a KPI for measuring the loading rate of the invoicing. That is to say, to measure the Enter and the Exit of the entire process (see the picture above). If we achieve keeping a reasonably stable rate in time for both KPIs, then we can be sure that we are doing things well, we’ll be keeping a stable flow, or in other words, we will be “Protecting the Flow”.
Reality has shown that when we have good rates on both factors, the Comfort Factor, and Order Entry, we’ll accomplish the invoicing goal and a smoother operation.
In summary, the idea is to enable a more clear comprehension of this apparently hard process, the Orders & Sales process. We need the right dashboard and the subsequent timely actions.
© Patricio Salas T.
® INTEVAL CONSULTORES
www.inteval.cl
We could even go further, setting a KPI for measuring the loading rate of new Sales Orders, and a KPI for measuring the loading rate of the invoicing. That is to say, to measure the Enter and the Exit of the entire process (see the picture above). If we achieve keeping a reasonably stable rate in time for both KPIs, then we can be sure that we are doing things well, we’ll be keeping a stable flow, or in other words, we will be “Protecting the Flow”.
Reality has shown that when we have good rates on both factors, the Comfort Factor, and Order Entry, we’ll accomplish the invoicing goal and a smoother operation.
In summary, the idea is to enable a more clear comprehension of this apparently hard process, the Orders & Sales process. We need the right dashboard and the subsequent timely actions.
© Patricio Salas T.
® INTEVAL CONSULTORES
www.inteval.cl
