Issues facing Sales
Engineer to order (ETO) product manufacturing companies provide products tailored to customer requirements. These companies generally offer product solutions which are loosely termed as ‘standard’, although product design defers until a customer enquiry or purchase order is received.
The product solution offered to the client is incomplete and based only on an outline of the intended solution. The outline product solution lacks detail, and therefore both the design and the cost of the product remain uncertain. Engineering is expected to clarify these design details at a later stage.
At the sales stage, the company is reluctant to invest engineering resources in completing the product design. The cost of completing a detailed solution for every customer enquiry would be high. Many customer proposals do not result in a sale.
The company must balance the risk of incomplete product information against the cost of engineering a complete solution at the point of enquiry. In an attempt to manage the risk, many ETO companies request that Engineering review and sign off customer proposals. The additional review helps to share the responsibility but does little to reduce the risk.
Regardless of the measures companies take to validate customer proposals, the product proposal remains uncertain.
Following a customer order, Engineering is re-engaged and allocated the time to review the customer order and the sales specification. It is at this stage that Engineering is likely to make changes to the design to correct technical issues overlooked by sales. Engineering may find omissions in the specification which are required to make the product work correctly.
In extreme cases, Engineering may need to make fundamental changes the product design. The redesign can have severe consequences on the project, the company and customer creditability.
Problems facing the Sales team
Costs relevant to this paper can be broken down into several categories
- Sales proposal cost: This cost includes the time to gather information and to prepare customer quotations. The cost may include time spent by other departments such as Engineering or Production to help in the assembly of the technical or commercial details.
- Cost accuracy: This is the accuracy of the information used by Sales to prepare customer quotations.
- Order conversion: Much of the work carried out by Sales does not result in a customer order. The order conversion rate significantly affects the cost of selling.
Engineer to order (ETO) product companies must have the means to provide sales teams with quality product information without delay. The failure to provide good quality product information may be losing the company business and adding to sales cost. It is not sufficient for sales teams to use generic information, or to ask the customer to wait while engineering prepares product details. The sales cost is greater for companies suffering from low order conversion. Low order conversion rates increase the urgency to reduce sales cost. Technically and commercially accurate quotations are of paramount importance to be competitive.
By working differently, companies can reduce sales cost, reduce time to prepare quotations and lessen the opportunity for error. See more …..
Errors can occur for many reasons; these are some of them
- Inaccurate or obsolete reference information used by Sales. Often historical information is used as a reference. However, this information may contain errors and will almost certainly be out of date.
- Incomplete or missing information can require further research which takes time.
- Estimation processes are inherently inaccurate.
- Mistakes or incorrect assumptions take place, particularly when under pressure of deadlines
Errors are costly in terms of time, money and creditability. There are numerous opportunities for error to occur, although 99% of these will be due to mistakes made by people. If the information used by Sales is either inaccurate or obsolete errors can be easily imported. Other processes such as estimation are inherently inaccurate regardless of the care taken to apply the methods. Often Sales are forced to rely on historical data, this is a sure way of recycling inaccuracies and defects.
Using a process of product standardisation, the Sales team will be able to use accurate, verified and current information. Information will be immediately available which will reduce selling costs and many opportunities for error will be removed. See more …..
Time relevant to this paper can be broken down into several categories
- Time is cost: The time spent finding or processing information is directly proportional to the cost.
- Proposal time: Customers expect the return of quality information quickly and by agreed deadlines.
- Support time: Sales may rely on the support of another company specialist to complete proposals. This input is often unscheduled but is required urgently and can disrupt other scheduled work.
- Suppliers: Suppliers may be required to provide information, the company often has little influence on these suppliers priorities. A delay receiving information can delay a customer proposal.
- Review: It may be a company policy that several departments review customer proposals before they are issues. These reviews often involve a large number of people.
A large proportion of Sales time is used preparing information for clients, both in providing useful information and the customer proposals which will help secure new business. Manually preparing customer quotations requires considerable research. Information is often missing or inaccurate which requires additional support from engineering teams or suppliers. Gathering this information takes considerable time. Engineering support adds cost, although many companies do not record this cost. Engineering rarely schedules sales support work, disrupting other scheduled work. Bottlenecks and production delays can occur. With each transfer of information and process completed there is an increased risk of error. Having to check the information received, processed and issued increases the cost further. See more …..
Capacity is the total amount of work a team can perform but limited by the number of staff available and the size and complexity of the work.
- Bottlenecks in Sales can result in loss of business
- Increasing capacity often requires taking on more staff, therefore, increasing the cost.
- Change can cause unexpected work and generate new bottlenecks
- Errors require rework and result in unexpected work
- Managing capacity takes management time
Bottlenecks in Sales and Engineering can result in the loss of new business and harm existing projects. Bottlenecks occur either due to excessive workload or the cyclic nature of work. Increasing capacity in both sales and engineering teams often requires recruiting more staff. New staff must be trained and it takes time before they are fully proficient. Costs rise proportionately with the number of staff employed. Errors are more likely to occur when staff are under pressure, and there is a lack of time or resources to complete work. See more …..
Sales offices must generate a high number of formatted documents, some of these include
- Customer proposals, these summarise technical and commercial details. They must be informative and accurate as they quickly lead to contractual agreements. A poorly presented proposal is unlikely to attract new business.
- Sales drawings are often required to support customer proposals to help describe the product. Often these drawings are generic and are issued for guidance only
- Financial summaries provided to summarise the proposed product or project for internal approval. These documents usually list the costs and selling price together with terms and conditions.
- Preparing sales documentation can consume considerable time
- Change to the proposal or the information used to prepare the proposal may require the documentation to be re-issued.
Producing good quality documents can take significant time and is costly to produce. Creating good quality documents can add significant workload to Sales, Engineering and other departments resulting in workflow bottlenecks. Underestimating the documentation required can have a significant impact on product margins and cash flow. Documentation can be assembled together with the configuration of a product, reducing a time-consuming task to a few seconds. See more …..
Change can occur for many reasons and has far-reaching implications
- Customers may be the cause or reciprient of change
- Time and cost to resolve, although in some cases can provide an opportunity to seek more time and money.
- Rapid response is required to minimise the impact
In this section, we consider change management regarding product specifications. Changes may occur for many internal and external reasons. Changes tend to have a more significant impact when they occur later in the business process. External changes may result from, the customer changing the specification or a supplier unable to deliver a critical component. Internal changes may occur as a refinement of the design process, as new information becomes available. Further changes can occur due to solution optimisation or the resolution of a problem, such as a budget issue. By working differently, change can be responded to quicker with less impact on the business and the customer. See more …..
Rules are required to ensure that products are selected and integrated correctly. Product rules may apply to sizing, suitability for application, compatibility and many more reasons.
- Apply rules automatically wherever possible
- Failure to apply product rules can result in considerable additional time, cost and customer creditability.
- Safety can be compromised in some cases.
- All products require rules.
In some companies, product rules may not be easy to locate. Occasionally the need or availability of a rule may not be readily visible. Without the use of the product rule, major errors are likely to occur. On occasions, product specialists carefully guard knowledge wrongly perceiving the knowledge increases their value with the organisation. Hoarding knowledge is bad for the company. Knowledge needs to be readily available to everyone authorised to access it. See more …..
Sometimes contingencies are applied to product costs when there is a lack of confidence in the reliability of the costs.
- Contingencies mask the underlying problem and make it more challenging to correct cost issues.
- Competitive quotations are more difficult when contingencies inflate costs
Product contingency masks the underlying problem of inaccuracy and lack of repeatability. Contingencies add costs to products arbitrarily, making it difficult for sales teams to price competitively. The practice sends out a very negative message to staff responsible for product definitions and sales. See more …..
Sales handover procedures are used to ensure information passes smoothly between Sales and the operations team, often Engineering or Projects.
- Sales handover meetings often require many people and are therefore costly regarding time and money
- Operations teams are sometimes reluctant to take responsibility for the project if they disagree with the assumptions or specifications made in the sales proposal or customer order.
- Time to organise, reducing the time to deliver the project or increasing delivery time.
Sales handover processes are required when responsibility passes from Sales to Engineering or Production. The meetings are used to clarify any uncertainties in the information being handed over and customer requirements. Meetings attended by representatives from each department. Often the information supplied by sales is incomplete and requires engineering effort to complete the design before passing to production for manufacture. By working differently, product information can be passed from sales to production with the need for additional engineering. See more …..
Finding the most current and comprehensive product information is essential to Sales, Engineering and Production.
- Location: Information is stored in several locations
- Difficult to find if not centrally indexed
- Specialists tend to hold onto information because it increases their perceived value in the organisation.
- Obsolete very quickly
Finding the most current and comprehensive product information is essential to Sales, Engineering and Production. It is typical for the storage of information to be in numerous locations across many departments. Individuals are known to hold valuable data and information exists in several different types of media. Knowing that information is current and reliable is a challenge when there is no central depository or responsibility.
By working differently, companies can resolve information location problems. Quality information can be available to anyone authorised to access it with the certainty that the information is the most current. See more …..