The Lean Front-End: A Breakthrough Opportunity for Manufacturers

Manufacturers need to maximize their speed and efficiency to satisfy customers, cut costs and enhance their margins will succeed. How? By fully driving their front-end business processes, rather than having their processes drive them.

Manufacturers are continually seeking ways to increase productivity and cut costs for competitive advantage. Today, one opportunity for manufacturers to gain margin improvements is in the front-end of their business: the sales, customer service and engineering processes required to transform inquiries into orders.

The complex products and channels of many manufacturing applications have given rise to equally complicated front-end processes. Often characterized by slow response, waste and errors, front-end activities are among the least optimized of manufacturers' business functions, consuming 30 to 40 cents of every customer dollar spent. While many companies have successfully applied lean thinking and tools to streamline their back-ends, the lack of effective front-end solutions has left them struggling with rampant inefficiency.

Additionally, leading manufacturers increasingly rely on mergers and acquisitions to help them drive revenue growth in an overall stagnant market. However, the inability to rapidly integrate front-end processes, channels and systems with those of newly acquired companies frequently prevents manufacturers from realizing strategic value and benefits from their acquisitions.

To solve these problems, manufacturers need a solution that addresses their unique requirements and allows them to reduce cycle times, eradicate waste and increase margins so they can achieve a truly lean front-end. As James Womak and Daniel Jones point out in the Harvard Business Review article "Beyond Toyota: How to Root Out Waste and Pursue Perfection": "For any product more complex than a toothpick & value must flow across many companies and through many departments within each company & Lean thinking always works when applied in a comprehensive way."

But what exactly is "lean thinking?" Lean thinking helps manufacturers cut costs and cycle times, boost productivity, drive benefits to their customers and establish continuous improvement by:

* Eradicating internal waste Analyzing activities and mapping processes to clearly define value streams enables companies to root out unnecessary activities and rework.
* Establishing a continuous, one-piece workflow Identifying and eliminating bottlenecks within front-end processes allows manufacturers to reduce waiting, downtime and inefficiency within and between steps.
* Relying on customer pull By expending effort and resources only on actual customer requests rather than guesswork, manufacturers can minimize product proliferation, unnecessary inventory, and order complexity.

Today's Front-End Challenges

Most manufacturers understand the need to improve their front-end processes, yet face significant challenges in trying to do so. The lack of lean thinking on the front-end leads to a "too many/too much" problem: too many people, processes, tools and products, which take too much time and create too much waste and cost.

Too Many People and Processes
The typical assembly-line approach used by many manufacturers to respond to customer inquiries is highly time-consuming and labor-intensive. Information required to create quotes and orders is gathered from a wide variety of sources in a sequential, "batch-and-queue" manner that involves multiple hand-offs among sales, distribution, customer service/order entry and engineering personnel, frequently disrupting process flow. Jack Welch, former CEO, General Electric Co., said, "Today, 30 to 35 percent of a salesperson's face time is spent with the customer. Salespeople spend too much time on administrating, expediting orders, arguing over receivables and finding late shipments."

Excessive manual handling also increases the chance of mistakes and delays, and fragmented, incomplete information about products, parts and service causes sales and customer service personnel to miss out on up-selling and cross-selling opportunities, increasing aftermarket erosion. The result is increased inefficiency, cycle times and expenses.

Too Many Tools
In an attempt to solve front-end inefficiencies, many manufacturers have deployed a multitude of point solutions, including price books, CD-ROMs, Web sites, custom-built product selectors, configurators, pricing and quoting systems, electronic data interchange (EDI) and computer-aided design (CAD) links, enterprise resource planning (ERP)-based order entry, and customer relationship management (CRM). While these tools may allow companies to achieve localized gains, they can exacerbate the "batch-and-queue" problem by not extending benefits across the entire front-end and by creating new requirements and bottlenecks.

Additionally, mergers compound problems when companies fail to assimilate the many systems, products, processes and channels of the newly acquired company into their existing processes. By implementing "too many" front-end tools, manufacturers often add to the very challenges they are trying to solve.

"Making steps flow means working on each design, order and product continuously from beginning to end so that there is no waiting, downtime or scrap within or between steps," wrote Womak and Jones in their article. "This usually requires introducing new types of organizations or technologies."

Too Many Products
The eagerness to satisfy a myriad of customer requests has led many industrial manufacturers to develop highly complex, often overlapping product lines that are "engineered-to-order" by knowledgeable and experienced engineers. While this approach allows companies to satisfy individual clients, it also creates a number of problems, such as the lack of standardization in product development, which drives up costs.

In addition, extensive product proliferation forces many manufacturers to carry large inventories of products and parts that are functionally redundant, in low demand and expensive to maintain.

More than ever, manufacturers need a front-end solution that can resolve these "too many/too much" challenges in a rapid, cost-effective manner.

Talking Lean

A comprehensive, integrated solution that increases efficiency and cuts costs across all components of the front-end can deliver the results today's manufacturers need to surpass competitors and realize bottom-line savings.

First, it can often reduce operating costs by 2 to 5 percent of revenue and boost operating profit by 30 to 60 percent.

Second, a lean front-end also offers improved efficiency for legacy back-end systems and solutions by cutting cycle times and delivering cleaner data. Those considering back-end solutions will benefit from implementing a lean front-end solution first ensuring the integrity of information going to the shop floor.

Finally, a lean front-end solution creates a global platform that integrates and automates all of a manufacturer's knowledge, information and tools, transforming the slow and cumbersome assembly-line approach used by most companies to a streamlined, simultaneous flow process. By establishing a single interface for sales channels and customers that encompasses the full range of a manufacturer's products and businesses, a lean front-end solution enables sales teams and distributors to improve customer service and response times.

The characteristics of a lean front-end solution include:

* Automation of rules, processes and approvals By automating the rules, processes and approvals required throughout the inquiry-to-order cycle, a lean front-end solution eliminates the need for hand-offs and queue delays at crucial decision points. This provides greater control when employees get the right information and tools at the right time, and ensures accuracy by eliminating inconsistencies in data.

* Single-point access to knowledge from engineering, customer service, and aftermarket Because requirements, specifications, CAD drawings and other essential information are combined in a single, cohesive system, companies can create accurate proposals in a fraction of the time formerly required, leading to improved quote conversion rates. Also, instant access to aftermarket service and part data allows personnel to sell across the complete product portfolio, maximizing cross- and up-selling opportunities to win larger orders.

* Broad dissemination of specialized knowledge By capturing and automating access to formerly specialized information a lean front-end solution lets companies better leverage the knowledge of highly skilled salespeople and engineers, allowing generalists to become experts. Automation of sales processes and rules extends this value further, expediting functions and increasing consistency in product design.

* Powerful analytics for continuous improvement With accurate, complete data stored in one location, manufacturers can easily create meaningful, accurate forecasts and analyses, as well as target key areas to implement continuous improvement and best practices.

* Integration of all systems and information Within the manufacturing environment, complete business integration involves two elements: First, companies must integrate the components in the front-end, which includes people, processes, tools and systems. Second, companies must integrate the front-end to the back-end in order to fully realize the value of a single, end-to-end system. By integrating all systems, processes, and information, manufacturers can gain value from their acquisitions.

What to Look for in a Lean Front-End

To be effective, a lean front-end solution must deliver the following key capabilities.

1. Leverage complex product information
From inquiry to aftermarket, the ability to manage both the customized engineer-to-order products as well as the more standard, make-to-stock products is essential for any lean front-end solution. Front-end personnel must be able to quickly and easily access product, channel and engineering information at every stage in the process in order to handle selection, configuration and quoting; order and fulfillment; and delivery and aftermarket requests.

A solution that provides a single, integrated repository designed for hierarchical product information is critical to disseminate required data at key decision points throughout the business and across channels. The ability to simplify and streamline this information by eliminating obsolete or redundant selection and configuration data and creating automated intelligence- and rules-based processes is also key.

2. Adaptable workflow management for complex processes
Most manufacturers have a complicated, manual front-end workflow, with inquiries and orders moving frequently via a "batch-and-queue" process among people serving multiple functions. At each step, different people must evaluate the data, determining the best sources to answer questions and the right times to move an order from one area to the next. A successful lean front-end solution should shift workflow from a linear, assembly-line process to a work cell approach, with necessary adjustments made throughout every stage of the process, rather than at the end.

The solution should also accommodate key aspects of existing processes, rather than force-fitting those processes into the solution, and it should allow processes to be adjusted or changed on the fly. This flexibility and responsiveness makes it easy for manufacturers to drive best practices consistently throughout all front-end actions and decisions.

3. Rapid solution implementation
With today's tight budgets, manufacturers can ill afford to launch time-consuming initiatives that take years to deliver a significant return on investment. Therefore, the solution should provide cost-effective set-up, implementation and maintenance processes that deliver rapid, measurable benefits, providing payback on investment within six months or less.

User adoption is also a consideration, so make sure the solution is easy to use. Additionally, a Web-based integration platform that connects with ERP, legacy, and point solutions, along with customer and channel participants, lets manufacturers leverage the value of their existing back-end investments. Implementation should be non-disruptive to current IT infrastructure and require minimal internal resources.

The Cost of Not Acting

Today's manufacturers face an extremely challenging selling arena. Only those that can maximize their speed and efficiency to satisfy customers, cut costs and enhance their margins will succeed. To do this, companies must be able to fully drive their front-end business processes, rather than having their processes drive them.

Until now, manufacturers seeking to make front-end improvements were stymied by the lack of effective options. Today, a lean front-end solution gives forward-thinking companies the process-driven, end-to-end system they need to gain efficiency and realize competitive advantage.

Delaying action can be costly, causing businesses to miss out on significant savings. Companies that lag behind in implementing a lean front-end will find it increasingly difficult to protect their existing customer base, gain competitive advantage and retain market share, leaving themselves vulnerable to acquisition by those who acted more quickly.

About the Author: Godard Abel is the co-founder, president and CEO of BigMachines Inc. Prior to founding BigMachines, Godard was general manager of the iNiku.com application service for Niku Corp., a provider of Web-enabled enterprise applications. Before entering the technology industry, Godard consulted for McKinsey & Co. and advised leading manufacturers in the United States and Germany on strategy development and business process improvement. Godard earned an MBA from Stanford University and both a BS and MS in engineering from the Massachusetts Institute of Technology (MIT).

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