Implementing a Lean Front-End  How Do You Measure Success?

Learn how front-end process optimization contributes to establishing a customer-centric value stream, and use the following KPIs to measure the success of your company's lean front-end initiative and its impact on overall business performance.


Once the future state process and systems have been designed, then a manufacturer has to develop an implementation plan, which 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 by sales, channel partners and customer in one place. It should be scalable to accommodate business growth — whether growth occurs organically or through a merger or acquisitions. And, it should provide deep, multifaceted functionality that encompasses the entire quote, order and product configuration 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. According to a recent Industry Week article on customer order management, while a majority of industrial manufacturing orders are still being transmitted via fax, postal mail and phone, that is changing rapidly. Web-enabled, wireless, e-mail, intranet/extranet and conventional electronic data interchange (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 rather than later is becoming an imperative for doing business, just like purchasing a fax machine was 30 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 fast-paced 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, and 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 is rather a commitment to a customer-centric, value-based business transformation with technology deployed as an enabler to standardize operational processes and improve business performance.

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. With a single cohesive system, front-end personnel — as well as distributors and manufacturer's representatives — can quickly create consistent, accurate and cost-effective proposals, complete with engineering drawings and accurate pricing. By granting 24/7 access and providing complete guided selling information, companies can reduce quote-to-order cycle times by 50 to 100 percent and eliminate one to four days from the order-to-shipment cycle.

* Mistake-Proof Quoting and Pricing. With the configuration logic, pricing rules and workflow, quote and order errors can be eliminated. This can result in 100 percent clean orders and in the elimination of 80 to 90 percent of credit memos caused by pricing errors.

* Faster Customer Response Time. With all required data, including historical order information, available through a Web-based portal, sales personnel can respond to customer queries in seconds or minutes rather than hours or days.

* Higher Fulfillment Rates. Technology-enabled automation results in greater quoting efficiency and faster order processing — from order to production — resulting in higher throughput of finished goods.

* Margin Improvement. Standardizing, automating and synchronizing front-end processes can reduce SG&A by 10 to 20 percent, which typically reduces operating costs by 2 to 5 percent of revenue and boosts operating profit by 30 to50 percent. Margin improvements are typically achieved through faster and more accurate quote generation, automated order entry with no errors, decreased need for sales engineering support, and fewer demands on customer service resources.

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