What are the consequences of a salesperson who just can’t say no? Surprised to hear that the best salespeople often have to say no in order to win business? Surprised to hear that simply saying “yes” isn’t the best course of action when closing orders? Don’t be. It’s easy to say “yes” when working with customers. Yes is the easiest of answers because it is the simplest way to please a customer. It’s less confrontational, easier to say and is often seen as the surest way to keep customers engaged. However, sales success has never and will never, just be about saying yes. Sometimes, salespeople must be able to say no. In fact, not saying “no” means the difference between business won and lost and ultimately means the difference between a happy or unhappy customer.
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What exactly does a qualified marketing lead look like to your enterprise? As an enterprise focusing on business to business sales, should that definition be based on your potential customer’s size? Should it be structured around the products they buy or their geographical location? Or, should you also consider their technical requirements and the amount of money they could spend? Properly answering these questions requires you first start by segmenting your customer base into their unique business models, strategies and approaches. Every customer falls under a different customer segment, and each customer segment fills a different role in a given industry or market. Understanding these unique customer segments allows your enterprise to immediately identify qualified and unqualified prospects. If not, then you’ve forever set the table for producing one unqualified marketing lead after another. So, what are the consequences and outcomes of not producing qualified leads because your marketing strategies lack focus and direction?
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Most companies understand the importance of strategic business planning, but very few are able to move those strategies to actionable plans. Very few are able to define what these plans mean to each and every employee and ultimately, what each employee must do to make sure the plan is a success. Instead, they focus solely on the outline of their overall strategy. They are solid in providing a big picture view of the direction they want to take the company, but they lack the follow-through capabilities to see those strategies mature. In the end, they spend too much time outlining their strategic plan, with little to no focus on how their separate plans will make the strategy a success. They are on the cusp of pursuing something great, but just can’t seem to move forward. So, what can your company do to avoid this? More importantly, how can your company focus on moving strategies to actionable plans?
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Sales key performance indicators (KPI) must now match the complexities of today’s global marketplace. Gone are the days when small businesses could measure their sales team’s performance solely by the amount of revenue or gross profit they generated. No longer are smaller enterprises able to rely upon these antiquated and outdated performance measurements, only to reconcile their true costs of sales at a later date. Granted, the value of a sale and its corresponding gross profit will always be important. However, equally important is the type of product the team sells, their sales forecast accuracy, their ability to liquidate slow moving inventory and ultimately, the team’s ability to help the company reduce its cost of capital. It's time your small business track these very same measurements!
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As the vendor in a supply contract, how would you define the benefits of these contracts for your customer? Would you focus solely on the savings your customer enjoys by committing to a long-term contract, one where your enterprise is able to reduce your customer’s pricing through their economies of scale? Or, might you focus more on how these contracts help your customer reduce their turn times on finished goods? Most vendors assume these are their customer’s main benefits. However, other vendors understand that there are additional benefits, ones they can outline with their customers in order to strengthen their own negotiation position. They define these additional benefits in order to accentuate their company’s value proposition. So, what are these other benefits and how can your enterprise use them to strengthen your negotiating position?
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There are reasons marketing and sales go together. Both are built around business development. Both aim to grow revenue and both are known for stretching the truth in order to pique customer interest. However, what happens when marketing goes too far? It’s not uncommon for marketing to over-promise, or to use one too many prompts to illicit a buying response. What might this involve? Well, it could include an email or direct mail campaign promising immediate availability of product. It might involve placing information on the company’s website about performance, or about inventory levels that may or may not be accurate. After all, what’s wrong with stretching the truth just a bit? Surprisingly, these situations have a way of building upon themselves until all that’s left is an alienated customer base.
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Recently a customer of mine asked what they should use as their ideal cycle time in a particular manufacturing workstation. More importantly, they wanted to know which average was most indicative of a performance measurement, or benchmark time for a given work task. Would it be their mean (what we know as average), median or mode time? Surprised to hear that there are three possible methods of calculating average? Don’t be! While each method provides a different answer when determining averages, only one should be used to set your benchmark cycle time in a given production workstation. Only one points to the ideal performance measurement and only one should be used to track variances from task-to-task and from day-to-day. So, which one is it?
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When someone talks about price skimming, what exactly are they referring to? Are they referring to a pricing strategy, or about focusing on a particular type of customer, or both? In order to answer these questions, think of how some companies are able to get a higher price for their product by focusing in on a couple of unique customer segments. They have a product offering whose cost-per-use benefits are clearly ahead of their competition's offering. However, because they operate in a price sensitive market, they focus on a specific customer segment in order to get the highest possible return on sales. Therefore, it’s a pricing strategy that is predicated on appealing to the needs of specific customer segments. So, how does this work?
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Most small manufacturers simply can’t afford to have an ERP system that tracks manufacturing cycle times and the variances between those times. However, even for those companies with the most up-to-date software, there are some inherent benefits of witnessing production happen in person. In fact, even the best software isn’t intuitive enough to show you how to eliminate idle time and increase production throughput. For that, you have to see work being done for yourself. With this in mind, I thought I would include a cycle time tracking excel sheet for small manufacturers with a built in graph that shows average, median and mode cycle times in a given production work station.
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What role does your NRE multiplier play with respect to better managing customer change requests on custom designs? Well, while there are varying opinions as to how a company should manage these changes, the best advice I can give is to first determine what your non-recurring engineering multiplier is, and then focus on the fact that any customer changes are exactly that, changes driven by customers who should cover those costs. By this I mean that once you’ve moved past the design phase, and have gone to full-scale production, any and all changes requested by the customer must be charged back to the customer in order to cover your holding costs of inventory. The best rule of thumb is to remember that these stop-and-go changes don’t just affect your production of their custom-made product, but that they ultimately affect your ability to service your entire customer base.
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Are you a manufacturer of custom-made designs? Do you manufacture these custom assemblies based on unique customer requirements? More importantly, do your existing supply contracts protect your finished, semi-finished and raw material inventory once these customers need to make change requests and revisions? If you’ve answered "no" to this last question, then you’ve likely decided to rework this inventory at your own expense. In this case, you’ve allowed your customer to continually make changes, changes they should pay for, but don’t because your contracts don’t protect your inventory. It’s time this change.
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It’s not uncommon for companies to go sales KPI crazy. After all, there are a number of ways a company could assess the value of a given sale. However, if there was ever one sales key performance indicator every company should use, it would most certainly have to be those benchmarks associated with reducing the company’s inventory and receivable financing costs. Why should companies use these two financing costs to measure the value of a given sale and the overall performance of their sales team? Simply put, these financing costs determine the gross profit on sales, and in today’s economy, these financing costs are substantial.
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Most of my customers make the common mistake of confusing blanket orders and Kan Ban contracts, with some referring to both as JIT (Just in Time) agreements. Unfortunately, it’s never that simple. Very few Kan Ban contracts are ever able to meet the strict delivery requirements of a JIT agreement. Granted, they are similar, but their differences must be understood in order to structure the supply agreement to meet each party’s unique needs. After all, there are buyers and suppliers who enter into these agreements and both must be cognizant of their appropriate roles, responsibilities and liabilities as they pertain to the inventory needed to make these orders work.
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Are you a small business owner who is suddenly facing an uncertain future, a future where financing is hard to come by and where delinquent customer payments aren’t the exception to the rule, but the only rule? If this is your first time visiting my site, then you’ve not read the posts I’ve included about some of the simple ways to improve your small business financing. It’s never easy to deal with an uneven cash position. Given the current state of the economy, the pending issues in the Euro zone and the prevailing concerns of businesses about the future of business financing, I thought it once again necessary to allay these fears. As bad as it might seem, there are solutions.
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Can marketing be used to lower a company’s costs of acquiring new customers? Can marketing justify the universal claim that it costs companies anywhere from three to four times more to find new customers, than to retain existing ones? Well, the simple answer to both of these questions is a resounding yes, it can. Most companies hear that it costs them more to find new customers, than to keep existing ones, and chalk up this statement as just another erroneous business cost that can’t easily be quantified, or one that is merely a soft cost not to be concerned about. Unfortunately, for them, and fortunately for you the reader, they’re dead wrong.
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Does your enterprise have a hard time meeting customer expectations on new product introductions? Do you often find that your engineering department includes far too many "bells and whistles" and that these added features do nothing more than raise your prices so high, that your product offering is no longer competitive? If you’ve answered yes to each of these aforementioned questions, then it’s time to define how best to balance real customer needs versus expected customer needs. Your engineering department may think they now what your customers need, but are they basing these opinions on factual assertions, or on assumptions? More importantly, are they taking an approach predicated on dictating what customers need, rather than listening to what these customers want?
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Can the TOWS analysis help your company navigate the upcoming year so that it's well positioned to tackle whatever challenges await? No doubt you want to make your first quarter your best quarter, but how does the TOWS analysis go about laying the groundwork to start every year off on the right foot? More importantly, how does this planning tool help define last year in terms of what went well, what didn’t go well, what market changes occurred and what your enterprise must do to replicate success from your first quarter, and every quarter thereafter? We’ll answer each one of these questions in detail by providing insight into how your company can use the TOWS analysis to define action plans, set priorities and lay the foundation for a successful new year. So how can your company use this strategic planning tool?
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Today I decided to include a sample Kan Ban contract that specifies the liabilities for both a buyer and supplier as they pertain to the finished inventory, semi-finished inventory and raw material inventory within the agreement. These contractual agreements work when both parties clearly define these aforementioned liabilities and are willing to negotiate in good faith. However, it’s essential that these agreements are signed by both parties, as the amount of inventory needed to make these contracts work is quite substantial. Use properly, the Kan Ban agreement can help reduce the buyer’s inventory holding costs, while providing the supplier with consistent manufacturing volumes.
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Is your business that of a VAR (value-added reseller) whose strength lies in how it manages large amounts of inventory? As a supplier of time-critical parts, are you looking to enter into a strategic partnership with your market’s largest OEM (original equipment manufacturer)? Or, are you an integrator servicing the equipment manufacturer’s end-user customer base, a customer base that forces you to rely upon the VAR for spare parts, and the OEM for technical expertise? Regardless of whether you find yourself in the middle as the integrator, as the VAR servicing the OEM’s customers, or as the equipment manufacturer itself, there are opportunities for each party to enter into a strategic partnership. So, what would one of these partnerships entail? More importantly, what must you do to ensure your partnership addresses your company's specific needs?
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What does a strategic partnership mean to your enterprise? More importantly, how does one define a strategic partnership and shouldn’t that partnership be linked to your company’s overall strategic plan? When answering these questions, think of how the TOWS analysis helps to define your company’s internal strengths and weaknesses relative to your market’s external opportunities and threats. The TOWS analysis is a fantastic tool to not only support and define your company’s overall strategic plan, but to ensure that your partnerships are aligned with that plan. Used properly, and the tool can simplify how your company approaches planning.
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Does your strategic plan account for the possibility of increased market risk and high financing costs? If not, then consider the following. Just when businesses thought the damaging effects of the 2008 recession were over, along comes a new and more menacing threat posed by a potential Euro zone failure. Whether it’s Greece, Italy or Spain, one of these countries is sure to have a long-lasting impact on global financial markets. In fact, it’s happening already and either your company's strategic plan addresses this market risk, and possible higher financing costs, or it will suffer the consequences.
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As a small business owner, do you sometimes find marketing to be somewhat overwhelming? Do you often question the wisdom of investing capital in approaches that are hard to track and whose results are hard to nail down? More importantly, have you relegated your marketing strategies to coming up with a new brochure, catalog, attending a couple of tradeshows & conferences and hoping that a onetime revamping of your website and company blog will suffice? If you’ve answered yes to these aforementioned questions then perhaps it’s time to understand inbound marketing vs. outbound marketing and why one has taken over the other in terms of increasing marketing return on investment. So, which one is it and what should your small business concentrate on?
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How important is it to properly manage your product's bill of materials? As a manufacturer, do you take the time to perform a substructure, or subassembly analysis in order to segregate your most common subcomponents and incorporate them in future designs? Do you understand the importance of isolating commonality at the part and raw material levels in order to reduce inventory skews, counts, costs and manufacturing cycle times? If you’ve answered "no" to each of these questions, then this is a definite must read. Identifying common subcomponents often holds the key to increased production throughput. So, what are the critical steps to performing a subassembly analysis?
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As a product manager, do you take the time to isolate those value-add (VA) and non-value-add (NVA) service features that may or many not be needed by your customers? Are you a manufacturer of custom-made parts who needs to weed out those processes that do nothing other than add unnecessary time and increase costs? More importantly, when trying to nail down those product and service features customers are willing to pay for, versus those they aren’t, do you take the time to isolate your value-add versus non-value-add business processes? If not, then this might be worth a look. We’ll explain the importance of isolating VA and NVA process steps within your product and service offering.
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If you find the above title a little intimidating, don’t worry. We’ll simplify this entire process. Using voice of customer (VOC) data techniques and employing a Kano analysis can be daunting. However, while the tasks themselves are involved and the process of gathering data somewhat laborious, they are very straightforward methods of quantifying those product features and benefits that customers want, versus those they don’t need. Every company has its internal and external customers. Each push their own solutions and their own initiatives. As a product manager, your must isolate those VOC data points that dictate what your product must have for market entry.
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Conventional wisdom dictates that bad credit customers are just that, bad. After all, it’s nearly impossible to plan inventory purchases against customers who might be here today, gone tomorrow. Most companies shy away from customers who must prepay orders, or those customers with a less than stellar credit rating. However, there is another school of thought that espouses pursuing bad credit customers at all costs, especially in cases where cash flow is a going concern.
This doctrine dictates that in a cash strapped business world, where credit is hard to come by and delayed customer payments are the norm, companies should refocus their efforts on customers who’ll reduce their receivables financing costs and improve their cash position. So, given the reality of today's economy, should your company pivot and start looking for customer who must prepay orders?
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Most businesses have heard of the benefits of vendor consolidation, but few have considered the benefits of customer consolidation. The approach is to reduce the customer base in order to reduce the company’s sales transaction costs. The mechanism that makes this possible is to use multiple distribution channels to market, or multiple sales agents. This is often a goal of companies whose costs on sales transactions are simply too high, whose manufacturing is fractured by infrequent customer orders and cyclical demand, or whose customer volumes are too small to service. Imagine the costs of selling 3 units to 100 different customers, as opposed to selling 300 units to a single customer. Obviously the second transaction has lower costs and is therefore easier to manage. So, how can companies benefit from customer consolidation through multiple distribution channels?
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One of the more valuable lessons emerging from this economy has to be the importance of maintaining strong vendor partnerships. Unfortunately, a large number of companies take an adversarial approach to vendor management. While some do make an effort to find a middle ground, the vast majority don’t. In fact, most rarely take the time to define how best to work with their vendor base. However, it’s those companies that excel in vendor management that are ultimately able to weather the storm and emerge stronger. Given today’s business climate, it just makes sense to adjust your company's approach to this new reality. So, what are the four strategies you should adopt with respect to how your company manages its vendor base?
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Does your company manufacture custom-made products and if so, have you taken the time to define your inventory carrying costs on these custom designs? Perhaps you're unaware of how the carrying costs on one-off designs might differ from say, standard product lines. Sales of conventional product lines typically dictate that a company manufacturers a product, holds it in inventory and then proceeds to go out and make sales. However, for custom-made assemblies, it’s entirely different as your company might not order raw materials or start production until an order is received. In addition, your company must adjust its manufacturing schedules when confronted with customer change requests. Ultimately, it's the customers who must sign-off on these modifications before the product moves to the next stage of production. Either way, these changes directly impact your company’s carrying costs of inventory on these custom-made products. The question is, by how much?
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Finding that middle ground between having too much inventory, and not enough, is never an easy endeavor. On one end of the spectrum are high inventory holding costs that accompany holding inventory without sales. On the other end are lost sales due to low inventory counts and levels. One involves high financing costs and the risks of inventory damage and obsolescence while the other involves losing sales and possibly customers, due to a lack of available inventory. One is a constant reminder of the company’s cost of capital and the other is a reminder of the costs of lost opportunities. Neither outcome is acceptable and finding that middle ground is paramount to success. So, what does it take to find that middle ground in inventory?
Continue reading "The Bell Curve of Inventory Management: Finding the Middle Ground" »