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9 November 2016, UK
Managing the Sales Flow The TOC Way Oded Cohen Israel, Estonia TOC Strategic Solutions 9 November, 2016
Oded Cohen Oded has over 38 years of experience in developing, teaching and implementing TOC methodology, solutions and implementation processes working directly with Dr. Goldratt all over the world. Among the countries to which Oded brings his expertise are the USA, Canada, Japan, India, China, the UK, Poland, Russia, Ukraine, Colombia, Chile, Peru, Turkey and many others. Oded has authored multiple TOC articles and contributed to numerous TOC books. Oded in the is the author of Ever Improve – A Guide to Managing Production the TOC Way, published in June 2010. Oded co-authored the book Deming & Goldratt: The Theory of Constraints and the System of Profound Knowledge – The Decalogue. Together with Jelena Fedurko Oded has co-authored the book Theory of Constraints Fundamentals. Oded is International Director of TOC Strategic Solutions Ltd
[email protected] and Founder and Co-President of TOCPA.
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28th International Conference of the TOC Practitioners Alliance - TOCPA
Managing Sales Flow the TOC Way - Definitions Sales – anything that the company sells to the outside: products, services or partnership
The Boundaries The entire sales flow - from the sales funnel: collecting the leads of potential buyers until the firm customer’s commitment is achieved: as customer’s order, signed agreement etc. Partial flow - In reality there can be situations in which the process starts in an advanced step while skipping some of the initial steps. 3
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Sales Flow Sales Funnel
Potential Buyers & Sales LEADS
Step 1
Step 4 Step 3 Step 2
Step n
Successful completion of the sale
Sales $ 4
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Why and When does a company needs to consider managing the sales flow?
The TOC experience tells us that the market is the primary constraint of every system. Sooner or later – this constraint becomes a reality Hence – it is better to get prepared for it! Therefore, our recommendation has been to start managing sales the TOC way as soon as possible, in parallel to building operational excellence and developing the market offer(s) to capitalize on it. 5
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The special Characteristics of the Sales Flow High level of uncertainty exists in nearly every step of the flow: “Raw Material” is not always available The outcome of the process is not fully defined and known at the outset – when starting the process Some of the steps are performed by other functions/departments which are not under the authority of the sales person or the sales manager The completion of some steps depends on the reaction/reception of a third party - the client The client can scrap the process at any time 6
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The Reality of Sales Flow – The Conversion Rate
Sales Funnel
The conversion rate presents the expected success of moving from one step to the next and eventually from Lead to Sale. Companies that sales through quotations and bids tend to track conversion rate as a general percentage
LEADS Step 1 Step 2
Step n
Many organizations do not record nor keep track of the conversion rate. Nevertheless, many systems contain data that can enable tracking the global conversion rate
Successful completion of the sale
Sales Target
GAP Sales Booked 7
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Data needed for Managing the Sales Flow Data for planning and controlling the execution: Step conversion in Percentage – the probability of moving fro one step to the next step
Time – the duration that the opportunity is likely to stay in the step until the successful move to the next
Touch Time – is needed for steps that are performed by critical resources
Money – the expected amount of money that is likely to be sold at the end of the process. Money should be recorded both in terms of the value of the sales and the expected Throughput
Card – the term that is used for denoting an opportunity 8
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Managing Sales Flow the TOC Way Can we use concepts and techniques from the standard TOC Flow management solutions to manage the sales flow? •
Production MTO
•
Production MTA
•
Project Management
While some concepts can be used no solution can be used on its own. This is due to the multiple objectives sales must achieve: Financial targets within time frame for delivery while considering sales capacity 9
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Managing Sales Flow the TOC Way The suggested approach is to chose one of the solutions as a base and to add to it elements from the other two. Different cases: For cases that each salesperson has many opportunities that demand relatively short touch time, we can use the MTA as the base For few sales opportunities that take long time to conclude, that have high touch time and demand contribution of other functions – we can use CCPM as the base For the rest we can use MTO with Diagonal Buffer as the base. 10
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Sales Management Based on MTA – An example The company sells personal pension fund though sales agents that visit the potential buyers at their homes. There are 15 agents. Some of them relatively new. The company sets the target of 36 sales per quarter (12 weeks) for each agent. Targets are accumulative. “FG” “RM” List of potential prospects LEADS
Initial Call
Meeting 1 Face to Face Meeting
Data Gathering And Varification
Prospect agrees – contract signing
Closed Deals
To use MTA as a base we need to calculate the sizes of the: 1. “FG” Buffer 2. “RM” Buffer 11
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Data for MTA based Sales Management List of potential prospects LEADS
Length of stage
Initial Call
Meeting 1 Face to Face Meeting
Data Gathering And Varification
Prospect signs the agreement
1 week
2 week
2 week
3 week
Probability of moving to next stage
50%
67%
50%
75%
Criteria for successful completion of the stage
Prospect agrees to meet
Prospect agrees on the problem and the direction that is suggested
The prospect is eligible for a pension policy and conceptually agrees to conclude the technical details
The prospects agrees to sign the agreement for the pension policy
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Sales Management Based on MTA – The Buffers Overall conversion rate = 12.5%
24/week
List of potential 1 prospects LEADS
“WIP”
3/week Closed 1Deals
Average duration = 8 weeks
“FG”
“RM” “FG” Buffer = 3x12 weeks = 36 Cards Reflecting the quarterly target.
“RM” Buffer = 3/0.125 + 25% = 30 Leads Assuming this quantity can be replenish in one week 13
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Planning the Flow - The Pipeline How many cards should we have in every step? (Stable view) 36 List of potential 1 prospects LEADS
“RM”
“WIP” – Pipeline to ensure 3 sales /week
Initial Call
Meeting 1 Face to Face Meeting
Data Gathering And Varification
Prospect agrees – contract signing
Closed 1Deals
“FG” “FG” 3
50%
24
67%
12
50%
8
75%
4
14
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Sales Management Buffers Status 30 leads List of potential 1 prospects LEADS
“RM”
3/week “WIP”
Closed 1Deals
Average duration = 8 weeks
“FG”
“RM” Buffer Status – as per the OH in the buffer The status of the “FG” Buffer should be calculated as: The ratio between the accumulative closed deals and the accumulated target . For week “n”:
Target achievement [%] = Total Closed deals / (n x 3) 15
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Controlling The Pipeline How healthy is it? (Daily Meeting)
30
36
List of potential 1 prospects LEADS
Actual
24
Initial Call
50
Step Status Step 1 Step 2 Step 3 Step 4
Meeting 1 Face to Face Meeting
12
10
Data Gathering And Varification
8
Prospect agrees – contract signing
4
3
G 24 12 8 4
Closed 1Deals
3
Y 18 9 6 3
R 12 6 4 2 16
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Controlling The Pipeline The Overall Picture (for daily and weekly reviews) The table reflects the health of the overall pipeline. Health is reflected in the weighted total. The table points sales manager towards areas that need focusing. Step Status Step 1 Step 2 Step 3 Step 4
G 24 12 8 4
Y 18 9 6 3
R 12 6 4 2
Salesperson
Step 1 Step 2 Step 3
Step 4
Weighted
Total
A B
12.50% 5 20
25% 0 0
37.50% 3 0
75% 5 4
13 24
C
0
1
5
1
D
10
0
0
E
5
7
F
1
G H
Total
Target Deals for next week 2 0
7
5.5 5.5 2.9
0
10
1.3
6
11
3
26
8.8
3
5
7
0
13
4.0
2
0 16
3 0
13 0
0 2
16 18
5.6 3.5
4 1
I
8
0
2
0
10
1.8
6
J K L M
14 2 1 10
4 10 4 1
5 0 6 1
4 0 6 2
27 12 17 14
7.6 2.8 7.9 3.4
0 5 2 1
N
5
5
0
0
10
1.9
3
O Total
10 107
4 44
2 55
0 27
16 233
3.0 65.3
3 40
2
17
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Yes, but… This view is not enough The overall picture is based on stock buffers. It tells how fat or skimmed is the pipe line. However, like in any stock system some items may flow fast while others may be slow movers or even “dead wood” Therefore, there is a need to add another view that will give management the sense of speed within the flow.
Step 1 Step 2 Step 3
Step 4
Salesperson
Weighted
Total Total
Target Deals for next week
12.50%
25%
37.50%
75%
A
5
0
3
5
13
5.5
2
B
20
0
0
4
24
5.5
0
C
0
1
5
1
7
2.9
2
D
10
0
0
0
10
6
E
5
7
11
3
26
1.3 8.8
F
1
5
7
0
13
4.0
2
G
0
3
13
0
16
5.6
4
H
16
0
0
2
18
3.5
1
I
8
0
2
0
10
6
J
14
4
5
4
27
1.8 7.6
5
3
0
K
2
10
0
0
12
2.8
L
1
4
6
6
17
7.9
2
M
10
1
1
2
14
3.4
1
N
5
5
0
0
10
3
O
10
4
2
0
16
1.9 3.0
233
65.3
40
Total
107
44
55
27
3
18
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Managing Time The simplest way to manage time is to use Time Buffer Every step has a start and an end. By tracing the time that the card is spending (or staying) in a step we can calculate its “age” and colour the time buffer accordingly. Example: Step 4 Expectation Duration: 3 weeks
Start
Week 1
Week 2
Week 3
Expected Completion
“Black” - overdue
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Sales Flow Buffers: Stock (Cards) & Time (Age) Salesperson
Step 1 Cards
Step 2 Step 3 Step 4
A
5
B
20
11
C
0
D
10
3
E
5
2
F
1
1
G
0
H
16
12
I
8
2
J
14
4
K
2
L
1
1
M
10
6
2
N
5
3
2
O
10
3
Total
107
49
4
2
2
13
Weighted
Total
Time Buffer Y R 1 2
G 1
Total
Cards
Cards
Cards
Cards
B 1
0
3
5
18
2
0
0
4
44
1
5
1
7
0
0
1
7
Target Deals for next week 2
7
5.5 5.5 2.9
0
20
1.3
6
11
3
31
8.8
3
5
7
0
14
4.0
2
3
13
0
16
4
4
0
0
2
34
5.6 3.5
3
1
0
2
0
18
1.8
6
3
7
4
5
4
41
0
2
10
0
0
14
4
6
6
18
1
1
2
24
7.6 2.8 7.9 3.4
5
0
0
15
1.9
3
3.0 65.3
3
3
2 5
2
4
2
0
26
26
19
44
55
27
340
0 2
1
5 2 1
40
20
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Managing through the Buffers Buffers provide management with the mechanism to: 1. Take recovery actions to ensure achieving the set results –using short and frequent meetings of management with team leaders and individual salesperson.
2. Instigating POOGI - for improving salespeople capabilities, level and quality service from other functions and upgrading the system where needed.
Lost Cards – opportunities that the process of selling has been stopped, should be recorded with the reasons causing the stoppage. The reasons should be analysed on personal level and on the system level. 21
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Managing through the Buffers Benefits: For the manager: Easy control over the process. Ability to identify problems early Focused communication with the salespeople Ability to focus managerial effort where most needed More realistic expectations For the sales people: Clear picture of current situation Ability to identify potential problems and prevent them Better communication with managers (quicker updates) Focused efforts according to the buffer status 22
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More on Sales Management The Fleetguard Experience http://tocpractice.com/ipapers/2016/04/25/st-and-the-red-curve/
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