Utilizing Your Lean Capabilities to Boost Sales
Businesses are “in business” to make a profit. And profits are composed of revenues minus expenses. Pretty basic stuff.
Plenty has been written about the impact of lean on internal costs, i.e. the expense side of the equation. But how do we use our lean capabilities to increase revenues?
A successful Lean transition results in reduced lead times, improved delivery performance, increased flexibility / responsiveness, and enhanced product quality.
Needless to say, all of these parameters can have a positive impact on revenues. They should allow for increased market share (volume), increased prices, or both.
Similarly, an effective Lean transition reduces costs by eliminating waste, freeing up space, and improving internal yields (quality). This should allow us to be more aggressive in pricing when needed.
It is a fact, however, that many lean companies fail to fully exploit the above gains, i.e. to turn such Lean benefits into increased sales revenues.
To see how your company is faring, here are a few questions that you might want to consider:
If you’ve reduced your internal lead times, have you also reduced the lead times quoted to your customers?
If you’ve cut your internal lot sizes via set-up cost reduction, have you also cut your “minimum buy” requirements?
If on-time delivery performance has greatly improved, are you measuring and reporting this improvement to your customers?
If customer complaints and product returns have experienced major gains, has your sales and marketing team been provided with these additional quality sales bullets?
One excellent way to advertise your improved customer performance is to send customers a regular “report card.” Consider including on-time delivery (against your promise date and perhaps even against their request date), as well as quality parameters. You might even want to publish your lead times compared to industry averages or even against your local competitors.
Have you cut internal lead times and lot sizes enough to transition from “make to stock” to “make to order” for some customers?
For those customers that require you to hold finished goods safety stock, have you re-negotiated these levels based upon your new lead time / lot size capabilities?
Is your internal reliability and responsiveness such that you can now offer “Supplier Managed Inventory” as a differentiator for select customers? E.g. automatically replenish their inventory so as to maintain it within agreed-upon min-max levels?
Can you benefit from offering consignment to select customers, i.e. they pay on use, instead of on delivery?
Have you attempted to arrange long term partnering agreements with key customers, designed to reduce their internal Total Cost-of-Purchase?
Lean can significantly reduce your cost of production. Has there been an analysis regarding the impact on total profitability, through increasing share, by reducing prices for select customers / market segments?
Conversely, if your company is approaching full capacity, has there been a discussion as to selective price increases? Elimination of marginal customers? Expanding capacity? Acquisitions?
While this list is far from exhaustive, it should provide you with a starting point.
As a sales plug of our own, we have been extremely successful helping our clients gain inroads with their “A” customers and/or prospective customers. We play the role of an independent 3rd party and help identify and quantify the benefits attainable by both supplier and customer of pursuing the above strategies.
If you’d like to discuss any of these concepts, drop us a note or give us a call. There’s no charge for a telephone discussion, and we attempt to always add value.
Good luck with your lean manufacturing transition.