United States Steel Corporation

We focus on lean manufacturing on the shop  floor but often overlook applications of these  same methodologies to non-manufacturing  processes. Our sales and distribution processes  often create mura (unevenness) and muri (overburden) in  manufacturing. If we do not include commercial processes in  our scope we are treating symptoms not causes. 

For example, a factory produces 100 widgets a day. We  invest in new capabilities to produce 25 additional, upgraded  super widgets a day. Our sales force tries to upsell all our  existing widget customers to better and more expensive super  widgets… and succeeds! Great right? 

Except now we have orders for 100 super widgets  but only capacity to produce 25, which will result in late  deliveries, excess logistics costs and customer dissatisfaction.  And at the same time we have a production line for 100  widgets with no demand, resulting in idling facilities and  layoffs. 

Let’s look at a real case. 

One prepaid phone company distributes through a 3rd party  distribution channel to approximately 10,000 independent points of  sales. The company employs some 200 business developers who  attend to the points of sales in their territory and grow the sales  network. 

This ratio of approximately 50 POS per developer was  conducive towards a “road warrior” who prized being “in and out as  fast as possible” in order to cover the entire area monthly.

This approach created inefficiencies and costs throughout  the entire value chain. Poor demand forecasting led to inefficient  production planning. Not aligning sales to production capacity  resulted in low delivery performance, high overtime and excessive  costs of expediting.

“The POS segmentation and determination of developer roles create a systematic method to align the independent POS on our same value chain”

There was a need to balance supply and demand across  the value chain, not only in terms of volume but also in  product mix. But with 10,000 independent POS, it was  ineffective to pretend they were all the same, but impossible  to treat them all as unique individuals. 

By leveraging Nielson data and observations from  the business developers, we rated all the POS on 3  characteristics: 

• Potential sales (estimated total sales of all similar products  at POS) 

• Market share of the potential sales 

• Sales health (an indicator of how well the POS shares end  customer information, forecasts demand, carries the product  mix we want to sell, etc) 

Incorporating the health axis into the analysis allows us to  measure many of the root causes of variability that add cost  and complexity to manufacturing. 

Based on where each POS falls in the pyramid below  we determine what “profile” the business developer should  assume to best manage that POS. 

Farmer:The farmer profile is best suited to manage large  potential POS where we are happy with our position, that is  we have significant market share and healthy sales. These  relationships need to be invested in to be cultivated and  grown. 

Hunter: The hunter profile is ideal for large potential POS  where we have low market share. The developer needs to be  opportunistic to aggressively grow our stake in the POS. 

Doctor:The doctor manages those large potential POS where  we have significant market share but our sales are not healthy.  Something is causing inefficiency in our processes: infrequent  and too big orders, poor demand forecasting, unbalanced  product mix, etc. The doctor diagnoses the illness and cures  it while keeping the patient alive and well. 

Gatherer: The gatherer profile is for POS with marginal  potential but where we have significant market share  and healthy sales. The gatherer stops by, collects what’s  easy, says a few words of encouragement and moves on.  Attendance and maintenance of the status quo, but low  investment. 

Veterinarian:The veterinarian profile is for marginal  potential POS where we have market share but the sales  are not healthy. There is a health problem that needs to be  solved. The vet should diagnose the illness and attempt to  treat, but if the cost of the solution is too steep it’s time to put  the patient to sleep. 

Executioner: For marginal potential POS where we don’t  have any market share to speak of. Pull the plug. Maybe  send some info on how to order online and targeted  advertisement, but it is not worth investing a business  developer’s time in these POS. 

Each business developer in their territory will have  multiple POS in each category, so they will need to adopt  different roles for each one. With the proper role specific  standard work they can give custom treatment on a mass  scale, and will systematically lead all their POS towards  increased and more stable demand.

 The health axis creates a direct link from manufacturing  through sales to align the entire organization to the value  chain. The POS segmentation and determination of developer  roles create a systematic method to align the independent  POS on our same value chain. We can now return to the shop  floor with less unevenness in our demand. 

The health axis creates a common KPI linking  manufacturing, planning and sales to align our entire  organization to the value chain. The POS segmentation and  determination of developer roles create a systematic method  to align the independent POS on our same value chain. We  can now return to the shop floor with less unevenness in our  demand.