Web-Based Software Tools Enable Lean Sales and Distribution Fred Noble

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1 Web-Based Software Tools Enable Lean Sales and Distribution Fred Noble During the last 25 years manufacturers have devoted much time to studying the concepts and practices of the Lean Enterprise, a continuous process improvement methodology utilized and made popular by Toyota Motor Company. Companies like Dell, General Electric and Hewlett-Packard have implemented Lean Enterprise programs that have boosted customer satisfaction, reduced costs and improved product and service quality. Simply stated, Lean Enterprise thinking is about understanding what is most important to your customers and then working to streamline and improve business processes and practices that contribute to delivering these things. Practices that do not contribute to delivering what customers covet are minimized or eliminated so that maximum energy can be applied to delivering what customers want in the most efficient way possible. You no longer need to be big to be lean Until now, it has been difficult for the small or mid-sized enterprise (SME, for short) to enjoy the advantages of being or behaving like a Lean Enterprise. The cost of tools and resources necessary to easily track and measure results in order to implement the measure-improve-measure Lean Enterprise methodology has been out of the reach of most SMEs. Large organizations, armed with sophisticated systems, databases, analytical software and personnel for monitoring and tracking results have found it easier to engage in Lean Enterprise programs than have their SME counterparts. All of that is changing because of the evolution of software technologies. Desktop and enterprise server-based software applications remain popular and that segment of the software industry is growing at an annual rate of about 5%. But SaaS delivery of software services is growing at an annual rate of 30%, due to the many benefits that SaaS provides. Generally, SaaS offerings are robust in features, low cost, secure and easily scalable since they can be accessed via a web browser. With SaaS, you pay a monthly fee to view your company s data via the Internet and through a software application stored and maintained remotely by your SaaS provider. For a fraction of the cost of enterprise-resident software, the SME can now implement process improvements and measure the results as quickly and thoroughly as the large enterprise. You no longer need to be big to be lean! SaaS might be your first step to becoming Lean With SaaS you don t own the software or need to buy and maintain servers and related equipment to support it; your SaaS provider does. Your SaaS provider manages the servers, backups and security tools that protect and deliver information to your browser. You and your people focus on the information that your SaaS solutions provide to help you manage your business. Simply by deploying SaaS solutions, you will be on

2 the path to continuous process improvement since you ll be freed from system maintenance chores to sharpen your focus on what s important to your customers. All of this may seem contradictory to some ingrained notions of business management. Surely the best way to have control and get the most from your informational tools and software is to own and manage it yourself, one might think. But consider the market dynamics from your software provider s viewpoint. Once you ve agreed to purchase software, you own it. Your software provider has transacted the sale and will prosper in the on-going relationship with you by selling maintenance agreements, upgrades and training. Although your provider will want you to be happy with your software so you will recommend the product to others, you cannot return the software for a refund unless it fails to perform as advertised. If you become disenchanted at your vendor s responsiveness to your calls or willingness to improve the product, you have little or no recourse. Consider the pressure under which a provider of SaaS subscription services works, however. You may contract for services on a month-to-month or annual basis at a small fraction of the price of a desktop or enterprise-server-based software package. You do not own the software nor are you under obligation to perpetually renew your subscription. If you aren t happy you can cancel your subscription per the terms of your agreement and take your business elsewhere. Your SaaS provider knows that he/she must perform to your satisfaction month-in and month-out or your business will be lost. SaaS providers are motivated to think constantly about continually improving the value of the information and services they provide their customers. SaaS providers, by the demands of their business model, are therefore Lean Enterprise organizations. As your needs evolve and as you continuously improve your operations, your SaaS provider is the most likely of your business partners to evolve features and services to support you and to make sure you are deriving full value from them. Lean Thinking isn t just for manufacturing organizations When the automotive and electronics industries began studying the reasons behind Toyota s success, they initially reached two conclusions. The first was that Toyota s Lean Enterprise culture was a philosophy of improving manufacturing processes. The second was to believe the Toyota or Lean Enterprise culture to be built exclusively around quality goals and specifically the attainment of six-sigma quality results (statistical terminology meaning that measured defect rates are less than 3.4 failures per million instances). Those conclusions eventually proved to be incomplete. Toyota extended its Lean Thinking beyond the manufacturing function and into all areas of its business. The continuous pursuit of perfection in product quality was matched by the pursuit of perfection in other business areas that impacted the areas customers considered to be important. Clean and organized facilities and shortened and predictable product delivery were also areas of focus.

3 Product quality has improved to the point where it is arguably no longer a differentiating business characteristic. Acceptable quality is expected a given in the eyes of the consumer. Other product/business attributes may now provide greater opportunities for the differentiation that leads to business growth and increased market share. The revolution caused by the commercialization of the Internet has changed the way customers learn about products and businesses as well as the way those businesses sell and distribute their products. Lean Enterprise thinking, the Internet and SaaS software tools are changing the way manufacturers, wholesale distributors and retailers sell, stock and supply their products. The improvements resulting from these changes are resulting in reduced operating costs, leaner inventories and differentiating attributes for the businesses making them. With SaaS software, the SME can implement Lean Enterprise programs as well as the larger organization. Combining this with the nimbleness advantage that the SME normally enjoys suggests that the small manufacturer, wholesale distributor or retailer can compete very effectively in the market, regardless of the competition faced. Santrio and SMEs Intuit s QuickBooks software holds a leadership position (and commanding market share) in addressing the accounting software needs of SME (small/mid-sized enterprises). Santrio provides a SaaS product that functions with QuickBooks and enables what we call controlled collaboration between our customers sales, customer service and supply chain as well as their ultimate customers. By sourcing all data from the information contained in QuickBooks, we assure consistency in the information being viewed by all collaborating parties. Santrio obtains, formats and delivers information and provides reports that show sales and supply chain results (orders, shipments, invoices) enabling the feedback needed to successfully implement a lean selling and supply chain organization. Using Santrio, organizations can immediately enjoy the benefits of streamlined order management and supply chain processes by providing members of their sales and distribution team (sales reps, customer service personnel, retailers/dealers and warehouses) as well as customers with web-based services that reduce or eliminate costly and time-consuming activities. Examples include the following: Scenario 1: A wholesales distributor of lighting fixtures and accessories has a dealer network of 400, a parts list of 1,500 items and routinely receives an average of (50) orders per day. More than 50% of the time, a dealer will call to check stock status of items before placing an order. Each call averages 6 minutes duration and is taken by an inside sales person. Wrap up time (to record the call and sometimes to send a confirming ) for that person after each call averages approximately 2 minutes. Dealer use of the Items tab of Santrio software has virtually eliminated the need for these dealer inquiries and improved the satisfaction levels of the dealer network

4 because dealers can check stock status from a web browser whenever they want. Figure 1, below shows what the dealer sees when checking stock status from their web browser: Figure 1 A sample screen from Santrio s Items tab By using Santrio to eliminate 80% of the dealer calls to check stock status, this wholesale distributor has realized opportunity savings* of $40 per day (80% of 25 8 minutes each X $15 per hour cost of inside sales person). The daily subscription cost of Santrio for this company, its internal users and (400) of their dealers is approximately $4 (that s correct, four dollars) per day! There were also upfront costs for Santrio to tailor and customize pages (not shown in Figure 1) and these costs will be covered by the savings realized, just by reduced call inquiry volume, in the first month of operation with Santrio. Scenario 2: A distributor of sports apparel received orders from approximately (200) retailers in a variety of ways (fax, , phone call, etc.). Over the course of a year the average order count per day was (30) but, at certain peak seasons, daily order count could be (100) or more. Each order received was edited by an accounting administrator and rekeyed for entry into QuickBooks. Sometimes callbacks to the retailer were required for clarification. Average time to re-key orders, inclusive of preparation and wrap-up time

5 was 4 minutes per order. Approximately 25% of the orders received required a callback to clarify order content and acknowledgements were prepared and mailed for each order received. Santrio replaced this process with an order entry screen similar to the one shown in Figure 2, below. This screen, combined with a detailed item list (in a format similar to the one shown in Figure 1, above) could be accessed via web browser by each retail dealer and used to submit orders that Santrio transmitted directly to QuickBooks (eliminating re-keying). Dealers avoided an order handling charge by using Santrio to place their orders and thus rapidly became familiar with the new process. Figure 2 A sample screen showing the order entry template without listed items The following provides an approximation of the opportunity cost savings* realized through this simple but step-saving improvement, facilitated by Santrio: - Elimination of order re-keying: (30) orders per 4 minutes/order = 2 $15.00 per hour (fully loaded cost of order entry person) = $30.00 per day - Reduction of need for order callbacks: From 25% to 5% = 6 calls per 5 minutes each plus allocated connect costs = 30 minutes + $2.00 per call = $9.50 per day

6 - Elimination of the need for mailed order acknowledgements (now done via and available to retail dealer online with Santrio): (30) orders per $0.75 per mailing (estimated) = $22.50 per day - Total estimated opportunity cost savings* = $62.00 per day The monthly subscription fee for this client to support four internal users and its network of (200) retail distributors is $108. That works out to less than $4.00 per day. They paid Santrio $1,000 in upfront development to customize forms and screens (not shown in Figure 2). Scenario 3: An entrepreneur saw an opportunity to rapidly build a multi-sales-channel business to distribute specialty gift items, initially through gift shops in locations frequented by tourists and then via his own e-commerce channel web direct. To launch his business quickly, he contracted with a third-party call and product distribution center to allow him to take and fulfill orders received by his growing channel of retail dealers. He also structured an e-commerce website that presents his business and products to prospective customers and accepts orders via secured online credit card services. Orders and telephone support services are provided by the same third-party warehouse that is used by his retail dealer channel. QuickBooks is the accounting software he chose since he had experience in using it with other ventures. Santrio is the order management software service he uses since it can easily be viewed, via web browser, by his third-party call center and warehouse as well as future dealer and channel partners. Additionally he can monitor and review orders as they are being placed. This allows him to see where his sales channels needed help in selling his products and entering orders a very important thing to know during the early stages of his business development. To this client, daily savings in process improvements is not as critical as is his ability to present a streamlined ordering process to his clients. Additionally, because Santrio can be viewed online from anywhere at any time he has instant and complete insight to his early stage customer and sales channel interactions with his new business. He can rapidly tune and improve his processes to meet his customer s needs. Figure 3, below shows a screen from the Customers tab of Santrio that provides a detailed view of customer orders and customer order history. Data is up-to-the-minute and synchronized with QuickBooks accounting software.

7 Figure 3 Showing a listing of this customer s order history. Drilling into each order provides detail of the order. This client has been able to conserve precious early stage capital because, rather than investing in enterprise-resident systems, servers, software and analytical tools, he pays Santrio a monthly subscription fee of only $59! * NOTE: Opportunity savings means that inside sales person task time is reduced. Tangible savings can be realized if inside sales hours worked are reduced or if the saved time is productively re-applied elsewhere in the business. Conclusion SaaS technology has all the needed attributes to be a SME business growth enabler. It allows the enterprise to derive the benefits of sophisticated software and business monitoring tools without sacrificing valuable working capital to obtain them. Santrio is dedicated to continuously improving the value of our SaaS software service to enable businesses to continuously improve the effectiveness, efficiency and value of their sales, customer service and supply chains (as depicted in Figure 4, below).

8 Figure 4 A depiction of Santrio s potential role in automating and improving processes in the sales, service and the supply chain of the SME The author: Fred Noble is Product Marketing Manager at Santrio. He is also a Lean Enterprise, continuous process improvement instructor. M107-a

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