CIA of Operation Management

Well since I have your attention and you may be wondering what CIA has to do with operations. CIA was the termed coined by one of my clients as “Central Item Allocation” during an enterprise transformational project. Large manufacturing companies face three prominent challenges that are rated very highly in customer surveys. The top three challenges are resistance due to cultural challenges, managing proliferation of IT systems and coping with Mergers and Acquisitions.

This article discusses the third challenge of merger and acquisition, particularly with respect to operational efficiency. In the last 10 years there has been a proliferation of companies going global. The reasons are varied and range from 1) access to low cost resources, 2) access to new markets and 3) a way to hedge the market by diversifying. However these acquisitions have created a monster of a problem to the COO and the CIO. Millions of dollars are being spent on building a common standard business processes across cross cultural and national boundaries. One of the key decisions that come up during due diligence efforts is whether to build a single instance or a distributed set of systems across the enterprise. Single instance is beneficial from a TCO (Total Cost of Ownership) point of view, but causes two problems. It takes the ability from the individual sites to manage their manufacturing. It takes the individuality away from the plants which have unique characteristics and strengths. The best people to manage the operation are usually the people at the plant who breathe and live the production on a daily basis. With the single standard across the enterprise, they have to comply with the corporate standards. The second problem is a situation where the company may decide to divest a manufacturing unit; it becomes a highly complex process to separate the IT infrastructure.

Integration of the acquisition is a nightmare and has to be managed diligently. The challenge faced by the COO is to determine the best way to utilize the distributed capacity “effectively” to serve the variable market demand. CIA was coined to develop a common order taking process that would consider the demand characteristics and allocate the orders intelligently to the individual manufacturing sites.

Some of the key factors that were considered during the design phase were 1) How to create a level capacity loading, 2) How to promise profitability, 3) How to promise based on logistics costs, 4) How to accommodate customer preferences and 5) Can the small lot orders be aggregated in bigger lots before promising. Overall the CIA function can become very complex if all the decisions have to be considered during order promising. The challenges are to accommodate all the logic within a short interval of time to ensure that customers and sales representatives do not have to wait for an inordinate amount of time to get a promise date. To make this happen, some basic fundamentals have to be in place, to develop this solution in a multi plant environment. This cannot be done without the standardization of products and processes – thus the single instance of an enterprise application plays a critical part.

A comprehensive successful implementation of CIA will help in better utilization of the capacity across multiple plants, balanced production and load leveling, reduction in delays and shortened cycle times, aggregation of small lot orders and improved customer service.

Support Structure for Sales Effectiveness

I have been involved in several sales cycles for software and services over the last 11 years. It has usually been grueling affair trying to manage the whole process and working 80 hours week to bring it completion. Over the years, having worked in consulting and sales, I have come to the conclusion that selling is the most difficult task for an organization. I have grown to respect sales organization and the effort that they put to bring it to a closure, not only for their effort but also working in an environment of uncertainty.

This piece is not about the sales process but the support structure required making the sales process effective. The three key dimensions that organizations should focus on are Marketing, References/Case Studies and Customer Testimonials.

Customers have become savvier buyer of software and services over the years. Although some customers fall into the category of Leaders/Innovators, who are open to new ideas and willing to try out new innovative solutions, a great majority of them usually are followers who are primarily looking for success stories. Empowered with a list of references, the sales team can quickly gain the confidence of the buyer. Customers usually prefer references in similar solution areas and similar industries. References and case studies help to clear the first hurdle whether the experience of the software and services has been successful in a similar environment. It removes the first line of skepticism and the customer moves to the next step of analysis.

Once the references veil has been lifted the next thing the next step to bring the customer at ease is existing customer testimonials. In order to create a positive customer testimonial, three things has to be in place. The first one is a successful implementation and experience where the existing customer is willing to stand and vouch for the product and service. The second is a strong personality within the existing customer base who can help influence the community and the third a user community, blogs, discussion sites where the new customer can visit and gather perspectives. A positive customer testimonial goes a long way in increasing the effectiveness of sales process.

The Marketing organization in a software and services company holds a significantly important role is creating messaging and disseminating the message across the community. The first step for the marketing group is to create an effective and simple message that comprehensively describes the offerings that the company has to offer. The message should be simple and effective which the sales team can easily explain in a form of an elevator speech. The second step is to work with analyst and publications editors to get the message across. The analyst and publications are very powerful and have existing customer base that are eager to hear/read about the new solutions and practices. On several occasions when I have visited customers, we tend to discuss the new trends and technology. Customers would inevitably turn out some document that were written by analysts and would want to understand how our solutions fit into the model. Being in the top quadrant requires not only implementation successes but close alignment of the company’s message with the analyst. The other medium to disseminate the message is attending community conferences and organizations. Executives and managers attend conferences to listen to new trends and this is the best place where you can talk one-on-one in an outside location.

In summary – the Marketing, References and Customer Testimonials play a key role is enabling sales. The software and services SG&A are one of the highest in the industry. A small change in the effectiveness of the process can reduce the overall cost of sales and increase the margins.

Like to hear of other support organization and structures which will increase the sales effectiveness.