Staple Yourself To Their Order
Are there opportunities to optimize how your customers interact with your solution from the moment of purchase to the point of payment? To find out ‘staple yourself to their order’.
Order Cycle Management
Staple yourself to the order was a popular idea printed in the HBR way back in 1992. The principle was that to really understand your customer’s experience of your business you needed to closely follow each step in the process from when the customer planned and placed the order to the receipt of the goods and thereafter to how any customer service inquiries are handled.
By so doing you would experience just how efficiently your business operated in response to the customer – from how the order was processed, scheduled for production, produced, packed, shipped and so on.
The more technical term used for ‘staple yourself to the order’ was Order Cycle Management.
Staple Yourself To Find New Value
The new ‘staple yourself to the order’ is about how the customer extracts value from your solution, as well as from their relationship with your company as a supplier.
In today’s sales environment it includes how the product is stored, used and ultimately converted into value (or more specifically into results for the customer’s business, or project).
It requires looking beyond the purchase decision as an event and thinking in terms of all the activities in the purchase. That is the Procure To Pay Cycle.
Are there opportunities to improve your customer’s procure to pay cycle?
How Can You Optimize The Procurement Process?
A supplier can increase its importance to the customer by helping to strip time, cost and complexity out of any of the steps in the customer’s procure to pay cycle. That means simplifying, optimizing or accelerating how the products, or services are:
1. Sourced, including; defining requirements, identifying and evaluating alternative suppliers and solutions, supplier short-listing selection, approval and so on.
2. Ordered, including; the trigger for the order, how the customer determines the specific order details, order quantities and timing, order administration costs, reordering and replenishment.
3. Stored, including; how, when and where the product is received, storage – in what locations, quantities and at what cost, including how quickly stock is turned, levels of spoilage, etc.
4. Consumed, or used, including; any waste, what it is combined with, etc.
5. Tracked, that includes how it is analyzed, recorded, or reported upon within the customer’s business and its systems (i.e. MRP, Procurement, etc.). In addition any other administration or control activities associated with the products, or services, including; how it is associated with revenue.
6. Paid for, including how invoices and payments are approved and processed including accounts queries, rebates, paperwork errors and delays, as well as other related aspects of record keeping and accounting.
7. Returned, including how support queries are addressed, defective products are returned and so on.
Each of these steps in the customer’s process are potential sources of extra value. The key question is how might any of these be changed to impact on the customers business performance, either in terms of cash flow, margins, or revenues.
Why Staple Yourself To The Order?
Why should the seller be concerned with the buyer’s Procure To Pay Cycle? Well, there are at least 4 reasons:
1. Reduce Pressure On Margins
Procurement costs can account for a significant proportion of the total cost of ownership, or acquisition of a product or service.
While the buyer is clearly focused on cutting the supplier’s cost, there may be another 20%, 30%, or even 50% of cost that goes unnoticed.
These costs can include the time and resources committed to the buying process, the cost of warehousing and storing the products purchased, the administration costs associated with supplier invoices and payments and so on.
The supplier who can help the buyer to cut these indirect costs can alleviate the pressure and/or cut margins.
2. Find New Sources of Value
There may be untapped sources of value in terms of the products or solutions you provide. These may be rooted in opportunities to optimize how they order, store, use, etc. your solution in order to deliver greater value and to impact on results.
3. Improve Customer Satisfaction & Loyalty
The idea of stapling yourself to the order is very similar to the ‘Moments of Truth’ concept, with the focus being on ensuring every encounter or interaction with your business delivered customer satisfaction and built loyalty.
4. Improve Operational Efficiency
Stapling yourself to the order is a form of business process re-engineering that can identify opportunities to the benefit of both buyer and seller. For example reducing the paperwork and administration costs on the buyer by means of electronic invoicing is likely to cut costs for the seller also.
Ways To Improve The Buyer’s Procure-To-Pay Cycle
The means by which a seller can positively impact on the buyer’s procure to pay cycle are limited only by the seller’s imagination. Here are some of the generic strategy headings under which they might fall:
1. Spend Analysis – by helping the customer to analyze and track their spend and to pin-point opportunities for savings. For example where the supplier can alert the buyer to areas where spend is above the normal, or growing at an unexpected rate (relative to industry standards).
2. Demand Management – by helping the customer to manage internal spending by ensuring that unnecessary orders are not placed (e.g. suggesting where a lower cost substitute might be used, or pin-pointing rushed orders that are incurring extra costs).
3. Joint Sales and Operations Planning – working more closely with the buying organization in order to more closely integrate your business into its supply chain and dovetailing more effectively with their operations (e.g. warehousing, production and logistics).
4. Providing Greater Flexibility in respect of sudden changes to the customers orders, or market demand. An example would be the use of postponement where the sellers delays feature or packaging changes until the last moment so as to provide for the greatest flexibility in terms of the final quantities to be provided of specific product variations.
5. Inventory Management – help the customer to minimize the amount of money tied up in stock while at the same time ensuring a buffer against sudden swings in demand. For example increasing the rate of turn of raw materials and of finished goods, for both buyer and seller. So, for example, what is it going to take to get the number of days of finished goods in stock down to zero and to 3 days for raw materials?
6. e Ordering / e Catalogues – help the customer to reduce the paperwork and administrative costs associated with ordering/reordering, paying suppliers, etc. That means integrating directly with the buying organization’s procurement and other systems.
7. Single Source Supplier – enabling the customer to order more of his needs through your company (for example, by carrying other supplier’s products, etc.). Supplying the customer through more preferential longer term supply contracts that are also based on aggregating purchases from a number of different parts of the business.
Don’t Just Focus On The Buying Process!
We are used to examining the customer’s buying process. But, sometimes we need to go one step further. We need to examine the buying process in its broader business and procurement context. So how does the customer use your solution? How can you add value and strip cost in the way it is ordered, stored, accounted for, used and paid for?