Best Practices in Guided Selling - Measuring Quoting Strategies¹ Financial Impact

1. Best Practices in Guided
Selling: Measuring Quoting
Strategies’ Financial Impact
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Cincom in-depth analysis and review
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2. Best Practices in Guided Table of Contents
Selling: Measuring
Quoting Strategies’ Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Measuring Quoting Strategies’ Financial Impact . . . . 1
Financial Impact
Quote-to-Order Business Challenges . . . . . . . . . . . . . . . 2
Manufacturing’s Panacea for Pain Is Quote-to-Order 3
Quote-to-Order Solution Strategies . . . . . . . . . . . . . . . . 4
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Cincom in-depth analysis and review Measuring Results of Quote-to-Order Strategies . . . . . 5
Conclusions and Recommendations . . . . . . . . . . . . . . . 6
Getting results from quote-to-order
strategies begins with defining financial About Cincom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
measures of performance.
By Louis Columbus
Cincom Intelligent Selling Solution

3. 1
Executive Summary Measuring Quoting Strategies’ Financial
Impact
Manufacturing companies are capable of much greater The intent of this white paper is to explain the best
financial gains than they are getting today from their practices of complex manufacturers that are using
quote-to-order, order-to-cash, sales and product- financial metrics of performance to manage their quote-
configuration strategies. These process areas centre on to-order, order-to-cash, sales and product-configuration
how manufacturers create, set and keep expectations in strategies. Manufacturers that use financial measures of
their quotes for custom-configured products. performance are getting these kinds of results and more,
clearly making a financial impact on their companies:
Globally companies are adopting quote-to-order to
streamline how they sell customised products. Reasons • 95% reduction in costs to complete an order
for pursuing these strategies include increasing factory
use, developing related products to extend a product Nearly every manufacturing company has a rough
series’ life and often to up-sell and cross-sell their measure of how much an order costs to fulfill. The
existing customer bases with products tailored to their payoff of using a quote-to-order, order-to-cash, sales
specific needs. Examples of how quote-to-order, order- or product-configuration strategy is that there is major
to-cash, sales and product configuration impact reduction in the costs of fulfilling orders for
manufacturing, sourcing and product-management customised products.
strategies abound throughout the spectrum of complex • Order cycle times reduced from 17-33 hours to 30
manufacturing companies globally pursuing these minutes
strategies.
From an AMR Research survey of best practices in
Getting results from these strategies has to start with sales configuration, the median improvement in order
defining financial measures of performance before cycle times dropped from the worst case, 33 hours, to
changing these processes ever begins. Too often less than one hour. In aggregate, the order cycle
companies aren’t measuring the financial impact of times across all manufacturers were dropped to less
these strategies – and leaving much of the cost savings than an hour.
and incremental revenue unattained – because extra • 20% to 50% reduction in engineering support for
steps on these strategies are not taken. These presales tasks
strategies have to start with a series of financial metrics if
they are ever going to accurately reflect the cost savings The cost implications of minimising engineering
and revenue contributions they contribute. support is significant, but the strategic payoff of
having engineering focused on new product
development is a competitive advantage that takes
years to cultivate and grow. Having engineering
focused on tactical versus strategic issues can cost any
company a product generation.
• Days Sales Outstanding (DSOs) reductions from an
average of 60 days to 29 days
This is a measure of how long it takes a company’s
customers to pay their invoices. Analysts see DSO
reduction as a sign of increasing customer satisfaction.

4. 2
Quote-to-Order Business manufacturers is not in getting these process areas
defined, working and even providing a median level of
Challenges returns – it’s in measuring the right financial metrics to
show the value of these strategies over the long run.
Background Figure 1 shows a series of the financial metrics that
quote-to-order directly impacts for manufacturers.
Manufacturers grapple with the challenges of bringing Taken together, the strategies of quote-to-order, order-
increased revenue in while maintaining or best case, to-cash, sales and product configuration deliver a series
dropping the cost per order. Too often manufacturers of financial contributions that span manufacturing, sales,
find that pursuing a product customisation strategy production, engineering and finance.
actually drives up costs – and that’s because the financial
benchmarks for performance aren’t set before any of
these strategies are fine-tuned.
The time savings are well-known and easily measured for
adopting and fine-tuning quote-to-order, order-to-cash,
sales and product-configuration strategies. But to be
truly effective, any of these strategies needs to start with
a set of financial benchmarks. The challenges for many
Quote-to-order’s financial impact is significant.
Orders In
Margin In
Products,
Services,
Profits
Out
Reduction in Order cycle Reduction in Decrease in 20% to 50% 95% 10% Days Sales
order cycle times down incomplete order rework reduction in reduction in reduction in Outstanding
times from 17- 65% orders of from 15% of engineering costs to warranty down on
33 hours to 30 20% orders to support complete an costs average from
minutes less than 2% order over 60 days
to 29 days
Figure 1: Quote-to-order’s financial impact is significant.
Source: Configuration Is the Heart of Customer Fulfillment for
Complex Product Manufacturers, AMR Research
Louis Columbus, March 31, 2003

5. 3
Manufacturing’s Panacea for Pain Is Proving the value of any customer-facing strategy that
includes the generation of quotes, proposals and
Quote-to-Order responses to RFPs starts with a clear idea of what
Managing how quotes, proposals and responses to RFPs metrics will be used for measuring performance. AMR
are created, managed and fulfilled is what often Research and other research firms have for example
separates more financially successful companies from seen a correlation between the accuracy of metrics used
ones that struggle with managing the costs of sales, and the results achieved.
fulfillment and service. What’s giving these successful
Here are the places to start looking in your company for
companies the edge is their ability to manage to a set of
ways to trim quoting times and costs, order cycle times
financial metrics and have greater insights into their
and wasted resources in sales, engineering, production
businesses relative to their competitors.
and service. To build a long-lasting strategy in quote-to-
order, look first at the areas in the table below:
Table 1:
Managing Quote-to-Order to Metrics
Areas of Measurement Baseline: What to Measure Example of Benefits
Company-specific Project costs and expenses Use as a baseline for defining ROI
Number of orders per year Determine configuration’s impact on inventory turns
Current inventory and costs Inventory turn savings
Customer data Lifetime cost per customer; average deal size by customer
Sales Order cycle time Order cycle times reduction of 65% or more recorded with
manufacturers contacted
Cost of sales Days Sales Outstanding reduction from 60 to 29 days on
average
Cross-sell and up-sell revenue Increase of 33% on aggregate
Average sales price-per-order Increase from 9% to 26%
Quote and order Average costs to complete an 95% reduction in cost per order
order
Special pricing requests Over 100% ROI on automating special pricing requests
Bad or incomplete orders Incomplete order reductions of 20%
Customer service Number of customer complaints 98% reduction in cost of simple requests
Revenue lost to churn 60% when cross-selling is used with quote-to-order
Number of calls on order status Median level of 500 per week to 70
Warranty and returns Reduction in warranty cost on 10% reduction at a minimum
customised products
Labor cost reductions Decrease order rework from 15% to 2%

6. 4
Quote-to-Order Solution • Siemens Energy and Automation – Siemens is a
multinational conglomerate with offices and
Strategies operations in 190 countries and over 100,000
employees. The Siemens Energy and Automation
Division produces Above NEMA class motors and
Solution Case Studies relies on Engineer-to-Order (ETO) for 100% of its
production. The division set the goal of streamlining
There’s an abundance of evidence surrounding the
their quote-to-order process by enabling sales
results that manufacturing companies can achieve using
representatives to generate certified specifications and
quote-to-order, order-to-cash, sales and product-
quotes for highly configured Above NEMA motors.
configuration strategies. The results achieved at the
Included in the quoting process was the requirement
following companies illustrate what can be
of generating certified motor performance data and
accomplished when these strategies are combined with
CAD drawings, required by Siemens customers. After
a strong focus on financial measures of performance.
implementing the Socrates® suite of applications and
• Air Products and Chemicals – This international launching the revised quote-to-order system and
supplier of industrial gases and related equipment and processes to the Siemens sales force, the following
specialty and intermediate chemicals had to come up results were accomplished:
with a solution for managing a large menu of options – Certified performance-data generation required in
for its GASGUARD line, a product line for the quotes and proposal time dropped to less than one
company’s electronics gas division. Its guided selling hour from between four and six weeks.
and product configuration strategy included
automating sales order entry, engineering design and – 100% of configured motors are buildable, leading to
manufacturing information. The company faced a significant drop in rejected and inaccurate orders.
significant challenges with its configuration strategy – The time it takes to create a quote has dropped
and there was also a need to replace its ERP system at from between two hours to four days (depending on
the same time. As a result, the company overhauled complexity) to less than an hour.
both systems at the same time. The results included
the following: – Bills of material for products tailored specifically to
customers’ requirements are now directly loadable
– Unit cost reductions of 28% due to better demand into Siemens’ ERP system.
planning
– Engineering knowledge of products is now captured
– Lead time for engineer-to-order products from 14 so it can be quickly applied to customers’ unique
weeks to six weeks requirements as defined in quotes and proposals.
– Significant reduction in product configuration errors
– Improvements in cost-per-unit price reductions

7. 5
Measuring Results of Quote-to-
Order Strategies
Both AMR Research and Cincom are finding that when
benchmarks for financial performance are defined
before manufacturers initiate a quote-to-order strategy,
results comparable to those shown below are
achievable. The extent of manual to electronic
automation of core processes made an impact on these
figures shown in Table 2.
Table 2
Financial Performance of Quote-to-Order Strategies in Year One of Projects
Manufacturers Order Cycle Time Days Sales Quote Creation (%) Reduction (%) Increase In
Reduction (%) Outstanding (%) Time Savings Incorrect Orders Cross-Sell, Up-Sell
Reduction (%) With Quotes
Elevators 35% 15% 120% 46% 5%
High-tech 62% 25% 35% 67% 30%
peripherals
Components 37% 40% 45% 31% 22%
PCs and servers 52% 22% 150% 54% 47%
Auto maufacturing 34% 12% 21% 18% 20%
Industrial 12% 21% 67% 31% 23%
distributor
(channel assembly)
Furniture 14% 7% 11% 27% 12%
Network and LAN 23% 12% 27% 52% 37%
equipment
Averages 33% 19% 59% 41% 24%

8. 6
Conclusions and • Fix quoting processes first by attacking wasted steps
and inaccuracies. Go after the most broken processes
Recommendations and manually fix them first. Don’t just automatically
think that ripping and replacing processes will make a
difference – get a strategy together based on solid
There’s more to quote-to-order, order-to-cash, guided
measures of performance and move forward from that
selling and product-configuration strategies than just re-
point.
architecting workflows. To get the true financial benefits
of these strategies, you need to first look at the financial • Get away from having a multitude of quoting systems
measures of performance that you want to impact. The as disconnected islands. At one point, one of the
metrics provided in this white paper are just the world’s most well-known computer systems companies
foundation of what needs to be a much broader and had 11 different quoting systems, some delivering
more comprehensive listing of the financial measures of Available-to-Promise (ATP), some quoting systems
performance that are relevant to your specific business. providing delivery timeframes and some delivering
nothing in the way of commitment and delivery dates.
The following recommendations apply to manufacturers, One of the best possible actions you can take is to
resellers, distributors and service companies: consolidate quote-to-order systems to ensure
• Define the measures of quote-to-order performance customers get a common set of expectations
that are most relevant to your company. While this delivered to them using reliable processes to
white paper has provided several key metrics or accomplish that task.
measures of performance, it’s important to also find • Fine-tune pricing and quoting systems together if you
the ones that are the most relevant to your company. can. Just revamping quoting systems alone can yield
Start by going through the quoting process with the major cost reductions and increase efficiency of your
customers of that process – those groups include sales, operations, manufacturing and services
sales, operations, manufacturing and service. organisations. Adding in pricing can bring a level of
• Start measuring the impact of your quote-to-order fine-tuning around margin enforcement and analysis
strategies today. Don’t procrastinate about measuring that is spelling the difference between competitive
the relative levels of efficiency or inefficiency in your strength in one market versus another.
quoting processes today. Start scoring out how long it Bottom line: There’s room for improvement in how
takes to complete an order, how often you have to re- quote-to-order processes are managed inside any
work orders and start a trend line on these key metrics. company. Improving these processes starts with
You don’t have to spend thousands of dollars to do this defining a series of measures of performance first so that
– start at least getting a measure of how your improvements made can be tracked over time. Only
company is performing. Only after getting this through finding this cause-effect relationship will
baseline measure will all the efforts to improve start investments in software pay off.
showing up. You’ll have to start somewhere and this
benchmarking gives you the chance to define where
that starting point is.
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are trademarks or registered trademarks of Cincom Systems, Inc. All other
trademarks belong to their respective companies.
© 2011 Cincom Systems, Inc.
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