Staple Yourself to an Order - Briefly comment on the highlights which this article projects.

This article is about how a company can satisfy its customers. The costumers experience is determined by the companys Order Management Cycle (OMC). In pursuit to completely satisfy its customers, the company should track each step of its OMC. Tracking each step will allow the company to: a) Identify Horizontal Gaps: Horizontal gaps are communication and process-related gaps between various functional departments within the company. An order in its OMC, moves horizontally from one department to another in the company and runs the risk of falling between the cracks. b) Identify Vertical Gaps: Vertical Gaps are the knowledge and communication gaps between hierarchies. c) Perform Order Selection and Prioritization: A company can manage orders better by analyzing stakes, costs and benefits involved. d) Order based Pricing: Once company gets good control of OMC, pricing at the individual order level can be done. The authors give a complete description of how orders are handled by different functional departments and suggestions on how problems of a typical OMC can be fixed. - Explain the OMC chart shown on page 165 in terms of how coordinated integration between the various business functions and processes in a firm can lead to smoother through the 10 stages/steps of the OMC shown in that chart. The chart lists all the departments sequentially how order flows in the OMC. In a company, the first step in OMC is order planning. In order planning stage production planners, which are furthest from the customers, make crucial decisions and define what customers need. If the company is tightly integrated, the planners will have more information from marketing, sales and customer service representatives. The production planners will work jointly with marketing to develop sales and production forecasts. In the next step, it is sales and marketing functions which worry about order generation. The gap between order generation and order planning is minimized for an efficient company.

At the third step, cost estimation and pricing, joint effort is done by the engineers who do the estimating, accountants who calculate costs, a head quarters group that oversees pricing and the field sales force that actually develops a price. Each group accepts the judgment, competence and goals of others through mutual understanding and integration. The customer gets the bid in time with great attention. In well coordinated environment, the customer representatives will handle the next two steps of Order receipt and entry and Order selection and priorititization well. The reps, who are in daily contacts with customers, will know what is going on at the top level of the company; they will know who the companys best customers are. This will allow representatives to reject bad orders and accept orders which are in tune with the companys strategy and more profitable. At the sixth step, scheduling, when the order gets slotted into an actual production or operational sequence, the production will be eager to schedule the order. They will look closely at special changes order needs and will do required equipment changes to fulfill the order. This comes from the understanding that the orders which made to the production floor are profitable and completing them well will be in companys advantage. Since the production knows about the importance of the order, they would carry on the fulfillment step well. Usually it is most complicated step, but production will take extra step to complete it as per requirements. If the production sees any problems with the order they would know to get back to the costumer and resolve the issue fast. The billing step will be done as per customer requirements in a well integrated company. The finance will take close look at the notes prepared by sales to create bills which customer can understand easy. If all the earlier eight steps are done well, there will be less activity in returns and claims. If at all there are returns, the company will be on top it. There will be means where the returns and claims do not get into transactional snarls. Every attempt will be done to have customer satisfied. In the final step of, post sales service, the service representatives get inside customers organization. Since the order was done well and the representatives are well informed, the customer is immensely stratified and the customer plays big part in the companys profitability. In well integrated company, the executives are stapled to the order, in other words, they are involved in every step. These days many companies have sophisticated computer systems which can measure activity at each step. With information available from these systems, the executives can keep close eye at any evolving gaps and take action at the first sign of gaps. And the leverage here will be the integration between the departments to reduce any gaps.

- Explain the difference between Horizontal Gap and Vertical Gap in the context of the customer order management cycle. Use an example. Horizontal gap happens when there are communication and process gaps between different departments as order flows from one to the next department. Vertical gap happens when people in trenches fail to understand the strategy developed in executive board rooms or when the action taken by the departments are different from the company strategy. At any regular grocery chain, the marketing runs new campaigns every week where few items are on sale to attract customers. The items on sale are usually regular staple items and due to low promotional prices more demand is created. The onus is on marketing to work in tandem with purchasing and logistics departments. The purchasing department needs to know about promotions well in advance so that the right quantities could be ordered and logistics also needs to aware to make sure right amounts of promotional items are available on sale in the stores. If logistics bring in the items even one day late, a horizontal gap is created. Or if purchasing orders lesser amount of items, unaware of promotion, lot of customers unable to make purchase, will be dissatisfied. That might impact companys reputation, image and future profits. In one grocery chain store, a new executive inadvertently started to damage customers shopping experience in zeal to cut costs. As soon as this new executive arrived, he was stunned to find that the chain gave tens of thousands of loaves of leftover bread each evening to honor the grocery chain stores promise of fresh bread baked daily. The executive ordered that the bread need to be kept on shelves for twenty four hours to reduce wastage. Soon the sales went down. And after brief investigation, managers found that it was the smell of freshly baked bread that bought customers in to the chain. The new efficiency policy was rescinded and the bakeries were ordered to bake new bread every four hours. This increased the bakery sales by 35% and profit 10%, but waste increased at 35%. This is an example of vertical gap. The customers were going by the companys promise but at execution level things were different. - Explain the context of Order Based Pricing in the costs/profits estimation step of the customer order management cycle to improve profitability. Pricing is the bridge between the customer requirements and a companys capabilities. It is a critical part of OMC. The company needs to understand the opportunity and impact of the pricing. Pricing at order based depends on understanding the costumer value generated by each order, evaluating the cost of filling each order, and instituting a system that enables the company to price each order based on its value and

cost. The control of OMC gives managers capability to practice order based pricing. Engineers, accountants and salesmen are involved in the cost estimation and pricing step. Engineers do the estimation, accountants calculate the costs and sales group develops the price. The pricing process needs to be seamless in order that the customer gets the bids at expected time. The parties involved in pricing decision should know about this criticality about their decision. Rather than questioning each other judgments, competencies and goals, these groups need to work in cohesion to arrive at pricing which market can support. The management needs to make clear to these departments that they work to achieve the entire companys goal not just their own departments. A well knitted company will arrive at price in timely manner so that bidding process can continue and the company gets orders from the customers on time.