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Does Your Inventory Look Like Jurrasic Park?
Does Your Inventory Look Like Jurrasic Park?
I was working with a industrial manufacturer who made construction equipment, such as diggers and backhoes. They had a beautiful park-like setting around their factory. Artfully placed on manicured lawns around the ponds and fountains were quite a few backhoes . It reminded me of Jurassic Park. We discovered later that these backhoes were a lot like the dinosaurs – they had failed to adapt.
The backhoes in the park, though attractively displayed, were really just inventory. Those particular backhoes were there because they hadn’t sold. We soon understood why. The backhoe had about 40 features that the customer could choose. One of these features was a cup holder for the driver’s cab. There were two options: a stationary cup holder and a rotating cup holder that could be stowed under the dashboard. If a customer order matched a unit on the lot EXACTLY, except for the cup holder, then their inventory control system treated the two configurations as different. A whole new backhoe was scheduled and built, while the one with the wrong cup holder continued to sit on the lot, exposed to wind and rain and interest charges. Now, probably they should not have had two different cup holders in the first place. But if they did, the cost of giving away a rotating cup holder instead of a stationary one (about $20) was much smaller than all of the costs involved in building a whole new backhoe. And if the customer wanted a rotating one, he could probably have been persuaded to accept a stationary one today instead of waiting 3 weeks to get exactly what he wanted.
Two different configurations of a complex product might be “almost the same”, or “very similar”, or “quite different”, or “far apart”. Can we quantify these common sense terms? Surely two configurations that differ only on a cup holder, out of 40 features, are “almost the same”. If we can measure closeness, then we can see when a configuration in stock is “close enough” to what a customer wants.
For two configurations to be close to each other, there shouldn’t be too many features with different choices. Furthermore, some features are more important than others. In a backhoe, the engine, hydraulics, and buckets are very important. The cab is quite important. The cup holder is not so important. So two configurations are close to each other if they differ on a small number of features that are not very important.
The criteria for what is important can be based on knowledge about the product and what it is used for, and also on the cost in relation to other features. So “close enough” depends on how many features are different and how important those features are,. There might also be a probability of acceptance that depends on how many features are different. This can all be formalized, and we can compute a number that represents the closeness. If we can measure closeness, then we can automate the matching of orders and inventory in a much more nuanced way than “the same” or “not the same”. For complex products that are built to stock as well as built to order, this can substantially reduce inventory holding costs by keeping the inventory moving. This is the key to inventory optimization.
Each of those backhoes in the park had a story to tell. Stories like: “I could have been sold in October of 2007, but I didn’t have the rotating cup holder. Or in January of 2008, but I had flip-guard feet instead of street-guard feet.
Someday my perfect order will come, I know it will.”
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Part I: Reporting, Business Intelligence, Data Mining, Analytics: Actionable Tasks!
Software vendors use so many big words and confuse customers. Our customers have often asked us to clarify – so here I go. The definitions in this article are based on research of these terms, and the collective opinion of many of our customers and prospects. Over numerous conversations with our customers and the discussions of the terminology, the clarifications always go back to the origin of the terms and then move on to change in usage. Hence this article folows that flow. I would love your feedback as it is important to help buyers understand this.
Business Reporting
Business Reporting, as the term suggests presents the data from the database in an easy to read format. This originated when business users were frustrated that all the data was locked up in databases. There was a lot of data, but no one could get access to it without calling on IT folks. Hence Business Reporting was born.
Business Intelligence
This is a fancy name for business reporting. Business intelligence (BI) is a broad category of technologies that allows for gathering, storing, accessing and analyzing data to help business users make better decisions. In a 1958 article, IBM researcher Hans Peter Luhn used the term business intelligence. He defined intelligence as: “the ability to apprehend the interrelationships of presented facts in such a way as to guide action towards a desired goal.”
In 1989 Howard Dresner (later a Gartner Group analyst) proposed Business Intelligence as an umbrella term to describe “concepts and methods to improve business decision-making by using fact-based support systems.” Then in the late 1990s the usage became widespread (Remember the Bubble!). Then. everything with any data reporting was called Business Intelligence. So today, Business Intelligence is a glorified term for “Business Reporting”.
Data mining
Simply put, Data mining is hitting the data with all mathematical methods available to a mathematician! The data source can be almost anything – news papers articles, financial reports, sales data, medical data, … . This means that the data can have structure or can be un-structured. And the mathematical methods that can be applied can include neural networks, genetic algorithms, statistics on steroid and anything else they can think of.
One may ask – why are they doing this? What are they mining? Well, the simple answer is that they are mining the data looking for patterns; any patterns that can reveal relationships. So the methods used are varied and the kinds of data that are mined can come from a myriad of sources.
The results of data mining are lots of data! In fact – the result of Business Reporting and BI has been data overload. Now that’s the bad news. In a world of information overload, the last thing that we need is more data. We have less time today than we have ever had before. Business users do not need more data. They need quick conclusions on what the data is saying, converted into actionable tasks. Simply put – “Please tell me what to do”.
… More on the discussion of analytics to action in the next blog.
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Recommendation Engine To Empower Sales Process
There exists a great opportunity for companies to streamline their front end and specifically the quote to cash processes which will deliver immediate relief from the current economic reality. Emcien provides a “Recommendation Engine” for configurable products, empowering the sales process. In spite of tremendous technology advances, we see a selling process within companies that is very archaic, people intensive and time consuming. It involves sales people, sales engineers, quotes managers, configuration specialist, ……..
My favorite quote, also a dismal statistic, is from a Sales VP – “4 out of 5 quotes are lost because we cannot serve up the right stuff immediately at the point of sale“.
My second favorite quote is from a customer who was trying to buy a drive from a very well known company. “I am still waiting for a quote, so they don’t have my cash”, he said.
Why? Because after he gave them his requirements, they left and caucused, came back and asked more questions, caucused more…. 2 weeks later, he still did not have a quote. “Why is so complex” he asked. ”Because we have only one process”, he was told.
A Director at a lighting fixtures company told me that “EVERY customer request had to be touched by his staff” before they could issue a quote. 80% of the stuff ordered was repeat stuff, or close to repeat. Wouldn’t it be a lot more efficient for him (and the customer) to treat it that way! “We have only one process”, he said.
With Frank Hecker’s permission, I am republishing his article – “What Sales Engineers do”. It explains roles in the quote-to-order process that date back to World War II. In today’s economic environment, we cannot afford the luxury of so many roles and so much complexity for every unit we sell. We need to manage the 80% repeat sales in an efficient way, and leave the complexity for one-offs and custom builds. Companies that offer technical products have a quote-to-cash process that is completely outdated, very expensive and is a big opportunity for financial gain. Here is Frank’s article -
What “Sales Engineers” Do
“Sales engineer” (sometimes known as “systems engineer”, or “SE” for short) is one of those unique professions made possible by specialization of labor in an advanced post-industrial economy. Simply put, SEs apply their technical expertise in support of the sale of complex technological products, typically computer hardware, software, and/or services.
Note that even though many companies use the term “systems engineer” to describe this function (and I myself used the term in earlier versions of this text), what I’m describing here has very little to do with the formal discipline of systems engineering that arose after World War II out of the Bell System and large Cold War military/industrial projects like SAGE and Atlas. (For more on this see the book Rescuing Prometheus by Thomas P. Hughes.)
I haven’t done any detailed research on this, but I suspect that the use of the term “systems engineer” to describe a sales support position originated with IBM, probably within the sales teams devoted to serving large military and aerospace customers. With the advent of computers to replace and supplement products like card sorters (the original “business machines” in IBM’s corporate name) the products being sold became so complex that the typical salesperson was unable to fully understand and explain them. (As the old joke goes, “What’s the difference between a computer salesman and a used-car salesman? Answer: The used-car salesman knows when he’s lying.”)
Hence the need arose for sales teams to include technically knowledgeable people who could assist the actual salespeople, particularly in complex tasks like creating proposed system configurations to meet particular customer requirements. I suspect that the term “systems engineer” was adopted for such individuals both because this work was done within the context of engineering the complete systems of which the computers formed a major part, and also because calling them “engineers” was seen as giving them greater prestige and credibility in the customers’ eyes.
If the use of “systems engineer” in a sales context did in fact originate at IBM, I’m guessing that it then spread from IBM to other computer hardware and software companies. (Many sales VPs at high-tech companies got their start as IBM sales reps.) At some companies the SE function was renamed to something else — “marketing support analyst”, “sales technical support consultant”, “sales support analyst”, “sales engineer”, and so on — but the nature of the position itself remained essentially the same.
SEs perform the following activities in support of the sales process:
- soliciting technical requirements from customers
- giving presentations on and demonstrations of products
- providing informal advice on what products might fufill the customer’s needs
- writing more formal documents such as proposals and targetted white papers
- serving as a point of contact for non-routine technical issues at major accounts
- assisting salespeople with the creation and execution of an overall sales strategy for an account
Some of the things that systems engineers do not typically do (except when there’s no one else to do them!) include
- selling products
- providing routine post-sales product support
- developing products
- providing consulting services for system design and integration
These functions are performed by other people and groups, namely sales representatives, technical support people, engineers/developers, and professional services consultants respectively.
The principal qualifications for being a systems engineer are technical knowledge in the appropriate domain(s), verbal and written communications skills, and the ability and desire to work closely with salespeople. Having these qualities combined in a balanced way in a single person is relatively rare; in particular, most people with technical knowledge prefer to be engineers and developers, and most people interested in sales prefer to be sales representatives. This leaves people like me to soldier on as best we can.
Frank Hecker
About the Author: Frank Hecker is Director of Grants and Programs with the Mozilla Foundation, a nonprofit organization promoting choice and innovation on the Internet through its support of the Mozilla project and related initiatives. Prior to joining the Mozilla Foundation full-time Frank was a sales engineer with Opsware Inc, supporting sales of Opsware IT automation software and services to the Federal government. He has also worked for CollabNet, supporting sales of CollabNet services relating to open-source and other collaborative software development, and for Netscape Communications Corporation and America Online, Inc., as Director of Systems Engineering for the Netscape government sales group in Bethesda, Maryland. At Netscape he was sales technical lead for the Netscape/DoD worldwide site license, the FORTEZZA, FIPS 140-1, and Netscape Security Services projects, and many other sales activities; he was also a key contributor to Netscape’s decision to release source code for the Netscape browser, and was appointed one of three Netscape Fellows. His professional interests include the technical, business, and public policy aspects of open-source software, information systems security, assistive technologies, and online education. He was the winner of the 2009 Catalyst Award for his work in promoting open source accessibility, and was named one of Washingtonian Magazine’s top 100 leaders of Washington’s tech world
. He blogs at <http://blog.hecker.org/>
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How I want to buy a car
Every five or so years, I shop for a new car. I hate car shopping. The haggling, the long trips to dealerships way outside of town, the hours and hours of waiting, punctuated by furtive whispers to my husband, “Don’t give in! Stick to our budget! But don’t tell them our budget!” and similar. But that’s toward the end of the process. There’s a lot of work leading up to it.
First I hit the Consumer Reports site to research cars. A subscription is just $5.95 a month, but it auto-renews so you have to remember to unsubscribe or it quietly chips away at your wallet forever.
I find the five safest vehicles according to my car type and year. When I say new car, I just mean it’s new to me. I like to benefit from someone else’s new-car depreciation, which is something like 25% the minute you drive off the lot.
Anyway, I get on several different car sites like CarsDirect.com and AutoTrader.com to look for my next set of wheels. First I have to pick make and model, then enter my ZIP Code, then there’s a long list of cars. If I want to, I can see the list from lowest price to highest. The trouble is, I want to compare five different models and several different years. I’ve got to select the same filters over and over for all five and then compare the info. continue reading »
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Arm your salespeople to make the sale
I was talking to an executive at Oracle, and he told me that CRM is entering a new phase. Salespeople are the revenue generators of a company. Current CRM tools have served the purpose of helping salespeople organize their customers’ contacts and manage the sales process and pipeline, but this isn’t enough.
Your salespeople are representing and selling your product. Customers who want to buy your product typically list a few things they want and look to the salesperson to guide them. The salesperson is their advisor on your product offering. The salesperson is expected to know the product and suggest good choices for the customer. Is your salesperson equipped to do that?
There was a time when life was simpler and products were simpler. The customer said, “I want a 17″ TV.” The salesperson could look at what he had stocked and reply, “I have a 19″ I can give you for the same price.” Wow! Done!
Today, even the best salespeople don’t stay at one job for long. They move, selling what sells. Training sales newbies on a product is a big challenge for companies, and the cost of the salesperson not knowing the product he’s selling is VERY HIGH. As many as four out of five quotes are lost because customers weren’t guided to a good product selection. You can fill this gap by arming your salespeople with tools and product knowledge that will help them advise customers effectively on your product. Your company needs salespeople to have that capability so you can make money on the stuff they sell!
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How many choice combinations does your product have? That depends.
Possible combinations
This is a question with several answers. The easiest answer is the least useful. The number of possible build combinations, or unique configurations, is easily computed by multiplying the number of options for each feature. For example, if your product has feature A with 3 options, feature B with 2 options and feature C with 4 options, then there are 24 (3 x 2 x 4) possible build combinations.
These numbers grow very rapidly. If you have 5 features, each with 4 options, there are about 1,000 build combinations (exactly 1,024). With 10 such features, the number of combinations is about 1 million (1,048,576), and with 15 features it is over 1 billion (1,073,741,824).
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