Theory of Constraints Handbook - James Cox Iii [406]
In summary, both Ford and Ohno followed four concepts (from now on we’ll refer to them as the concepts of supply chain):
1. Improving flow (or equivalently lead time) is a primary objective of operations.
2. This primary objective should be translated into a practical mechanism that guides the operation when not to produce (prevents overproduction). Ford used space; Ohno used inventory [Goldratt uses time].
3. Local efficiencies must be abolished.
4. A focusing process to balance flow must be in place. Ford used direct observation. Ohno used the gradual reduction of the number of containers and then gradual reduction of parts per container. [Goldratt uses buffer time consumption]
Improving Flow
Our question was, “Do these concepts apply to the sales funnel management environment?”
The “work” flowing in the sales funnel is sales opportunities. How important is it to ensure opportunities flow with as few disturbances as possible through our process? Just like in production, delays in flow translate to longer lead times. In both environments, longer lead times means poor service to clients; it means deferred income; it means some of the entities flowing (be it work orders or sales opportunities) suddenly become urgent, and so on. In sales, just like in production, delays in flow often entail higher cost (be it work-in-progress [WIP] inventory or sales expenditure).
On top of the implications on cost, it is commonly known that when the system is clogged with WIP it gives rise to quality problems (masking them and making them more difficult to manage). In essence, the same goes for the management of sales opportunities. Delays in flow of opportunities typically entail quality issues, as salespeople and sales support functions need to deal simultaneously with more opportunities that are not flowing smoothly. It is apparent, therefore, that all the reasons why flow is important for production apply to the management of sales opportunities as well.
However, there is one striking difference. As a matter of fact, in sales, flow is of much greater importance. Unlike in production, the longer a sales opportunity is delayed in a certain step, the lower is the probability to win this opportunity. Moreover, when opportunities are not flowing, more time and attention are required by the salesperson or the function dealing with these opportunities. Try to imagine that in production the longer the work order is in the queue, the longer the touch time becomes. In sales, this is the reality. The attention given to delayed opportunities is at the expense of bringing in and following up on other opportunities. Flow, therefore, is certainly a primary objective when it comes to the management of opportunities in the funnel.
What about the second concept of supply chain?
Preventing Overproduction
The second concept (preventing overproduction) is known by our production people as “choking the release” (not releasing work to the floor until a certain time—the buffer—before its due date). The underlying assumption is that having too many orders on the floor creates jams, masks priorities, and disrupts the flow. Is this relevant to the sales environment? Let’s examine the ramifications of having too many open projects. Having many open projects means that every resource involved in the sales process is simultaneously responsible for performing tasks across multiple projects. When a resource is working on many projects, bad multitasking is unavoidable; the resource jumps from one project to another without really advancing any of the projects. When different resources need the inputs of each other to complete their tasks, bad multitasking intensifies. To complete the task, one needs the input of the other (which, for example, can be a designer, a buyer, an account manager, or the client), but since the other is not available (busy on another task), the first resource jumps to another task. When the second resource becomes available, the first one is now busy on the other task, so the second resource jumps