Sales Contract Pain Points
More often than not, Codarex pricing engagements are to support pricing during the contract negotiation lifecycle. However, we have moved from a singular pricing view to a holistic, entire process view. Corporate leaders have rightfully determined that unless fundamental processes and resources are re-aligned, then the full ROI on better pricing will never be realized. Our most recent engagement with the International Air Freight Group at UPS, re-emphasized that for large global company departments, gaps in sales processes exist and different groups can implement different strategies and operate below the radar. We found effort to standardize the contract process happening independently across the world. Our role was to consolidate these efforts and to take the current state to the next stage.
Life of a Contract
The contract negotiation cycle can have many stages with interactions from various resources and departments. Typically Contract Management software does not address the workflow, but handles managing the different versions of the contract state. Furthermore, it may NOT save the pricing iterations but only the final version or state. Pricing start and end are important to update models and to understand price sensitivity to different products for a customer in a particular segment.
Codarex Sale Toll Gate Framework ©
The contract negotiation cycle can have many stages with interactions from various resources and departments. Typically Contract Management software does not address the workflow, but handles managing the different versions of the contract state, and final implementation of the contract. Furthermore, it may not save the pricing iterations but only the final version. Pricing start and end are important to update models and to understand price sensitivity to different products for a customer in a particular segment. Firms will develop ad hoc processes to support quoting. This of course will lead to disconnects due to inputs from many departments and different users touching the quote. In addition, there is no accountability since user information is not tracked.
These issues combine to result in sub-optimal contract performance and resource utilization. What a firm needs is to create structure, process and accountability in order to maximize quote throughput, be more efficient with resource use, and track real-time contract profitability. Enter a contract workflow software, to address the technological aspects. However, a firm must now traverse the path from today’s hobbled quote processes to a more streamlined future. Codarex has developed a framework based on Business Process Management and Modeling to navigate to a new workflow.
Codarex Sales Toll Gate Framework, in a nutshell, maps quote tracks, determines decision points, establishes different stages and activities within stage, attaches activities to specific resources, and lastly leverages technology and business intelligence to provide analytics to support decisions at every decision point. Every engagement begins with an assessment of the current state. Creating a clear picture of the current state helps, firstly, identify the processes that the firm does well, and lastly, creates a starting point to for Agile Delivery iteration planning for the Sales Toll Gate Process. Furthermore, the current state assessment will also outline how resources are leveraged across different quote types, customer types, product owners.
Quote Tracks
In general, most customers have three major quote tracks: Full Track for RFP/RFQs, Small Value Track or quick quote, and Fast Track for spot quotes. These quote tracks, more often than not, align with the different channels that a customer receives quotes: direct through sales, from a web channel, customer call center, EDI and other minor channels. The RFP track usually requires considerable resource support from sales, pricing, supply chain, and possible engineering design. Typically these contracts are large in number of line items and volume, and intricate requiring managers and review teams, and take considerable time.
Small Value Track is typically for smaller customers that require new quotes, updated contracts, adding new products to the contract.
Lastly, there is always a Fast Track corresponding to spot quoting. There may be even be cases where you have customers on a large RFP contract but who still use your spot quote channel(s) to get better pricing.
Toll Gate Stages
At the very least, a quote track should have 5 stages:
- Qualify the Sales Opportunity
- Create Proposal
- Close the Deal
- Contract Handshake
- Contract Management
Qualifying an opportunity is necessary to ensure firstly, that the correct team gets the correct opportunity; secondly, that a quick decision on whether the opportunity is a good fit is made; and lastly, create plan to make the quote package complete. Creating a Proposal the stage where a RFP/RFQ is translated in the firm’s products and services. Typically, ,this occurs in the company’s Configure, Price, Quote (CPQ) system. There should be a profitability analysis, and the quote assigned a status, such as must close, need to close, nice to close, growth, etc. Close the Deal comprises the iterations to try to come to agreement with the customer on pricing, support, and other T&Cs. The Contract Handshake is the stage where final pricing is available. Furthermore, T&Cs are finalized, and other contract negotiations. At this point the contract is ready for review by the Financial Group and ultimately loaded into the contract management system, pricing system, and order management. The last stage Contract Management is ensuring that profitability estimates are tracking, and if not determine any actions to rectify the issues.