The Order Cycle

Separate different processes using the The Order Cycle by Shapiro

Chapter 10 p.4

I Ask

I sometimes feel that there is no coherent logic to all the activities in our company. Is there a method in the madness?

I Answer

All the activities in the company must be focused around adding value to customers and should be regularly measured to verify their contribution.

One can separate direct value adding processes from indirect or support processes.

Below are two examples that will clarify the difference between the two types of activities.

Example 1

Indirect value adding process

• Company Strategy processes
• Human Resources function
• Career Development process
• KRA process
• Skills Development Training
• Other activities focusing on making us individually and as a team more effective with our contribution

Example 2

Direct value adding processes

Direct value adding processes is best described by Shapiro’s Order Cycle and relates to products and services our customers pay us for:

1. Planning
2. Demand generation
3. Cost estimating and pricing
4. Order receipt entry
5. Selection and prioritization
6. Scheduling
7. Fulfillment
8. Billing and payment
9. Returns and claims
10. Post sales service

I Explain

Do you understand the steps in the order cycle in your business and your – as well as your teams – contribution to every step? What can you do to optimize every step and does it really add value to your customers?

I Advise

The elements or steps of the order cycle will typically fall into the urgent and important quadrant of the Time Management Matrix, whereas support services will typically fall in the Important / Not urgent quadrant.

Thank you to: HBS Professors Benson Shapiro and Kash Rangan