Returning to Healthy Growth Li & Fung GNP Group MGT0650 Consulting Skills for Managers

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Returning to Healthy GrowthReturning to Healthy GrowthLi & Fung GNP GroupLi & Fung GNP GroupMGT0650 Consulting Skills for ManagersMGT0650 Consulting Skills for Managers

Project Final ReportProject Final Report

Class 2 – Team EClass 2 – Team EChan, Chiu Kit JeremyChan, Chiu Kit JeremyLao, Teng Chong KelvinLao, Teng Chong KelvinMau, Ka Ying AdaMau, Ka Ying AdaNg, Kai Li NoraNg, Kai Li NoraYuen, Melissa CieYuen, Melissa Cie

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Executive SummaryLi & Fung GNP Group is a major player in the gifts and promotion trading industry producing more than 30,000 sku per year and revenue over US$600 million. The Group has maintained their competitive edge over competitors by providing a wide breadth of products at competitive pricing.

However, as a result of the world financial crisis and the weakening of the consumer spending sentiments, many customers are more careful with orders in terms of quantity and price, growth has remained stagnant and sales targets not met.

With this in mind, the consultants looked into the business of the GNP Group through general observation, market research and communication with existing customer and have pinpointed the key weakness being the sales process. The production side of the business received strong commendations from customers and performed well according to management benchmarking against competitors and therefore have concluded that any cost associated with improving this aspect would not outweigh the cost.

It is recommended that the GNP Group should standardize their selling process and construct a data base for both product data as well as sales data.

Firstly, based on the research performed, there is evidence showing that the turnaround time on customer’s purchase enquiries have a correlation with the success rate of the sales presentation, and according to the sales team staff, the delay is generally caused by inadequate product data and time required to prepare showroom.

Secondly, based on discussions with numerous customers, there is a large volume of untapped revenue from existing customers for products which have been or could be manufactured by the GNP Group, and orders have not been placed simply because they do not know that the products are available at GNP Group.

Thirdly, there is a large percentage of products which are similar or duplicated across the 12 teams and such similarities are not converted into cost savings and price reductions largely because individual teams are not aware of other team’s products.

The sales standardization process would involve the creation of a sales presentation skeleton used across teams as well as preparing a generic showroom to shorten lead time required for sales presentation. Also, the GNP group should invest time and manpower to generate a database of product and sales data and strive to ensure the data remains up-to-date by generating KPIs to individual teams or efforts would be wasted. When all said is done, we expect that the combination of high success rate and increase customer penetration would result in the 30% increase in revenues.

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Situation

• GNP Group is a major player in the gifts and promotion trading industry

• 32 of customers serviced by 12 teams

• Provide a wide breadth of products (30,000 sku per year) at competitive pricing

• Generate over USD$600 million revenue per year

Li & Fung GNP Group is facing problem in driving business growth…

Complication• The growth in GNP Group has been stagnant in recent years. • After 2008 global financial crisis and the weakening of consumer spending

sentiments, the Group faces great threat from recruiting new customers and meeting sales target.

• As on Sep 2009, the total order has dropped by 6% and the total actual + forecasted sales has denoted 8% decrease vs. year ago.

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Gift & Promotions (GNP Group)Alice Lai

Executive Vice President

Gifts Group Promotions Group

Avon

USA

(GG

1)Su

sann

a N

g, S

enio

r VP

Catalogue/Direct SellingSusanna Ng

Senior Vice President

Family EntertainmentJoe Maher

Senior Vice President

Specialty Stores

Avon

Inte

rnati

onal

(GG

3)El

len

Ng,

VP

Publ

ishe

rs C

lear

ing

Hou

se (G

G1)

Susa

nna

Ng,

Sen

ior V

P

Bath

& B

ody

Wor

ks (G

G2)

Alex

andr

a Au

, Gen

eral

Man

ager

Dis

ney

Stor

es (P

DP)

Rita

Li,

VP

Crac

ker B

arre

l (PD

Q)

Alex

andr

a Au

, Gen

eral

Man

ager

JoAn

n St

ores

- H

ardl

ine

(GG

4)G

eorg

e Ye

h, G

ener

al M

anag

er

JoAn

n St

ores

- S

oftlin

e (G

GJ)

Elle

n N

g, V

P

Star

buck

s (G

G2)

Alex

andr

a Au

, Gen

eral

Man

ager

Coca

-Col

a (G

G5)

Satt

e Ts

ao, G

ener

al M

anag

er

McD

onal

d (G

G5)

Satt

e Ts

ao, G

ener

al M

anag

er

Oth

ers

(GG

5)Sa

tte

Tsao

, Gen

eral

Man

ager

Organizational Chart:

The merchandising teams are divided by customers and are highly merchandising driven, causing limited communication and sharing in-between different teams.

Source: 2009 GNP Group Internal Information

Hierarchical structure limits communication and sharing in-between teams.

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How can GNP Group return to healthy growth?

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48% of the customers are not satisfied with the current mediocre sales process

Source: 2009 customer opinion survey by Team E Consulting Group

Customer Satisfaction Level in Different Service Attributes

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Sourcing Capability

Quality of Sales Staff

Product Quality

Product Design

Production Facilities

Account Service

Product Cost

Sale Process

% ofCustomer

Service Attribute

Very Unsatisfied Unsatisfied Somewhat Satisfied

Satisfied Very Satisfied

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Observations Leading to Sales Process Focus

Based on the survey above we concluded that

1. Customers are generally satisfied with the production aspect of the business including production cost, design and quality.

2. Logistics services are not a deciding factor in vendor selection process for the customers, as most customers prefer to use their own in-house logistics team.

Findings discussed with GG4 GM and noted that management are of the same conclusion and is further substantiated by management’s benchmarking of production cost and delivery time against competitors.

Productions process is highly effective and the GNP Group have developed expertise in the area and therefore focus will be placed in the sales process.

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GNP should standardize the sales process in order to resume healthy growth.

Source: 2009 Benchmarking study by Team E Consulting Group

Relationship of Customer Satisfaction Rating vs. AnnualGrowth Rate of Consumer Product Industry

-10%

-5%

0%

5%

10%

15%

20%

25%

40% 50% 60% 70% 80% 90% 100%

Customer Satisfaction Rating

Ann

ual G

row

th R

ate

Greater customer satisfaction ratings result in greater sales growth!

Company ACompany B

Company C

Company DCompany E

Company F

Company G

Company H

Company I

Company J

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The marketing process is not standardized, causing long turnaround time for customer pitching.

• Inadequate resource to handle all customer request due to prolong marketing process • Customer satisfaction jeopardized due to variance in marketing quality


GNP Group should standardize its sales process in order to increase sales efficiency and capture 30% sales growth in 1 year.

Communication on products is inadequate, results in limited product offering & untapped sales opportunity.

Historical data is not readily available. Many sales opportunity are not identified and captured.

• Merchandisers could not effectively pitch to customers with existing resources• Costs savings resulting from product modification not captured• Cross selling potential not captured due to unknown products by merchandisers

• Sales or product experience not shared preventing effective sales analysis/projection • Extension of preparation time resulting from inadequate data• Ineffective budgeting and trend analysis due to scattered information

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Customer enquiries that are completed in 2 weeks have a much higher chance to close the deal!

Source: 2008 GNP Group (Division GG4) internal data – account servicing team

Average Success Rate

0

10

20

30

40

50

60

70

80

90

0 5 10 15 20 25 30 35

Preparataion Time

Su

cess

Rat

e

Presentations ready in under 2 weeks have above 50% chance of turning into orders

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Source: 2009 trade interviews with customer – JoAnn Stores

Marketing tools constraint reduces quality of sales presentation

JoAnn Stores VP of Sourcing & Product Development:

• “LF has no catalog for me to easily browse through for products that I would like my team to purchase.”

• “The turnaround time for product offerings is slow as compared to other services that LF is able to provide.”

• “The displays at the showrooms are very nice, but there is no product information that I can readily obtain and team always has to go back to vendors to requote the same items.”

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Showroom Preparation Time

0 5 10 15 20 25 30 35 40 45

Showroom prep time forGNP Group (GG4 Division)

Showroom prep time forcompetitors (w. Fixedproduct showrooms)

A shorter showroom preparation time will lead to more efficient and increased sales

Source: 2008 GNP Group (Division GG4) internal data – account servicing team

GNP Group has limited space for vast variety of product, so each time prior to customer visit, the showrooms are reset to showcase only relevant items. Competitors tends to have fixed showrooms due to their focus on narrower product offerings.

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Source: 2009 salesperson opinion survey by Team E Consulting Group

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Increase understanding ofcustomer need

Building professional image

Reliable internal knowledgefor reference

Significantly improved Improved Somehow the same

Impaired Significantly impaired

Merchandisers could not effectively pitch to customers with existing resources

• Salespersons believe better product information improves their sales performance

Q: Do you believe the following support can help to improve your sales performance?

Top 2 boxes: Over 55%

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Comprehensive product information brings about strong sales support

Salespersons:

• “If product database is available, I can easily obtain information about the product and vendor which are new to me so that I can spend more time on understanding the client’s needs and building relationship.”

• “With the help of product database, I will be more familiar with the product range available to our clients. A thorough product knowledge demonstrates our company’s professional and expertise in the industry, which significantly affects the decision-making of vendor choice of the clients.”

• “If I am provided with reliable vendor and product information, I can substantially improve my sales performance. Less time is spent on duplication of product type, assessment of vendor capacity etc.”


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19%

16%

0%

20%

40%

60%

80%

100%

120%

Product Modification New Product Development

% o

f Ne

w P

rod

uct

Co

st

Product Design ProductionQuality Assuarance Quality Control

33%

73%

Source: 2008 GNP Group (Division GG4) internal data – product development team

Significant cost savings resulting from modification of current product types are not captured

Cost advantage from modification products

with similar spec (~42% reduction)

Comparison of Product Cost Structure from New vs. Modified Products

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Modification of existing product types can be common

Seasonal Product Resemblance Distribution in 2008

22%

78%

Portion can be revised from existing product line

Portion required new development from scratch


Instead of developing new product from scratch, 78% of the items can be revised from existing product line!

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Cross selling potential for sales growth if GNP better understands its customers

Source: 2009 customer opinion survey by Team E Consulting Group

GNP Group's Sales Contribution in Top 10 Customers

0%10%20%30%40%50%60%70%80%90%

100%

Total of Top10

Customers

Customer 1 Customer 2 Customer 3 Customer 4 Customer 5 Customer 6 Customer 7 Customer 8 Customer 9 Customer 10

Sales Contribution by GNP Group vs. Other Suppliers

GNP Group Other suppliers

• On average, GNP Group contributes to 42% of top 10 customers’ total sales• Challenge – Further increase our contribution ratio through cross selling

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Incomplete sales/ product information hinders sales

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sales data Product data

% o

f To

tal

Missing piece leading to incomplete information and hinder the sales pitching process and business analysis

Sales and Product Data Availability in System for Division GG4

Source: 2008 GNP Group internal data – IT Department

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Inadequate date lengthens preparation for sales pitching

0

1

2

3

4

5

6

7

8

9

All from System Partly from System,Partly from other

sources*

All from othersources*

Av

g. N

o. o

f D

ay

s

* Other sources e.g. information obtained from other teams, from documents etc

+200%

+700%

Preparation Time Required for Sales Pitching for Division GG4

Preparation time will be lengthened if data are not promptly available in the system


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Scattered information leads to ineffective budgeting

and sales analysis

Top Team/ Managers

Data are partly input to the

system

External reports e.g. ranking

Staff from all teams

Catalogue/ Direct Selling

Team

Family Entertainment

Team

Specialty Store Team

Promotions Team

Customers’ survey/ feedback

Historical reports

I’m bombarded with information from various sources and have to spend tremendous time to consolidate them, what could make the target setting process easier?

Business analytical reports

Same happened to business/trend analysis. Fail to effectively observe business insights.


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Recommendation

Standardization of business need because:

1. Positive correlation between turnaround time and sales volume

2. Customer penetration not maximized due to inadequate resources available to sales

3. Cost and time savings not captured due to inadequate communications across teams

Conclusion• A standardized sales presentation and a sales

and product database to be created.

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Standardize presentation • A standardize sales presentation deck used across departments• A generic showroom stocked with highest selling products readily

available with additional area dedicated to customized products depending on customer enquiry

• Regular discussions between departments to inform counterparts of products and business updates

Sales and product database• Inclusive of all sales and products across all teams• User friendly search functions enabling easy access for users• Recognition function and grouping function for similar products• Sales forecasting function using sales of previous customers to

predict possible products that might be liked by new customers

Recommendation

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Recommended Implementation Plan:

1. Create a focus group led by GNP EVP and team heads to determine the classification criteria for database as well as key messages for the sales presentation and products for showroom. (1 week)

2. Appoint GG4 GM as implementation champion and two data entry staff to perform data gathering and data entry based on criteria previously determined. (1 month)

3. Trial run of data base and disseminate to all teams in GNP Group and follow-up with surveys for pros and cons and areas for improvement, implementation champion to aggregate all suggestions and comments and discuss with EVP. (1 month)

Implementation Plan

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4. Enlarge implementation team to gather and process data for the remaining teams of the GNP Group. (6 months)

5. Distribute surveys for pros and cons and areas for improvement and the implementation champion to aggregate all suggestions and comments and discuss with EVP and determine if any additional changes required for the data base. (1 month)

6. Engage external parties to write sales and products forecasting programs to predict purchasing habit of existing and potential customers. (2 months)

7. Ongoing updates of data, set up KPI associated with the database and require individual staff to ensure updating of sales and product data and tie to compensation to ensure staff would update data. (Ongoing)

Implementation Plan

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Summary

‘Deliver the right product at the right place at the right time’

Standardize sales process to further reinforce Li & Fung’s core value:

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Thank You

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Appendix

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Customer Li & Fung Vendors

Creation of Trend Guide

Creation of Sourcing Brief

Trend Guide Sourcing Brief

Review and communicate

on requirements

Arrange Samples & Quotation

Quotation SamplesReview Quotation &

Samples

Is Quotation OK?

No

Yes

Review Quotation & Samples

Is SampleOK?

No

Yes Yes

Orders Issued

NoNo

Is Sample OK?

Customer Quotation

Customer Samples

Consolidate forBuy Trip

Presentation

Yes

Is Quotation OK?

Process Time: 20 weeks

8 weeks

2 weeks

4 weeks

6 weeks

Appendix 1.1 Sales Process – Current Situation

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Customer Li & Fung Vendors

Creation of Trend Guide

Creation of Sourcing Brief

Trend Guide Sourcing Brief

Reviewon requirements Arrange Samples

& Quotation

Quotation Samples

Review Quotation &

SamplesIs Quotation

OK?No

Yes

Review Quotation & Samples

Is SampleOK?

No

Yes Yes

Orders Issued

NoNo

Is Sample OK?

Customer Quotation

Customer Samples

Consolidate forBuy Trip

Presentation

Yes

Is Quotation OK?

Process Time: 18 weeks

8 weeks

2 weeks6 weeks

Search inInternal product database

Prepare photo quotations & product details

Information Available?

YesNo

2 weeks

Appendix 1.2 Sales Process – Recommendation

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Appendix 2 and 3

• Please refer to the word documents for Appendix 2 and 3.

Returning to Healthy Growth Li & Fung GNP Group MGT0650 Consulting Skills for Managers

Documents

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