Why is Lost Order Analysis important for Organization?

Keeping continuous order pipeline is one of the healthiest indications of the organization. Even though ensuring order pipeline is perceived as accountability of marketing or sales function, it is actually cross-functional deliverables. 

Typically in a medium size organization, the following functions involved in order procurement process

1. Marketing or customer relationship 
2. Sales 
3. Engineering & 
4. Finance / Cost estimation 
5. Business head or pricing committee

Order procurement process indicates the speed, flexibility in decision making, teamwork, cost competitiveness and disciplined approach of the cross-functional team and management. One of the analysis indicates the organizational speed, decision making is "Lost Order Analysis."


What is meant by Lost order Analysis?:

Even though Lost Order Analysis is reactive, it analyses the reason for losing the prospective customer order. The reason could be a technical reason or regret from a technical perspective, pricing issues, delay in response from the organization, perception of the customer and so on.

This analysis will give clarity of why the organization is losing the potential customer's order.

What are the parameters to be analyzed? :

As said, this is cross-functional deliverables, and the business head must review the cross-functional team on the following parameters and the gap 

1.No of potential customers asked for queries  Vs. No of queries responded on time
2.No of quotes responded Vs. No of quotes converted into a sales order
3.Reasons for losing the potential orders

this analysis will give an insight about the organization on the following 

1. The effectiveness of marketing function to identify, grasp the opportunities
2. The cross-functional effort in ascertaining technical, commercial feasibility on time
3. decision-making ability on pricing 
4. Speed in responding and followup with prospective customers
5. Cost & Quality competitiveness in the market from customer's perspective


How frequently the organization needs to do  Lost order Analysis?

The frequency depends on the industry type, customer 's profile, lead time to respond. Generally, we suggest to our client to do the lost order analysis at least once in a quarter, as it is a reasonable time frame to understand the losses.

Role of business head:

The role of a business head is critical to conducting lost order analysis reviews as typically the functions point each other for losing orders and most of the time from our experience, the organization losing the orders due to both strategic and operational reasons.

The frequent review by business head will help the organization to improve the policies, business processes and of course to improve sales turnover of the business.

For example, when we initiate this analysis in one of our client, the team had realized that the majority of the orders lost due to High pricing. When we did deep analysis on the pricing, the cause identified was on the "cost estimation method" in which "lot size" was given overemphasis while costing in engineering function as well as at business head level. Once team identified the mistake and policies were framed on " lot size" in costing. After the corrective action,  we could see the reduction in the quote value and subsequently order conversion rate was increased significantly. 

The point is as a business head, if you do the lost order analysis frequently along with your cross-functional team, you will get a lot of insights about your order procurement process, and you can improve your business turnover.

 Also, this type of analysis will improve your cross-functional working cultures towards speed on decision making and execution