Bridging the gap between supply and demand is the prime objective of any business.
When mass manufacturing was at its peak, demand was generally higher than supply and options for customisation were limited. Standardisation was key to maximising efficiency. Henry Ford’s famous quote, “Any customer can have a car painted any colour that he wants so long as it is black” encapsulated this approach.
Today, customisation is becoming increasingly common and there is a constant tug-of-war between the sales and production teams. The success of today’s manufacturing organisations depends on managing this effectively.
The key is to understand how value is generated in a company, and how it flows throughout the supply chain – from the procurement of raw material to the end product. Wendy L. Tate, Diane Mollenkopf, Theodore Stank and Andrea Lago da Silva discussed some of the key traits of companies that have been able to successfully manage this perennial problem in their article, Integrating Supply and Demand.
Bringing down the barriers between sales and production
One of the most common barriers that hampers interaction between sales and production is the failure of managers to understand how their area affects the company’s overall efficiency and profitability. Data, even when it is available, is often not shared across the organisation.
Key performance indicators (KPIs) for production and sales are often not interrelated, resulting in each department working towards optimisation separately without keeping the overall objective in mind.
These factors cause each unit within the company to have an insular focus rather than concentrating on the overall success of the organisation. This is especially true in the case of organisations that are dependent on suppliers for their end product. Effective information sharing can be the cornerstone to their success.
We came across an example of this during our work with a paper manufacturer. Once the relevant people understood the impact of variation in production volumes of process performance (for example excessive changeovers), the sales team became more aware of the impact of their work on the overall value to the organisation. This then became a catalyst to optimising production.
Retail: The new catalyst of organisational efficiency
Retailers have now become a key party in driving organisational efficiency among manufacturers. In their article Rebuilding the Relationship Between Manufacturers and Retailers, Niraj Dawar and Jason Stonelli looked at how major retail players like Walmart and Proctor and Gamble control market access and influence consumer behaviour.
However, manufacturers could stand to benefit from this relationship. Major retailers collect huge amounts of data regarding customer buying patterns, which presents a great opportunity for manufacturers – if they could find a way to access this information and leverage it to modify their production patterns.
Changing the way your departments interact and the way your company interacts with both suppliers and retailers requires organisation-wide behavioural change.
In organisations where sales and marketing teams work closely together, customer retention rates go up by 36%, leading to a 38% higher rate of sales close rates. In other words, breaking down the silos between the various departments within an organisation not only leads to better morale, it also results in higher sales and a shorter pipeline.
Ultimately, to enable the effective sharing of information, identify the organisation’s value drivers and create systems and processes based on these. Then, create a culture of discussion and analysis within the organisation – this will empower all departments to focus on improving organisational efficiency and driving customer satisfaction.