Originally published by Antonio Marco Ranucci on LinkedIn
“Three rules of work: out of clutter find simplicity; from discord find harmony; in the middle of difficulty lies opportunity.” – A. Einstein
Production and sales departments are probably the two pulsing hearts of an organization. This goes back to the essence of a firm: it buys/builds, transforms and then sells. Unfortunately, these two line functions do not always get along very well given the different goals they are often driven by. Extremizing the concepts, one department looks at efficiencies and consequent volumes’ maximization while the other is interested in customer satisfaction. This mismatch of interests can generate internal clashes and strategic misalignments that impact the business bottom line.
What this article could do for you
This article explores 3 items that can foster the collaboration between production and sales in order to maximize productivity without losing customer satisfaction:
1- a Segmentation Tool;
2- an S&Op Process;
3- a Systemic Culture.
Before going into the specific items listed above, we need to explore further this concept of diverging interests. In order to do so, here below we present the extremes of an organization culture driven by either one or the other department. What would happen if production or sales runned the show on their own?
A pure production-oriented company.
In this kind of organizations operations are driven by the purpose of maximizing productivity at the expense of sales variety. The minimization of waste and the reduction of machines’ downtime needs by definition long and stable production campaigns. On the other hand, it cannot tolerate short unordered manufacturing schedules (by ordered I mean output slots that take into consideration the impact of products’ sequencing on the industrial yields).
Generally these kind of companies implode in the long term for lack of customer retention. No news here, customers want to be listened to. The old saying of Henry Ford (“the customers can have the car they want as long it is a black ford T”) does not work very often in modern times.
A pure sales-oriented company.
In these organizations sales departments are oriented to always say yes to their customers. Maximizing their satisfaction with a minimization of the churn rate is the only thing that matters, not considering what this implies for production departments in terms of inefficiencies and loss of output yields. Short and customized production campaigns are the ones loved in these kind of organizations. Alerts of inefficiencies from the production department are joyfully ignored and the business gets submerged in growing waste of time and resources. A pure customer oriented company has more chances to survive, however it can also quickly lose sight and control over its contribution margins. The disequilibrium between what it gives to the customers (in terms of cost to serve) and what it gets from them (the net price) puts an end to this kind of organization.
“It is easy to love your friend, but sometimes the hardest lesson to learn is to love your enemy.” – Sun Tzu
The 3 Items
a) Customer Segmentation Tool.
Both departments need to speak the same language in order to understand each other. Isolated priorities, on the other hand, bring the dialogue to an abrupt end. Take the example of credit card companies: they have a clear definition of who is a gold, silver or standard customer. By aligning on a common definition, all the departments of the company are able to provide a consistent and coherent customer experience. Specifically, production departments will know when to say no to production campaigns that are not worth the effort (in the long term these rules should be codified).
b) An S&Op Process.
Having a ranking, thanks to the segmentation, will solve most of the clashes. However, exceptions may occur. For example, production lines are full and we cannot accommodate a gold customer (which is kind of imperative). Scheduling forecasts, reserved production slots, consignment and on-call stocks are other kind of solutions, but let’s say that nothing works in an immediate and proceduralized way. S&Op meetings bring together the two departments in order to discuss these cases and prepare the ground for a solution both handling the production and the customer relations. The only rule here is to be extremely rigorous in preparing the meetings. The agenda will need to be clear, rigid and exhaustive around the quantities to accommodate.
c) a Systemic Culture.
Often organizations are immersed in cultural feudalism, with every unit developing a clan attitude and a “us against them” philosophy. Developing a collective ambition is part of the game and cannot be ignored. Every email, meeting or informal communication will need to leverage this ambition. How to develop such a culture is part of renowned business literature.
To sum up, we need the two pulsing hearts of our companies to beat in rhythmic harmony and this article explores three items that empower this collaboration.
And you what do you think?
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Thank you for reading!
About the Author
Antonio Marco Ranucci is a Controlling & Process Mapping expert having strong financial and operational consulting background in several Industries with European agencies, public entities and banks. His main experiences are in overall transformation programs, revenue management, process reengineering, profitability analysis and controlling frameworks.With excellent managerial experience gained from several missions, Antonio has proficient command over English, French and Italian languages.
Author Image Credit: Antonio Marco Ranucci