It’s a common misconception for early founders that all sales are good sales. If there is a misalignment between sales, finance and ops, the wrong sale can result in considerable expenses or missed opportunities. By implementing an effective communication strategy and building operational resilience you can avoid the wrong sales and grow and scale proportionately to your business capabilities.
Departments being siloed and conflicting priorities contribute to communication breakdowns that result in “oh crap” moments. A recent example comes to mind of a team who didn’t communicate which resulted in a costly sales deal.
I was working with a client whose sales team was working hard to close a deal with a large club account. Club accounts function differently than traditional retailers by buying in bulk at one time, versus the annual-long contract of traditional retailers. Meaning that for some, it’s a one-time opportunity, but if all goes well the club account will buy again.
Unfortunately, this client’s sales and ops team didn’t have an internal communication plan in place. The sales team won the account, but to the detriment of their business. Because there wasn’t a solid communication plan in place, the team experienced the “oh crap” moment when they realized that their current contract manufacturer didn’t have the capability to produce the quantity needed for the club account buy in addition to their current inventory demand. To get over this hurdle, the brand would need to invest a tremendous amount of time and money to deliver the inventory, or they risk losing not only the current but future opportunities to sell into that club account.
This is one of many examples I see repeatedly which reinforces the importance for brand owners to establish an internal communication strategy and make sure all teams are aligned on business goals and capabilities. Not only is it important for internal teams to be aligned but establishing consistent communication with external partners will build trust and can help easily avoid any “oh crap” moments like the example above.
By creating an internal communication strategy, founders can provide infrastructure, communication systems, and alignment so each stakeholder, and key departments have input and understands all that’s going on.
Ensure internal and external partners are on the same page in terms of business strategy and goals. Build alignment across the organization so the sales strategy is in line with the production strategy which ultimately ladders up to your business strategy. Review your business model and make decisions based on your target customer needs, reasons to believe, how you compete, etc. Focusing conversations on data and information helps keep things from getting personal and creates a cohesive environment where people can speak freely.
S&OP stands for Sales and Operations Planning, which is a mechanism that allows teams to gain alignment and focus on how to balance supply and demand.
Working with a retailer like Trader Joes is a perfect example of why you need a solid S&OP in place. Trader Joes can be more complex than traditional retailers. For example, they may order against an annual forecast, but won’t tell you the cadence of their orders, which creates challenges in the planning process. It may force a modified inventory management strategy to ensure the brand is servicing this type of account.
The unknowns require immense communication and coordination across the entire supply chain. Implementing a sound planning strategy based on reliable historical data provides accurate forecasting. And when combined with production partner alignment, so they understand volume and timing requirements, the result is the ability to consistently deliver based on order size.
Clearly define who needs to communicate with whom, when, and how. The quickest way to avoid communication breakdown is to create a cadence of regular touchpoints with key stakeholders to establish a two-way communication street across departments.
It’s imperative for sales to provide the right information to the ops team – what does the first order look like, what are ongoing needs, what is the inventory plan and velocity (units per store per week)? Sales should provide a clear view of demand for ops to understand the retailer’s needs and to create the appropriate inventory strategy.
It’s equally important for ops to relay capacity information to the sales team so they know what the business can and can’t produce. When good communication is established, sales can give more accurate product timing projections to retailers and avoid needing to go back and ask for more time.
Finance also needs to be kept in the loop to understand how it will impact cash flow.
Founders tend to know more about their financial status and their sales demand but are often less aware of their operations and supply capabilities. By bringing all departments together (operations, sales, and finance) through communication, the three legs of the business are more likely to be in sync resulting in operational resilience. Ultimately an internal communication strategy can lead to increased sales, eliminating waste and lost time, and minimizing rework.
About the author:
Paul Vilker, CSCP is a dedicated supply chain professional with experience in managing teams and driving project success in manufacturing, operations, planning, and capacity management and control. He's demonstrated leadership capabilities within the food supply chain and is passionate about seeking collaborative and innovative solutions to enhance the goals of clients, their teams or affiliated organizations.