August 30, 2019

How to Increase Profitability by Aligning Sales and Operations with Stockpile Reports

Author: Stockpile Reports

When Sales and Operations Aren’t In Alignment, Both Suffer

Joe is thrilled. He just landed a huge contract with a major company he’s been working for months. This is a great win for him and his sales team who have been diligently and persistently working this lead. Excited, he puts in the PO for the order and immediately gets a call from operations, chewing him out for overpromising, informing him that they won’t be able to fulfill the order in time.

This is not an uncommon conversation between a sales manager and an operations manager.

The process of aligning sales and operations teams with management’s goals and expectations is often met with resistance, distrust, and frustration. Management wants to meet forecasted revenue numbers, passing along the goals to the sales and operations teams, but there is a major breakdown between sales and operations. For building material companies, this problem translates directly to their financials by way of mismanaged inventory and inefficient logistics.

Management counts on the sales department to sell enough product to meet or exceed their forecasted goal numbers. Sales relies on the operations department to fulfill orders quickly and efficiently. Operations relies on management to provide them with the resources and equipment to meet the demands of the sales team. In a perfect world, this process is cyclical, but in the real world, where departments aren’t communicating effectively, chaos in sues.

Mismanaged Inventory is the Thief of Profitability

Building material companies keep inventory on hand to fulfill sales orders, but oftentimes, they either have too much or not enough at any given time. A company is either wasting time and money managing inventory that they aren’t selling or they are coming up short and missing out on sales orders. Both scenarios contribute to the distrust and frustration between sales and operations.

When the sales department sells a particular product to a customer, operations is responsible for fulfilling that order in a timely manner. If the company has excess inventory, fulfilling the sales order isn’t usually the problem. The trouble happens when a company is carrying an excess inventory of the wrong material; a material that isn’t selling, but rather is sitting on the ground costing time and money and taking up valuable storage space.

On the contrary, when a company, running on lean inventory, receives an unexpected order, it isn’t uncommon for the inventory to already be assigned to another order, resulting in a shortage. In order to meet the needs of the sales team, operations “robs Peter to pay Paul.” They “borrow” inventory from another location or order with the intention of replacing it down the line. This drives up the cost of production because you also have to truck in the additional materials needed to fulfil the order. In an isolated, one-time scenario, it typically works out, but when multiplied infinitely, it creates operational chaos.

Mismanaged Inventory Creates Distrust & Frustration

When the sales team is forced to go back to a customer and tell them that they don’t have enough inventory on hand to meet their order deadline, it creates distrust between the customer and the company. Likewise, when sales must go back to a customer and say the inventory that they have on hand isn’t to spec, the customer may not trust that the company can meet their needs and seek out a competitor or worse yet, they could cause a delay from their false promise of fulfillment, causing liquidated damages.

Situations like these set perceptions that may not be a reality, but they are a symptom of a larger problem. Sales is perceived to be overpromising and operations is perceived to be under-delivering. Management wants to hit revenue numbers and is counting on sales to sell and operations what to produce and deliver. Everyone is pointing the finger at someone else, only magnifying the tension, distrust, and frustration.

How to Align Sales & Operations with Inventory Solutions

Aligning sales and operations isn’t the problem. Inventory is the problem. The lack of trust between sales and operations creates a cultural nightmare. Sales is over promising and under delivering and operations is inefficient, inconsistent, and unable to fulfill orders on time. No one is taking ownership and the result? Resentment, distrust, and false perceptions. The relationship becomes completely polarized and instead of being on the same team with the customer in mind, sales and operations spend too much time fighting each other instead of fighting for the customer.

All of This Could Be Solved with Near-Real-Time Inventory

Stockpile Reports believes that stockpile inventory management should be simple and precise. Companies should be able to rely on the data that they are given and make strategic business decisions based on that data. In the world of organized chaos, there is a future in near-real-time inventory.

If sales could tap into data that was in real-time, making sales and hitting goals based on data that was at their fingertips, it would eliminate the current frustrations between sales and operations. If operations knew what was sold and when it was due to be delivered, they could implement production timelines that could be forecasted well into the future. Unexpected and last minute orders wouldn’t be an issue anymore because the operations team would be more efficient, eliminating the consequences of mismanaged inventory. The sales team could confidently sell inventory, trusting that the operations team would be able to fulfill the orders.

If you are interested in solving your inventory problem, contact Stockpile Reports today. We will show you how Stockpile Reports can improve your business operations, aligning sales and operations teams with management’s expectations.