All quiet on the Bad Front

I confess. I’m a bad guy.

While my colleague Håkan is a really experienced demand planning strategist originating from IKEA and with decades finding the right way of managing supply chain; I’m the one that comes from the Sales Side – the home of the bad boys.

I have always seen “supply chainers” as very clever people that are not only extinguishes fires, but also handles the sophisticated supply chain tools with excellence, the huge data volume, the simulation queries or multi-colored graphs without hesitating what’s right or wrong.

They always have total control over the delivery process, the suppliers, the Capacity. They can predict the future just by one-clicking a button providing my management team solid, fantastic overviews illustrated in gauges and trend diagrams.

They are telling the truth. They have the facts. They know the way things have to be done.

The supply chain people are, honestly, the good guys.

Well.

It’s not strange they become angry when the bad guy comes into the picture saying he neither sells the red truck that was planned, nor the green one. But he will sell twenty more mountain bikes every week, even if the plan was only five.

Maybe he will sell the mountain bikes, it depends. It should happen next week or next month, the probability is 99%. Which is changing to 10% just a few days after the original clear statement of 99%…

You’re getting it. It’s like planning for a ride to the moon, but the people that will drive the starship only have driver’s license for a Volvo.

Like Håkan said, if you don’t have the people onboard, there is no sense planning the details. In many ways, I can say the sales people don’t have a clue what the supply chain are planning. They are definitely not onboard. Why?

Let me introduce the Bad Side.

Of course a sales rep has goals, even in detail. It can be like this:

–        One red truck per week

–        Two green ones per week

–        Five mountain bikes per week

But the goals seldom control that this will happen. Sales people still go for opportunities they love, not the one that follows the demand plan and they are in most cases measured by revenue alone, doesn’t matter what they sell. And they often get more appreciation when they exceed their goals rather than meeting the goals on target, even if the supply chain then has to re-invent their selves to manage the increase of a product or business area volume.

Sure, many enterprises today have a sales process, with checkboxes to complete, just to be sure they go for the right opportunities and to predict the sales pipeline volume. However, very few companies have the communication to supply chain in place, in order to match sales pipeline to the demand plan and vice versa; to get input from supply chain to the sales organization.

By this lack of steering, it’s not surprising they are not “in sync” with supply chain people’s sophisticated plans – the plans are not in the same language!

The sales guys often tell they cannot sell that or that; the market is changing, the competition is harder than expected and so on. Well, that can be true. But it shouldn’t be a surprise when it comes to September or October – it really should be discussed from Day One! It’s much easier to catch up small deviations in February or March, when the alarm noise only is a whispering sound, than the ear-blowing whistle later on.

So, some advices:

  1. Create an action plan that tells the sales rep what to sell and when
  2. A sales process that secures actions will be done in the right order
  3. Translate the demand plan into sales language
  4. Consider not to start sales processes that wouldn’t be finished within the time frame of your goals

Keep up communicating and try to be as good guys you can, Sales people!

Forecasts are not about the number

I think there is a misconception when it comes to Demand Planning and Forecasting. I’ve done it for years and I realized the error in my thinking. I was caught up in the illusion that if I worked hard on my forecasts, if I set the right parameters, if I weeded out inconsistencies, my forecast will become better. I was soooo wrong. The problem is in people, people do not act the way you want unless you tell them how to act (and even then they don’t). 

My best and most used quote when teaching others how to forecast is

“The best way to predict your future is to create it!”

–  Abraham Lincoln.

It says it all. And it is not about securing 1000 products, It’s about the 10 you hang your strategy and your profitability on, these are the ones that are the future you are trying to create.

I remember sitting in discussions with sales leaders about these 10 heroes and how they would get more room in the catalogue, how the price investments will be tuned to support them with lower prices, and so on. Our forecast was sound, and based on good statistics, a proven algorithm and solid qualitative input. Then the catalogue was released and…nothing happened, no dramatic increase. Why? The guys and gals on the shop floor had no clue that there was a focus on these articles. They had been given highest priority by the supply chain to sell out some other 10 articles because there was an over capacity in production due to that those articles where over forecasted last year (or we would lose money). My forecast was now crappy on 20 of my biggest articles (10 under performing and 10 over performing) and eyes were on me for making a poor forecast. What do you think happened a year later?

If the sales organization had been clear on its priorities we could have made money in both last year and current year sales. If the WHOLE organization had been acting on the same prioritizations, we would have met the forecast. It’s all about communication.

So when talking about forecasts and how to increase forecast quality, remember that outside your structured systems there are people

Forecasts give companies the probable outcome of the future, sales plans secure that the outcome is the way you wished!

Sales strategy, do or die!

Why do I need a sales strategy?

If you don’t want to risk walking down an uncharted road, ending up in a dark unfriendly forest ultimately leading to the death of your company. A little dramatic maybe, but you get the point.

I read a good article by Stuart Harman. These are his words:

“Picking the “wrong” opportunities, overstretching resources, both organizational and financial, and taking your eye off existing business can all be damaging consequences of not having a systematic process for analyzing and selecting new business opportunities when they occur.

Periods of rapid growth can be just as confronting, and potentially damaging, to a business as an economic downturn. When multiple opportunities appear an executive team needs to give itself the best chance of “picking the winners” and maximizing its returns. In order to achieve this, there are some key considerations that executives need to be mindful of when analyzing opportunities.”

Stuart’s five steps to avoid this are:

  1. How does the opportunity fit with the organization’s strategy? Will it support the company’s chosen financial imperatives (growth, profit, cash, increased shareholder value or acquisition/divestment)?
  2. How does the opportunity leverage existing organizational capabilities and assets? The further an organization moves from its current sphere of business operations, the greater the risk to its success. If the opportunity requires a business to develop or bring in new skills, operate in a new geographic location, or trade in a new industry sector then the risks to success increase.
  3. What is the opportunity worth? What return will it bring and over what period? Are there also less tangible benefits associated with the opportunity such as positive publicity, marketing or strategic considerations?
  4. How much of the organization’s resource will winning and delivering the opportunity consume? Will it require key people’s time, bottleneck resources and/or cash? Is capital investment needed? Will it disrupt current operations? Will it cannibalize any of our existing business?
  5. What is the timing of the opportunity? Can it be secured next month, next quarter or next year?

From a sales strategy point of view you will cover the first 3 points.

Points 4 and 5 are more operational and come down to how good your internal communication is. Integrated systems make the communication more automated and give you the possibility of finding and compiling information from different parts of the company. This also requires that the sales process has a clear and structured approach to visualize what is happening in the pipeline, preferably in a CRM system.

A sales strategy will not resolve all your issues. For sure, but you will have the base to prevent you from wondering too far off the beaten path, you will be making quicker descisions  and you will save valuable resources. You can early in the opportunity ask “YES” and “NO” questions against your sales strategy and if the answer doesn’t fit, toss it!

Why is it so hard to set a clear sales strategy that is easy to understand and easy to follow? All, or at least most companies, have a strategy. Why not just write a sales strategy based on this?  It will not work, that’s why. You have to look the three preceding elements that formed the strategy: Vision, Goal and Objective.  Add the 7P* model to this and you’re rocking.

Once you have your sales strategy, devise a sales plan connected to the elements of the 7P model. From a Sales Management point of view, your areas of development are in People and Process, the other five elements are only areas where sales can give input and help devise plans for other parts of the company, you are not in control.  Your plan should contain the following:
State the current situation:
People, Process, Product, Price, Place, Packaging and Positioning
State the wished position:
People, Process, Product, Price, Place, Packaging and Positioning
State actions to get there:
People + Process + Tools & Systems
State the timeline:
What happens when?

Once you have got all this work done the real work begins, getting the people in the organization to adopt your strategy and plan. Repeat, repeat and repeat. Then follow up, give feedback and revise your plan as you go along.

Simple? No.

Necessary? YES!

*7P: People, Process, Product, Price, Place, Packaging and Positioning