How I learned about the grey in life, Part 4

When implementing change you can reach different results depending on how you go about putting the change in place. Change happens everywhere and all the time. I wrote a blog in Swedish about change on the topic that even if you are ready for change, other people around you could have lost a loved one or happened to get on the wrong bus this morning. See the individuals. There is no such thing as a factory worker, an economist, a stock broker, a sales rep, a demand planner, they are only individuals.

This time I am adressing the change process it self. Change can be small, like when your favourite restaurant changes the menu, or it could be a sales process implementation. It could be a short change cycle, like when you decide to cut your hair, or everlasting change like an S&OP implementation. Change is a part of life. For me change is the spice of life. I have small children and my life consists of a constant flow of small changes and therefore everything is a turmoil, in a fun/sucking the life out of me kind of way (people who have grown children often look back and say that these where the days). Without change we don’t challenge ourselves and we don’t learn. 

Change done in the wrong way or change just for the sake of change is a real energy drainer, for all parts involved. If you put alot of work (and money) into making change happen, it is a real waste if you don’t reach your destination. This is why it needs to be handled in a good way

When I learned how little I matter

It has been some years since this happened, and it still haunts me. I hate to fail, but I did. It was my lack of experience and spirit and wanting to do better that dug me a hole to fall into.

I was the in store logistic manager in a medium-sized IKEA store in Sweden. My staff consisted of 3 administrators and a warehouse manager. My warehouse manager had 7 contracted employees and 12 part-time employees under him. Our budget was tight and our goal was to secure that the store was filled to the brim and that it was neat and clean when we opened for our customers. So, no refilling, no empty pallets, no garbage and no forklifts when the first customers arrived. Great principle, a huge undertaking!

The decision to get this rolling was the start of the mess I later found myself in. My biggest problem was to get a schedule to balance how many heads we had, the total budget and the required amount of staff need in place at any given time during the 7 days of the week. If I took my 10 contracts and matched to the budget I barely had any extra hours left for the part-time employees. If I tried to create a schedule for the year using my 10 contracts, placing them to man all the positions, securing all the work that needed to get done, I could not make ends meet. I was missing about 4 heads in any given week, not to take in account our peak periods when I could easily need another 4 heads. I did not want to fire anyone (I could not really for legal reasons), but it was clear to me that we could not do this with so many full-time employees. At the same time, I had committed to make this work.

This required my warehouse manager to work every morning driving a forklift and later in the day was part of covering for coffee breaks and lunch. He was never available for any planning or to sit with the issues himself, so I helped him by stepping in and coming with excel sheets that would calculate schedules and they could even simulate changes (I’m good at excel). I also negotiated some contracts with the other departments creating two half time  from two fulltime employees. I stepped in and changed the layout of how the refilling would take place (where to put the pallets, how to unload more efficiently, how the cooperation to other teams worked, where to stack articles, you name it). I found lots of small changes and the schedule managed to squeeze a little bit more out of the team. We met with the team and presented my suggested changes and with only a few comments to the changes I said that we will start immediately. My warehouse manager was still fully occupied by the workload, so I even stepped in to support (and to show some solidarity) since I can handle a forklift. While I was active in the mornings I could monitor what was happening and I could comment on performance and support the staff in how the new way of working was supposed to work. I worked myself to the bone, from 5 am to 6 pm (8 pm some days).

During this period I lost sight of what I was trying to change. Operational issues, disgruntled employees, budget problems, quality issues, and so on, all landed on me. I had become the warehouse manager and in store logistic manager all rolled into one and it was getting us no ware. Finally I gave up, caved, chickened out, lost the game, call it what you want. It was not manageable. Did I mention that I hate losing?

Did I change anything? Yes, some of the routines stuck and there was improvement in some areas. Did I manage to meet the goals and hit the budget? No, I failed. And that’s just it I failed. I did not reach anyone to get acceptance of what I was trying to get done. It was basically my plan and I drove it.

Lesson learned

Since then I have been a part of successful change projects and I learned a lot of change management theory as well.

Stages you need to pass in order to reach acceptance. Your level of energy (regressed or acting out) is on the lateral scale and the stages you must pass or on the horizontal scale.

Change is driven by communication and motivation not good ideas alone. In order to achieve change you need to take the following into consideration:

  • Don’t change everything at once, no matter how tempting this is, that will only prolong the process and is a great recipe for failure
  • All managers need to be ahead in the change cycle, in acceptance, so they can support their people where they are (if both managers and co-workers are in the Immobilization phase, you’re in trouble)
  • Give people time to reflect on the idea of change (the pure fact that there will be change) before you start implementing it
  • Respect individuals, everyone handles change differently and will regress or act out differently (I have been yelled at a few times)
  • Never overstep managers, they have the responsibility to do the job and know their teams (connects to the previous point)
  • Involve people in the process, you need some early adopters that can speak within the ranks about the benefits of the change
  • Set goals that can be measured in order to provide feedback on the progress (KPI’s and OPI’s are great support, done right, we bloged on this earlier)
  • Ask for help, if the change is not going the way you expected, turn to your colleagues to find a way to move things along
  • Communicate, communicate, communicate! Tell people are we, where have we been and where are we going
  • Allow people to speak out and address their input, or you have to take care of rumors or bad seeds sown in your change project
  • Land one change before you throw in the next one

Another lesson I learned is that you can’t always fix a problem you did not cause. I do not consider a problem solved unless it never comes back again. My biggest problems kept coming back because they were created by central planning and I was sitting on the top of the iceberg, so I could only relieve the situation, not resolve it. This is a big reason why I later started to work at IKEA’s main office in Älmhult. By revealing the true nature of a problem you are much better at finding ways to deal with the issues.

If I could do it all over again, I would probably change everything I did, but that’s not a luxury we have in life, I’ll just have to live with my actions.

Making Sales happen, not happened.

In a recent blog post I pointed out some appropriate metrics to secure overall performance on a strategic level; the KPI’s (Key Performance Indicators).

These numbers are often followed up monthly or quarterly. However, to control you are on track in Sales this is not sufficient. Obviously, the KPI’s are mostly measured as history since the process stage “Order” often is involved in these figures.

While KPI’s are controlling what has happened, you also need to secure that it really will happen. That means you have to check earlier in the process and find numbers to follow that mean something if they are above or below than expected.

These numbers are called OPI’s – Operational Performance Indicators. Apart from a KPI, which would be connected to a strategic goal, an OPI is on operational level and connected to behavior. Since a certain behavior is performed all the time, all days in the week, you need to manage people’s predestinated habits. If the habits are not in line with your business targets you also need to manage change. A well-defined OPI would include change management as well as the metrics, since the deviation from the desired metrics may be used to perform change management, in purpose to achieve the KPI’s and the strategic goals.

So, to secure that your sales goals will happen, you have to state the metrics on a day-to-day or week-to-week level. An OPI is mostly coached from a sales manager to a sales representative (sales rep).

The OPI’s we see as appropriate to measure from a sales perspective are:

  • Weighted hitrate
  • Order value per sales meeting
  • Number of sales meetings per week and sales rep

Weighted hitate

In a previous blog post I discussed to use the Hitrate as a KPI. Definitely this is one of the most critical metrics in your entire sales organization, since it tells a lot about the efficiency in a sales organization or sales individual. With that in your hand, you are able to dimension the size and set the structure that is needed to achieve your long term goals.

But can you trust the figure? If not, it has no value at all.

Let us explore if we can find a way to an indicator you can lean on – in bad and good days.

The complexity starts when a sales rep often submits more than one quotation for the same opportunity. It can be a variant such as a low budget alternative along with the recommended proposition or another alternative, such as first stage and second stage of a project sale. Therefore it may be difficult to determine an exact value on this metric. However, a more real “weighted hitrate” may be derived. Usage of a sort of “cap” to which different quotes are belonging to – often named “Opportunity” – may be a solution. However, you then need to determine which quote sum to put into the opportunity; the recommended or the budget alternative (to be safe). The problem persists.

My recommendation is instead to establish a more accurate value – a weighted hitrate – which also can be used as a change driver, because it affects the entire sales process and the behavior of the sales reps driving that process.

You may say that it is not necessary to know exactly what the hitrate is – just measuring the same way over time. Indeed, this is a correct statement, but if you do not know the behavior in this stage in more detail, it’s harder to change to a more efficient way of working.

There are basically two ways to produce the weighted hitrate;

  • Method A: by investigating how many quotes that are linked to a specific customer
  • Method B: by measuring something else in relation to the number of orders a sales rep lands

Method A is easy to obtain from the “back-end systems” like CRM systems, by asking a simple question to the database: How many quotes are connected on average to the same customer in the expected time interval – the sales lead time? Divide the number with the total accounts that has one or more quotes connected and you get an average factor of how many quotes are submitted per active account. Use the factor to calculate the real total quote revenue, which you may use to calculate the weighted hitrate.

You may rely on the value calculated in Method A, if you ignore the “stage” complexity described above. If you sell for example windows, a first stage could be the ground floor and the second the first floor. Both stages are potential orders and therefore should be registered in the quotation log as separate quotation values, whereas variants – such as the budget variant together with the recommended one would not be sold both of them. Both variants are aimed to the same purpose (“the same hole in the wall”) and therefore should be handled as an average.

If the latter case occurs very rarely, you can of course ignore the problem and rely on the average value you get from method A.

But if you don’t know or have the above complexity (which most organizations do), you need to think differently.

My “Method B” takes a different point of view instead of looking at the conversion factor quote to order. Method B is also focusing on getting some change management in place.

Let me explain how it can be done.

Earlier in this blog post I stated that it is often desirable to measure earlier in the sales process, particularly in respect to that calendar time is often too short between quotation and order, providing a limited scope to coach sales reps in a proactive behavior. To achieve follow up reporting on earlier steps in the process, the sales reps have to register some kind of activity earlier in the chain.

If we go backwards in the process, the next task in the sales process that comes before Quotation may be “Sales meeting”. Today many companies don’t state it is obliged to register a sales meeting, as it may not be considered to be of great value, at least not from the sales rep’s perspective.

But it would be of great interest to know how many sales meetings a sales rep has to do to get one order. This is really steering towards using your time available in an efficient way, isn’t it?

There are many positive aspects to this, and thereby opportunities. Sales meetings are something that is measurable in time, not just in numbers. Let’s say a sales rep meets several times with a customer – first sales visit, then second visit, the quote submission meeting and finally negotiation. It counts to four (4!) meetings that consume valuable sales time!

Of course this has an impact on the hitrate.

The described behavior your company certainly don’t want to support, but has also critical impact on how many sales reps you need to hire to reach your strategic goals. Of course, it would be better if fewer heads were doing more sales – it will improve your bottom line.

Since a sales meeting may take a few hours of time, controlling the number of sales meeting that can be made in a week would be crucial for your profits. While a “sales meeting” may be of any type, you need to train the sales organization how a meeting should be performed and what the outcome should be. Best is if the sales rep can get the order at the first meeting, even if that’s not always possible.

All other types of meetings than pure sales visits “consume” thus available sales time that should have been used to meet other new customer prospects.

We can conclude that the more time spent on other than sales work, the worse hitrate.
If you use a weighted hitrate based on the number of orders divided by number of sales meetings, you will have a genuine power to control time usage spent on sales.

But beware!

If you only use the “Number of sales meetings per order” explored above to produce a weighted hitrate, you increase the risk that the sales rep only sells “simple”, easy sold or cheap products. The hitrate is actually also showing a better (faked) figure if you book fewer sales meetings, which is crazy, really. This makes the ratio rather “dangerous” to use and may not be communicated to the sales reps level.

But used correctly, it’s an extremely good tool to gain visibility into how sales reps use their time, in order to provide the right coaching them to use their time for the right things.
However, we recommend not using this figure alone, but in combination with the following ratio “Order value per sales meeting”.

Order value per sales meeting

The key figure “Order value per sales meeting” is directly based on the strategic objective “Total order value per sales rep”. This OPI steers towards each sales meeting would be both sales focused and contain value. In the long term this also steers to a higher average order value.

The OPI “Order value per sales meeting” can be used by itself or together with “Number of sales meetings per order”, discussed above.

Number of sales meetings per week

If we’re about to measure the activity type “sales meeting” to create the metric “weighted hitrate”, you might as well also measure the number of sales meetings per week. In addition, there is a clear correlation between the number of sales meetings and number of orders, making the ratio very educational for use in coaching sales reps.

The reason to follow the number of sales meetings is also to win a few days extra room to maneuver. Looking at the number of visits going down, it is necessary to focus some efforts. Generally, sales meetings are booked in the near future, with perhaps a few days or at most a couple of weeks ahead, but it may be worth booking in the longer term, especially in some difficult times when it may be easier to get the meeting booked 6-8 weeks ahead when the decision maker’s calendar has more room.

//Take care,

Stefan

How to know you are on track in Sales

It’s easy to set strategic targets. But can you count on the realization of them? Can you be sure when the question comes; “do we reach our goals?” Often the question comes too late. So why don’t we ask the questions all the time, by ourselves? Providing confidence to you as well as to your organization.

That’s what you do when you are using metrics in Sales.

But what should and can you measure? Let us argue our way to where in the process it is especially important to measure and how metrics might look like. The idea is that not all indicators should be implemented. Instead, the recommendation is to pick out a couple of them that meet the purpose you want to – and that is clear enough for those who use them.

First; when we talk about indicators, we mean:

  • KPI’s: Key Performance Indicators – connected to the strategic objectives
  • OPI’s: Operational Performance Indicators – are used to control the operational level (mostly from sales manager to sales reps with frequent intervals) to ensure the achievement of the strategic objectives.

KPI’s are often measured on a monthly or quarterly basis, while we suggest that OPI’s are monitored weekly or even more frequently depending on for example industry, products, organization demands etc.

As we shall see later on in this article, the proportion of quotes that will eventually be converted to orders is important to get more track of because the ratio largely affects steps before quotation phase and thus the requirements that are reasonable to ask a sales representative to accomplish to achieve his individual goals, as well as the strategic objectives of your company as a whole.

Going backwards

Securing the accomplishment of the strategic goals may be done by using the whip. That’s the case when you only measure the results – the order backlog – and not the way those results have been made. It’s easy to measure results in the order backlog, but it has one huge disadvantage; it has already happened. There’s not so much to do about it, now.

To really have any possibility act pro-actively and reflect upon an agile business environment, you should connect your company’s strategic objectives with your sales process. In order to do so, start with the results you have (the “whip mode”) and then go backwards in the sales process. The two first steps in the process – often the Order and Quote step – gives the following possibilities for targeting and measurement:

  • The ratio of “Total order sum divided by the number of orders” gives the average order value
  • The “Hitrate”, which indicates the amount (in percentage) of the quotes that are converted to an order

Average order value is a KPI, while Hitrate is a typical OPI; this is definitely not rocket science.

However, now it’s becoming more cumbersome. Still going backwards, the following steps in the process allows insight earlier in the process and can provide early signals about where it is going as planned and warnings where you should put in extra support. The advantage of measuring earlier in the process is to create the room for maneuver and reduces the risk of not achieving the targets, simply.

These “earlier” steps may be “sales meeting” and “phone call” and invites to several OPI’s.

The following KPIs we see as appropriate to measure from a sales perspective:

  • Total order value per sales rep – control of strategic sales target
  • Average order value – control to assure complete orders, with all accessories, more expensive product ranges etc
  • Number of orders per sales rep – steer towards a fast pace
  • Margin – steering towards profitability

Total order value per sales rep

Total order value is easy to determine and can be obtained from either the CRM or ERP system. The indicator “Total order value per sales rep” is a strategic goal that also connects directly to one of the main operational indicators (OPI) for early control sales behavior – “Order value per visit” – which is a way of steering sales reps to take home more value on each customer visit, but also to use more of their available time for sales work and less time for administration or other tasks. More about OPI’s in a coming blog post.

Average order value

The average order value is also easy to determine and can be obtained from either the CRM or ERP system. It’s an important indicator, because a larger value would, among other things, mean that you do not need to land quite as many orders and counting backwards in the sales process, not as many quotes need to be created, not as many customer visits have to be created and therefore do not need as many phone calls to be created. And conversely, a lower average order (typical for a recession) must be compensated in one way or another, either by selling more orders or increasing the efficiency of the process.

It sounds simple to increase the average order value, but is often difficult to do much about, at least in the short term. Therefore, increasing the average order value is often seen as a long-term project, but none the less important for that.

One part of efforts to increase average order value is to look at attitudes; daring to quote the new product models even though you do not feel so comfortable with them, daring to show the optional accessories for the customer, trying to get a more complete order (don’t you need a coffee machine in your conference room as well?”, or likewise) and so on. Another element that may affect the average order value is campaigns of various kinds – these can of course mean lower margins, which, in turn, should be balanced.

In the end, it is often a competitive offer along with a knowledgeable and passionate sales rep that in long term can increase the average order value.

Number of orders per sales rep

Steering towards the “number of orders per sales rep” provides pace of processing opportunities. With a given (short-term) average order value, it’s the number of orders that give the total order value for each sales rep. The indicator “Number of orders per salesperson” is a sales strategic goal that also connects directly to one of the main operational indicators (OPI) for early control of the sales behavior – “Visits per order” (see a coming blog post) – which is a way of steering sales reps to use their time available to customer visits that are sales meetings.

Margin

Today, the margin may be specified in the calculations. It may be applicable to mix the margin figures in conjunction with other indicators such as margin per customer visit or sales rep, product margin compared to services margin, etc.

Summary

It’s strongly recommended to describe the sales process from a strategic perspective within your company and map the key performance indicators (KPI’s) that have to be provided to guarantee achievement of the strategic objectives.

If you don’t go for the whip instead?

Hope you don’t… 😉

BR / Stefan

How I learned about the grey in life, Part 3

Why do Demand Planners handling the statistical forecast rarely or never listen to sales people? It’s because they are rarely or never right, not on article anyway. For me retail sales people are the enthusiasts that fearlessly charge forward to increase sales, regardless of the reality around them. This is a good thing, because if they had analyzed their situation they might see a hopeless situation and nothing would get sold. Retail thrives and these enthusiasts and the way that they tackle the everyday opportunities, for there are no problems. Forecasting on the other hand is not helped by the enthusiasm sales people bring to the discussion.

Why I never listen to sales when forecasting new articles

This is just one example of many…I was once the Demand Planner for storage boxes at IKEA. Most of these items where quite high volume and low price and they were sold in all countries and in virtually all stores. I had statistics from way back when and my numbers where reliable. This is a good start when you decide to add a new range. At IKEA we had never sold any good and cheap plastic boxes that had a width and depth that our competition provided, so we started a project to create this range. To cover the gap in sales and to test the market for these products we found a similar, ready-made product, at one of our suppliers that we bought to cover one year of demand in one country until the new range was in place. This was a good plan, apart from one thing, we asked the sales leader in this country to give us the amount of boxes they needed. 2 million she replied. I was quite shocked, our biggest seller at the time was selling at 1,4 million in this country and it was in multiple colors supported by multiple sizes to create a wide offer. 2 million sounded like a lot. We let it slide (management decision) and set up supply. The project ran like clockwork and we were getting ready to launch. The forecasts on the articles were now based on my statistical data and the market analysis we had done on the articles. The forecast was also double checked with sales and their input was that it was generally low but we persuaded them that we had back up and a growth plan to secure availability.

As the project was coming to an end, the suppliers started to produce the goods, we were ready to go, no wait; we have stock of 1 million plastic boxes left in our test country! We could not launch the new articles while this odd article existed in some of the stores, it would not give the right preconditions for the news. After some persuasion we managed to split the million on more countries, there was still some time before it was time for the global launch so we let the enthusiastic sales people do what they do best, they sold off the remaining stock in time for the release of the new item.

The launch was a success! All forecasts panned out except one, the smallest box. We sold twice what we expected! Of course I got complaints on the forecast quality, the sales people had told me that the forecasts were too low, but I do not recall any specific input why this small box would sell more, it just did. If I had listened to sales we would have been under achieving on 5 out of 6, I prefer that 1 out of 6 was over performing. There is always this risk with new articles, especially if the discussions are about numbers and not about the commercial value. It took me a month to fix the shortage issue, but we exceeded our turnover goal and that’s what really counts in the end.

Lesson learned

Sales people are always going to exaggerate the numbers, it’s in their nature. So ask them about the commercial value. What is their plan with the new item? Ask how this compares to the information, the numbers, you have available:

  • how is this new product different from product X, Y and Z
  • what commercial actions are you going to take and how are they different to how you are working with product X
  • when will you take these actions
  • is there a synergy effect  within the new offer
  • is there a synergy effect  between the new offer and current articles
  • is there any cannibalism on related articles
  • are there any customer values in the design or material that we do not have in our current range

If they cannot answer your questions, base your forecast on the statistics of similar items, because sales is most likely going to manage the item as they manage the current items.

If you have good statistics from a few years back, check the proposed forecast against existing range and if the forecast is higher than your best-selling range, take it down a notch, on an established market it would take a lot for a new article or range to exceed what has been proven in history. If there is a risk, have the Need Planning function increase the initial purchase to minimize the risk of running into a shortage. A shortage is not a good way to secure forecast quality on news, not to mention the damage this causes in the customer relations. This may require some forum and management approval. Never set a forecast too high to secure availability, this will only come back and bite you in the…

When a goal is over achieved, don’t grieve what you couldhavewouldhaveshouldhave done to sell even more, that’s just greedy. If your goals are right for your business then you should hit the goals not exceed them, that’s when you get good forecast quality, that’s when you get good profitability.

How I learned about the grey in life, Part 2

Taking care of the range that is being discontinued is a challenge. In the last blog I described the way we handled it in the Linköping store.  Now I will give you an example of when we succeeded in our goals only to discover that we have failed in reality.

The best way to ruin news launches

My first discontinued round or “outgoing” as we called it in IKEA was tough. The central purchase organization had gone overboard with commitments and purchase agreements and we literally had a mountain of textiles to take care of, especially bed linen and sheets. We pushed these goods really hard, slashed prices so low that it was ridiculous. A sheet cost €0,5. At the end we moved the mountain together. It was fun, exciting and exhausting at the same time; one of the many reasons IKEA is such a great place to work at. People bought sheets for their bedroom, the kid’s room, the guest room, their sisters, brothers, mothers, fathers, sons, daughters, you name it. They even stocked up so they could give some as bonus Christmas gifts (the sale was in August). At the end of the sale I guess that 95% of the people in the region where sleeping on an IKEA sheet. Fantastic result wouldn’t you say?

Not really! We cleaned up the sales space, restocked the new articles with their modern colors, textures and prints and we sold…nothing. Of course not, we just flooded the market, what did we expect? It took us 4 months to recover, and then it was time to plan the next outgoing round. This time it was less, but I the last round had an effect on this round as well and it was still had a painful amount to take care of. Since I later took over the forecasting system I can say with certainty that the initial forecast of the news had not taken the sales effect of the mountain of outgoing into account, and the contracts with the suppliers had to be renegotiated during the sales period. The Textiles department had to dig deep in their margins that year.

Lesson learned

Be clear on your goals (is it to clear out stock or to sell news).No matter how much you want to protect your investments in the supply chain, you cannot jeopardize your sales.

How I learned about the shades of grey in life, Part 1

The world is much easier to explain in black & white and when I was younger I lacked the knowledge and wisdom I have earned over the years, not that I’m old, but I can now appreciate the shades of grey in life.  Someone told me once that we learn from our actions, but it is our mistakes that give us wisdom. I want to share some of my mistakes or mistakes I was part of.

Learn when to listen

As in store logistic manager in the Linköping IKEA store I worked close with the sales team in the store to take care of the articles that were being taken out of range. Two times a year we repeated the process of emptying out the old to leave room for the new products. Every time we faced the challenge of selling out the stock at a preset budget of price reduction. Best practice was to simply take the forecasted sales for the remaining period and see if we ended on plus or minus with the stock we had. If we had a minus we looked if the article was critical for our sales and looked if we could either get more of the old article or if the replacer was available earlier than the switch date. Then we looked at the plus too see where we would invest price reductions. We did not have advanced tools for price elasticity, so it was up to the sales organization to select what articles to push with price and articles to push through commercial actions. In some cases we traded articles that had not been delivered yet with other stores so we could focus on fewer articles and push bigger volumes. This was all done in Excel (blessed tool), and it was the plan. We only had the task to execute, but if the pile of stock was too big, this would be communicated back in the chain to see if we could change the time horizon (that very seldom had any effect).

One year we got a huge pile of 2-seat sofas. Let’s say that the original price was €60, because I can’t remember. Only problem was that the supply chain had delivered 120 sofas and ZERO covers. Another 80 sofas where to be delivered 6 weeks before the end date and there was no input on when the covers would arrive. Our feedback to the supply chain was very clear, if the covers don’t arrive with the last shipment of sofas, don’t bother sending them to us. Then we slashed the price of the sofa to €1.99, ordered some extra bedspreads that fit and sold it off as a package. The sofas where displayed everywhere in the store and we cut a deep whole in our price investment budget. The second delivery arrived, still no covers. By now I would cringe at the mere sight of these sofas, but we battled on. Two weeks before the end date we had 5 sofas left, that’s when we got a delivery of 200 covers. 195 covers that could not fit with anything, simply a waste of space. We could not even give them away. So we threw them out, costing us and additional €10-20 for disposal. My irritation is the fact that we spent money on cutting the fabric, sewing the covers, packaging, transport to the warehouse, handling in the warehouse, transport to the store, handling in the store and disposal costs when it could have started and ended with disposal. All that time and energy for nothing. If both sofas and covers had come at once, we would actually have made money, but that is sometimes too much to ask. My boss Stefan wrote about the supply chain being the good guys and sales being the bad guys. How good are we, really…

Lesson learned

Supply Chain need to be able to understand the sales capabilities in their company and not just shrug off the sales input as a nuisance. In the end, if sales can’t do it or won’t do it, it won’t get done. No matter how sophisticated your forecast systems and supply chain processes are.

Also, the earlier in the chain you can take the cost, the lower the cost is, no matter what budget it affects.