Build Manufacturing Sales Strategy Through Sales & Operations Planning
February 12, 2018
A manufacturing sales strategy often turns out to be a combination of independent plans by the sales and manufacturing teams.
But when manufacturing and sales develop strategies to maximize their own parts of the business, both fall short and the business itself can suffer.
By using new manufacturing sales models to create a robust sales and operations planning (S&OP) process, industry leaders will be able to boost their bottom line in 2018.
It’s essential to incorporate employee feedback and the needs in shared services, information technology, learning and development, and change management.
Here are a few key reminders on how to attain that integration.
Fundamentals of S&OP
The S&OP process is where key sales, marketing and manufacturing/supply-chain managers collaborate to build the sales and production forecast for the year. Design and product engineering should also be involved when the introduction of new products is an essential part of the equation.
The first phase of the process starts with a sales and marketing forecast that’s more than just a dollars and cents number for the year. (“Just take everything up 4 percent.”) Sales and marketing need to use formal analytical tools, such as a Pareto Chart, to highlight the top-selling products and analyze their volume, dollars and margin contributions. Leaders should discontinue sales or products that yield a negative margin.
The sales team should then share input they have for the next year’s sales, including new customer initiatives, product promotions and estimated product volumes. This stage is where manufacturing and supply-chain leaders enter the process.
In the second phase of the S&OP process, manufacturing takes the sales forecast and runs it through the materials requirements planning (MRP) and capacity requirements planning (CRP) modules of the enterprise requirements planning (ERP) system. This helps determine if the sales forecast fulfillment is feasible. As a leader you must consider the following:
- Source capacity: Do your sources have sufficient capacity to provide the raw materials you need? If not, you must find other suppliers to provide the same materials at competitive costs. This also manages your risk for shortages from single suppliers, and helps support you if you need to ramp up production in a short timeframe.
- Factory capacity: Do your factories have the capacity to deliver the volumes you need? If not, can they meet demand in the short term with overtime until new crews can be recruited and trained to add capacity? But you must plan with a long-term view, so grow your internal capability and capacity organically, within your current constrains. Also, consider make-vs.-buy as a long-term strategy.
- Warehousing and logistics: Will you need additional trucks, trailers and drivers? Will you turn to a leasing company or use company-owned rigs? There are end-to-end supply issues to be managed. Ensure a coordinated plan to serve your customers and evaluate third-party logistics (3PL).
Strength in Sales
When crafting your manufacturing sales strategy, let’s say manufacturing thrives on making standard parts in quantity to drive down costs. But sales sees a big market opportunity that requires specialized products or modifications to standard items. The two departments could easily find themselves working at odds.
Another frequent disconnect happens when customers want product-line extensions of things a company doesn’t make. Sales may determine that manufacturing needs to do something to supply the customers’ needs. But it’s highly disruptive and expensive for manufacturing to react in the short term. This disconnect will eventually become a source of conflict.
Sales leadership can improve your manufacturing strategy by helping you think differently about how to analyze customer sales history and growth opportunities.
Field sales and customer service people are often most in tune with current customer needs, trends and where the growth opportunities are in the short term. After all, they put the customer first, and have first-hand information that does not always get captured in your current quantitative toolkit.
Consider workshop sessions with your field sales employees who deal directly with customers; do not just use the quantitative raw data. You will strengthen your manufacturing sales strategy and enhance your organization’s employee engagement initiatives too.
Formal qualitative tools like Voice of the Customer (VOC) questionnaires and free-text surveys can ensure robustness of your comprehensive sales plan.
Manufacturing Sales Strategy & Flawless Execution
Now that you have the fundamentals of S&OP and a comprehensive sales strategy, focus on final details and a mistake-proof execution.
Have the finance team run the numbers generated and present to the CEO and board members. Make revisions as necessary to satisfy their requirements.
Then, with feedback from the board and CEO, firm up your 2018 budget, complete contracts with suppliers and customers, and finalize your labor requirements including capacity and capability.
Build in project management, change management, and lean initiatives to deliver on the work plans. Many leaders see these efforts as separate endeavors, rather than as how you deliver on the work plans.
Incorporate all elements in the tactical plans and implementations, including IT, HR, and learning and development, now that you have an integrated sales and operations plan.
Even as you innovate and adapt to changes in the manufacturing industry, your end goal never changes: Develop and execute the right manufacturing sales strategy for your future organization.
Start 2018 with a plan to increase sales and position your company as an industry leader.