Applying process controls across your value chain helps ensure long-term profitable growth.
In most organisations, sales is a bit of a black box. You put money and resources into it with no guarantee of what’s going to come out. Hopefully, you have a few great salespeople on your team who keep closing deals. However, in many cases, there is more mystery than process around how the sales team does what it does, making outcomes unpredictable and inconsistent.
Sooner or later, this will become a problem. Of course, all companies need revenue growth; standstill will ultimately reduce margins over time as costs increase. But revenue growth and margin are often inversely related. Accelerating sales can result in higher labour and supply costs and lead to more waste, hurting the bottom line despite increasing revenues. At the same time, the additional demand on production to meet the higher sales volume can cause quality and fulfilment issues, leading to missed commitments and disappointed customers and triggering a downward spiral no company wants to set in motion.
Increase revenues and margin at the same time with better process controls.
To strike the perfect balance between sales and production and empower companies to stay profitable long-term, process controls need to be part of the entire value chain. Manufacturing companies are often familiar with operational process controls that dictate how things are done on the shop floor. But well-defined processes and procedures are much less likely to show up in the sales department—and that can be a costly mistake that makes it challenging to properly manage profitable growth.
Companies ready to stop relying on magic and start trusting repeatable, proven strategies to drive sustainable growth can use these tips to put controls in place (or polish up those that already exist) across all areas of the business.
Sell by the numbers.
It’s often said that sales is a numbers game, but companies rarely leverage their sales data as much as they could or should. While salespeople may know it takes a certain number of calls to generate a lead, they often miss opportunities to gain a much deeper understanding of customers and their needs, which can help make business and sales volume more predictable.
To start building sales management insight:
- Set the right sales KPIs. Key performance indicators are the backbone of operational efficiency, but when it comes to sales excellence, companies are rarely as diligent about identifying critical metrics that help determine success. Even though most salespeople generally subscribe to the sales funnel approach, they believe sales is less concrete and more complex than production and they don’t necessarily relish the work of analysing the numbers. This is an oversight as there are many data points that can give insight into what works in sales and what doesn’t—and most CRM systems are already tracking this data by default. Important numbers to consider include call volumes, conversion and win rates, customer retention rates, sales pipeline volumes, and first-year product sales, just to name a few. Remember, what gets measured gets managed and ultimately improved. So, it’s essential for manufacturers to determine their critical sales KPIs and put processes in place to track these numbers and improve them over time.
- Diligently monitor KPIs. Sometimes manufacturers do a good job of identifying sales KPIs, but they fail to regularly monitor these numbers and review them with the team at set intervals. Ideally, the sales team should consider numbers every day and determine if they made their goals for the day. This allows salespeople to quickly get back on track if a miss occurs. If daily reviews aren’t realistic or possible, then numbers should be reviewed at least weekly or, at the minimum, monthly. Regular reviews allow teams to problem solve and course-correct sooner rather than later and avoid missing quarterly or yearly sales goals.
- Make data-informed management decisions. Leverage KPI data to drive continuous improvement in sales. Regular reviews and conversations should translate into better-defined processes around sales best practices. For example, organisations that use their data to weigh clients and formulate estimates in a structural and consistent way benefit from high-quality forecasting data. The data can also help companies better understand the decision cycles of clients in different industries, allowing them to tailor customised sales approaches. And it can be used to help teams better manage the impact of variations in sales volume, such as seasonality or changes in the production environment. Again, the data is likely already in the CRM; it’s just a matter of putting the numbers to use. Companies may even want to consider tying KPI data into sales staff reviews, raises, and bonuses to encourage the sales team to take advantage of the invaluable insights at their fingertips.
- Encourage behavioural change. Replacing sales magic with sales process will require behavioural change and may not be a welcome shift, especially for some veteran players on your team. The idea here is to better understand what defines sales success and translate those practices into a repeatable sales process everyone can adopt. This, in turn, introduces more predictability around sales performance and allows the company to plan production accordingly to ensure both customer satisfaction and bottom-line profitability.
Tap your full production capabilities.
To take full advantage of optimised sales, manufacturers must meet higher sales volumes without significant increases in their costs that hurt the bottom line or major production problems that undermine customer satisfaction. In both cases, the key is to sharpen operational process controls to free up production capacity within existing operations. If a company must add more shifts or a new line to accommodate increased sales volumes, the margin shrinks. But if companies are operating at less than 100%—and most organisations are 60-70% efficient at best—and if they can tap into their existing capacity before adding new resources, then it’s theoretically possible to produce more without incurring additional costs. In this optimal situation, margins climb right alongside revenues.
To take advantage of existing capacity:
- Focus on precision of execution. This involves mastering the behaviours, process discipline, standards, and structure that create a continuous improvement culture where companies are always working to become more efficient. As with sales, KPIs and regular reviews are critical; so are behaviours including support from the top and the right level of employee engagement.
- Implement zero-defect manufacturing initiatives. Reducing waste and the costs that go with it requires producing items right the first time. As production increases, it can put stress on processes, leading to errors, quality issues, and waste. But manufacturers that are diligent about lean manufacturing processes and continuous improvement can create efficient processes that can stand up to increased production demands and keep waste under control even as output increases.
- Optimise equipment utilisation. Underutilised assets are a key source of hidden capacity in most operations. Correcting this problem starts with understanding and tracking operating equipment effectiveness or OEE. In most cases, companies looking to improve OEE and overall equipment utilisation find that the solution lies in better maintenance practices. For one diversified global manufacturer, measuring OEE and implementing a tiered total productive maintenance (TPM) structure, including maintenance team training, equipment stabilisation, and autonomous, preventive, and predictive maintenance, led to $70 million in cost savings and a 30% increase in EBITDA in just three years.
Stay in control of profitable growth.
While more sales are critical to growth, it is entirely possible to sell too much and hurt the company more than you help it. Manufacturers that are diligent about managing both sales and operations processes for the greatest efficiency will be best at capturing those sales without sacrificing their margins. The key to sustainable growth is to keep your eye on the money—both the top and bottom lines—and to find the balance that allows you to optimise your existing resources and profitably meet your customers’ needs as you grow.
