Have you ever produced a forecast but weren’t told about a last-minute campaign or marketing activity that went on to drive sales far higher than anticipated? If you ended up taking the blame for the company not having enough inventory to meet demand, I feel your pain. But don’t worry, there is a better way.
Why does this happen? What is stopping individuals and departments from providing each other with the correct information? Isn’t there a common interest in ensuring that the customer is served and the company delivers its business plan? Of course there is, but that’s not how it always works in the real world. That’s why we need a structured approach to cross-functional alignment.
Awareness And Knowledge Arise From Alignment
The importance of End-to-End Business Astuteness becomes clear in such cases. It’s all about the awareness, knowledge and alignment of each part of the business. This includes Supply Chain, Finance, Commercial, Marketing and any other department that can impact sales volume. Cross-departmental collaboration is key so that opportunities and risks are made visible to drive a more customer-centric and profitable business.
The challenge is that most departments do not know what the other department does or what their goals are.
Each department drives the actions of another department which results in finding the golden cog in the machine. That can be the one big sale the company was looking for, reduction in slow moving inventory or a major cost cutting initiative. The challenge is that most departments do not know what the other departments do or what their goals are. They do not understand the impact of their actions upon other departments, nor the importance of communication. Remember that any action by the various departments can drive revenue, but they can also drive costs. Be aware that any initiative you launch that is decided in your departmental vacuum can adversely other departments, and cost your company money. Unless you communicate and engage, you will never know.
These actions need to be presented in such a way that the consequences from an end-to-end perspective are clear to the decision makers.
Factors To Consider When Making Business Decisions
Imagine you have your own company and there is a decision to be made to change the production plan so that a large order can be shipped to a customer. What information do you need to make a decision? Here is what you need to consider:
• Cost to run extra shifts
• Cost to expedite the transportation
• Cost to procure materials
• Profit of the potential sale
• Risk percentage of product returns
• Impact on gross profit
• Impact on market share
• Impact on other customers
• Importance of the customer versus other customers
• Quality and compliance risk
The decision should be weighted by financial feasibility (Cost to Serve) as well the customer-centric factors. The pressure to hit the numbers often overrides the importance of doing a financial feasibility exercise. What’s more, it often takes time to get the necessary information to carry out financial feasibility tests – by the time the report is ready, the sale may have been lost, so use your judgement accordingly.
What You Need From People
• All departments must understand what the other departments do, know what they need and when they must include them.
• Create a training schedule where all employees have to learn about the other departments. This must start at the time of onboarding and then be repeated every couple of months.
• Use the lunch and learn tool, get people around the table to explain what they do and what they need from the other departments.
• Make sure that everyone speaks the same ‘language’. Departmental jargon is not helpful. Do not use abbreviations!
• Have regular townhalls or cross departmental meeting to communicate the company strategy sending the message that it is a shared responsibility that can only be successful with everyone on board. Hold people accountable!
What You Need From Processes
• New product launch – a clear project plan including all parties including accountability and timing
• Exception management – how to handle exceptions such as higher than anticipated sales, who does what?
• Clear daily/weekly/monthly meeting plan including accountability and deliverables
• The decision making process must be underpinned by financial and customer driven data.
What You need From Technology
• Manageable software – user friendly and fast
• Business warehouse – impeccable master data
• Informative interactive live Dashboards
• Scenario tools – quick action decision making tools
End-to-End Business Astuteness is the key to having one voice and a united team who are driven by the success of the company! In conclusion, having the big picture in mind and a clear understanding of how the cogs in the machine of your business will help you to make the right decisions at the right time!