Down Times Demand Different Approach to Managing Sales

It takes a different set of skills to manage salespeople through a down time.

 

Without question, sales managers have the toughest job in a sales organization. When sales are up and going well, the salespeople get the praise. When sales are down it is the sales manager’s fault. When margins are up, it’s the salespeople. When margins are down, you guessed it, it’s the sales manager.

A sales manager needs to be an accountant, a salesman, a therapist, a teacher, a leader, a motivator and a few others, and most of the time in the same conversation.

 

So what is the main difference in managing in good times versus bad? The needs of the salespeople. The salespeople are the engine that drives sales through the company, and if their needs are not being met the company will fail. So what do the salespeople need? We all know what they need, and it is no different in good times than in bad. They need job security, a future, and enough compensation to provide for their family.

 

The problem is that in good times those things are taken for granted. Salespeople may look for greener grass in good times, but in bad times salesmen just want green grass. So how do we give our salespeople green grass when there is not enough water to keep the grass green? Easy, don’t try to water all the grass, and don’t use paint to color the brown grass green.

 

Let’s start with the paint, or as I like to call it: TRUST. Be upfront with your salespeople, tell them how the company is doing, and keep them informed. The less they know about the company’s health, the more they will make up on their own.

 

And salespeople talk. Yes, that is right. They talk to everyone. As much as we as managers want to control that we can’t because that is what we hired them to do: Talk. Knowing this, make sure they all have the same message, and that message is yours: the truth.

 

Also do the things that instill confidence, not those that distract from it. For instance, implementing call reports for the first time during a down time is the worst time. That says “I don’t trust you.” But holding a weekly or monthly “state of the company address” is the right thing to do and instills confidence in the sales force that management cares about them.

 

So what do we do if we don’t have enough water for all of the grass? The hardest thing to do, but the right thing to do is to let some of it go brown. Laying-off employees is always the hardest, but it is always better than running out of water for all.

 

Be strategic in your watering. If compensation is going to be reduced in one area, raise it in another. Never leave the salespeople with more negatives than positives even if the bottom line is a reduction. Salespeople need motivation from their companies now more than ever, and that motivation can be used to direct their sales activities to fit the company’s strategic plan.

 

My father use to say to me, “A great sales manager could cut your pay, and you would thank him as you left his office.” That is what we need to keep in mind in these difficult times.

Create Value

Now is the time when manufacturers and suppliers should be looking at their supply chain together and creating value, not just cutting waste.

 

When times are good, and the volume of business covered inefficiencies, it was easy to capture cost savings by picking the low-hanging fruit. It becomes easy to show the value of integrated supply with a lot of small wins such as reduced inventories on high-moving items or increased production on long-running manufacturing operations.

 

The projects that become “high-priority” may, during the good times, mean less to your bottom line and more to the overall visibility the project has around the facility.

 

Well the good times are not as good as they use to be, and now is the time to dig deep for projects that will mean the most to the shareholders, the bottom line, the profit center and the overall budget. But it’s not about price.

 

So if it is not about price, then what is it about?

 

It’s about increasing communication. If you are not communicating more today with your strategic partners than you were last year, you will be forced into someone else’s cost-cutting measures instead of sharing in them and creating value.

 

Reduction in inventory can be the most visible tool you can use to increase your bottom line, but are we always looking in the right place? Our first reaction is to look at how much inventory is on the floor at the end user’s facility. Where is it stocked, how much is needed, and how often? This may seem simple taking into consideration the stocking and ordering requirements based on overall demand vs. predictable consumption, lead time, and package quantity.

 

But this may only be one-third of the inventory because the distributor and the manufacturer have their own inventory and their own stocking requirements. That is why each link needs to be a part of overall cost reductions. When communication on inventory requirements flows from the end-user, to the distributor, to the manufacturer, and back again, they can all benefit. Special manufactured items become catalog items, package quantities reflect customer needs, and return or exchange policies become proactive instead of reactive. The project will then transform itself from a cost reduction at the end user to a value-added link that strengthens the entire supply chain.

 

It becomes easy to create value by simply creating communication that flows along all links of the supply chain.

Inventory- “It’s all about the part”

One of my customers use to tell me “it’s all about the part”.

I didn’t understand what he was talking about for the longest time but I think I am starting to understand it. In terms of the supply chain, when the end-user is on the factory floor, assembling the product his company sells, his world revolves around one phrase, “it’s all about the part”.

Manufacturing is all about the part.

It’s about having the right part at the right place at the right time.

If you are strictly looking within the walls of your company without getting your suppliers involved your missing the part, I mean point.

If you have preformed 5S on your factory floor and your production is the epitome of lean manufacturing and you have 6 Sigma-ed 98.6% of the defects right out of your facility, it still doesn’t mean diddly if the supply chain fails and the part isn’t in the right place at the right time.

“It’s all about the part.”

Eliminate the non-value-added functions

One of the keys to integrated supply is eliminating the non-value added functions, but what is a non-value added function and what is a value added function?

That question sounds very simple to answer but once we delve deeper into the black & white, the answers get a little gray. On the surface a non-value added function would be a function your customer is not willing to pay you to do, or activity is redundant within your organization. The first place to look for the non-value-added is redundant mistakes. Next is to eliminate the “experts” and streamline the processes. Experts should become trainers, not the one that everybody hopes never gets hit by a bus because” we don’t know what we would do without them”.

Well I could go on with others but what I am really concerned about is the non-value-added in the supply chain. So where do we begin in the supply chain? Lets start with the obvious non-value added function in the supply chain, expediting. Nobody in today’s business climate, purchasing a durable good, wants to pay for an expediter whose sole function is to follow up on suppliers parts that did not meet the delivery schedule.

I want to buy products from manufacturers whose supply chains are so lean that their suppliers know what to deliver and when better then they do. When the manufacturer of the part is so in tune with the whole process that the raw material producers are a part of the supply chain of knowledge and they know what, when and how much to deliver. When the supply chain of knowledge is shared from beginning to end, then not only can you eliminate such non-value-added functions as expediting, but every point along the supply chain gets touched at every level from purchasing and accounting to inventory and warehouse space.

Ok so expediting is easy to spot but difficult to eliminate. Actually it is very easy to eliminate, ask for help within your supply chain. Everybody should be on board because cutting the waste out of the supply chain helps everyone involved.

The End User’s Culture

I was in Tennessee this week putting on a presentation on integrated supply and when I talked about how the culture on the factory floor usually dictates the type of replenishment system the end user employs, the strategic sourcing manager stopped me and said “Yes! that’s it, that is why point of use won’t work here.”

Well yes and no. Is it better to try to change the culture to fit the best replenishment system or is it better to fit the replenishment system to the culture, and what is the best replenishment system.

Well lets start with the last question first.

What is the best replenishment system?

Strategically we say the best system is; A system that insures the right product is at the right place at the right time, at the lowest possible cost.  A system where the first time the end user touches the product is when they uses it.

Tactically we say the best system is; Point-of-use Kanban or Toolcrib Software or Vending machines, or whatever the supplier is the most familiar with using.

What we should say is, what is the shop floor culture because that will dictate the type of replenishment system, or should we?

Lets go back to the first question “Is it better to try to change the culture to fit the best replenishment system or is it better to fit the replenishment system to the culture?” So, where is the culture today, and where do we want it to be tomorrow? We all know that it is easier to change the replenishment system than the culture, but I have found that the right replenishment system can assist in a culture change retelively quickly.

So what is our goal if we want to promote change in the culture on the factory floor? Well I think we all want a culture of quality and excelence, but what does that look like and how do we get there? I guess if I had that answer down pat than I wouldn’t writing this blog…..or maybe I would.  Anyways I guess what I am trying to say is this, don’t decide on what would be the best replenishment system for the current moment in time. We need to work together and share our goals for the future and work towards them. If we stick with what we have, we’re going to get what we always got, right?

Start with the goals for the culture for the factory floor, then develop a replenishment system that would fit into those plans, and that will be the right replenishment system for the culture.

Remember it’s all about setting goals & communication.

The Integrated Supply Relationship.

If Integrated Supply is;
#1 A relationship
#2 Starting with the end user
#3 Eliminating redundant & non-value added functions
#4 Within the whole supply chain (end user-distributor-manufacturer)
#5 Focusing on total cost reduction

Then what do we mean when we say a “relationship”?
A relationship in its simplest form can be a connection between two or more people centered around something they have in common. So an integrated supply relationship is a relationship between two or more businesses employees, centered around a goal or philosophy like cost reduction…

So lets take that idea look at it in manufacturing & distribution. We don’t have to look far, in what some consider the lean manufacturing bible, the book “The Toyota Way” by Jeffrey K. Liker, the principal “Find Solid Partners and Grow Together to Mutual Benefit in the Long Term” says it all. If fact, the foundation of the Toyota Lean principals states “You should base your management decisions on a long-term philosophy, even at the expense of short term financial goals.”
So what is your long term philosophy? If you have one, is it in conflict with the company you have chosen as your partner?
Maybe we should re-look at the long term integrated supply relationships we have entered into, or about to enter, and make sure both party’s know the long term philosophy. If we have a mutually beneficial long term philosophy the bumps in the road become very small. Not only do they become small but a lot of them will disappear completely. As the water-level of small problems lowers, all of the high priority issues, all of the important issues are revealed letting us focus on the projects that will make a difference to the bottom line.

A partnership between two or more companies, who are working towards a shared a long term philosophy, at the expense of short term financial goals, while mutually benefiting and growing. This is the definition of the Integrated supply “relationship”.

What is Integrated Supply?

“Do you do integrated supply?”

“I hear that the company down the road just went integrated.”

“We don’t like integrated supply.”

“Do they do integration?”

Lately, when I hear someone talk about integrated supply I think one of two things. First is “wow I don’t think they understand integrated supply” or “wow, I don’t understand integrated supply”.

So what is INTEGRATED SUPPLY?

One distributor defines it as “a contract between a manufacturer and a vendor that names the vendor as the sole source of a manufacturer’s MRO needs”. Fergeson, a giant in our industry defines it this way, “The Integrated Supply concept is a partnership between the supplier and the customer in which the two work together to meet jointly agreed goals, while each focuses on continued success in their core competency. The overall goal of the partnership is to lower process and procurement costs for the end user customers.”

Frank Lynn & Associates, Inc., who have been writing about integrated supply for as long as I remember defines it this way, ” Integrated supply is a relationship in which an end user out-sources functions to an integrator in order to reduce the total costs of procuring and holding inventory of direct and/or indirect materials with a focus on total cost reduction.”

I think Frank Lynn & Associates hit the nail on the head with this definition. Looking at the definition closer, it starts with “Integrated supply is a relationship in which an end user…”, because it needs to start with the end-user. The end-user is the most important part of the equation and if integrated supply doesn’t start with the end-user or the end-user doesn’t fully buy in to the partnership, then the program is destine to fail.
Next, they talk about “out-sources functions to an integrator..”. Outsourcing functions mean that there are functions the end-user is currently preforming which they recognize as non-value-added. Either the functions should be preformed by the supplier as a value added function or the process should be eliminated.

The next line, “in order to reduce the total costs of procuring and holding inventory of direct and/or indirect materials” does not focus just on one process for one commodity. They talk about reducing the total costs, all of the non value added activity for all commodities. When looking at the costs of procuring and holding inventory, we need to remember that there are three main players involved and each player needs to stay within their core competency. The three main players are the manufacturer, the distributor & the end user, and we all know their roles, or do we? Who should hold the inventory? Well the distributor of course, but then why does the manufacturer have so much inventory on their shelf? Maybe they have so much inventory because the distributor always drop ships the product from the manufacturer direct to the end user. Why does this happen? because the distributor doesn’t have enough inventory on the shelf, or because they don’t have the correct inventory on the shelf. Why? Well maybe because the end user can’t tell the distributor what he is going to use and consume tomorrow. Why, because they don’t know or because the right people don’t know……… and we haven’t even touched on the inventory at the end user.
Getting rid of redundancy in the supply chain is a slow process and you need to take it one day at a time, you need to eat the elephant one bite at a time, things don’t change overnight, and so on and so on. Again the process does need to start at the end user but it can not stop with the distributor, it needs to go all the way back to the manufacturer of the product being consumed.

In rest of the quote it states, “a focus on total cost reduction.” The focus is on total cost reduction, why else would someone enter into integrated supply. The distributor may use integrated supply simply to lock out their competitors (in fact most do). Some manufacturers use integration for the same reason. And many end users enter into integrated supply because their competitor did and they don’t want to be left behind, or maybe they think they can get better prices. The focus needs to be on total cost reduction from the end user all the way back to the manufacturer. I’ve seen too many integrated supply installations where the focus has been on cost reduction only for the end user, the distributor has increased their costs and the manufacturer has been left completely out of the picture. This type of integrated supply can only last so long before a competitor displaces one of the three chains in the supply. Yes if the manufacturer or the distributor is replaced, the impact may not effect the local economy at all. But the first time the end user is replaced by someone from outside the local area, or even outside the US, the whole supply chain looses.

To sum up the question, integrated supply is;
#1 A relationship
#2 Starting with the end user
#3 Eliminating redundant & non-value added functions
#4 Within the whole supply chain (end user-distributor-manufacturer)
#5 Focusing on total cost reduction

Looks like I have subjects for my next 5 blogs.

Just getting started

Here I am just getting started with my first blog with so many ideas and not knowing where to begin. Well lets start with the reason I am creating this blog. I am interested in eliminating waste in the supply channel for MRO (Maintain, Repair & Operate) Items. These items have also been labeled MROP&S or Maintain, Repair, Overhaul, Production Tooling & Safety items, but for the purposes of expediency I will just say MRO.

These items are supplies manufacturers use and consume in the process of; making their products, keeping their factories running and protecting their employees. These items are very hard to classify because each industry treats these items a little different and they categorize these items  differently as well. Some call them MRO items, Indirect material and expense items and they range from cutting tools and abrasives to toilet paper and lawn care. There are also items that bridge the gap between an OEM and an MRO item like fasteners.

These items also carry with them diffrent sences of urgency. In a high-tech assembly plant the most important items in their plant classified as MRO may be machine repair parts and in a machining plant the highest priority items are production cutting tools.

When it comes to managing the supply channel for the MROP&S items, the end users needs are going to vary greatly depending upon the industry but there are basic strategies and techniques all manufacturers can use to drive waste out of the system.

These strategies and techniques are the topics I am going to investigate using this blog.