Mar 20 2016

Sales, Marketing, and Manufacturing Improvement

The following reader question popped up in another blog:

“Does Lean apply to sales? We’re trying to introduce Lean thinking throughout the company and have found very little on how to lean the sales department.”

The response was a set of tactical recommendations on the behavior of sales reps with customers. Strategically, however, you need to think about the role of Sales within the business. It is not just to provide a flow of orders every day. Marketing is often mentioned in the same breath as Sales, with good reason, because sales are the business’s best source of market intelligence. Contrast, for example, the following approaches:

  • Selling through dealers. Selling through dealers protects you against market fluctuations but also cuts off direct contact with the end-users of your products. This may delaying you noticing changes in demand volume or customer tastes. This is one reason why Apple opened its own stores. In another industry, as recounted by David Simchi Levi, Italian pasta maker Barilla introduced a form of vendor-managed inventory with dealers to get a better handle on the popularity of different products.
  • Door-to-door sales, as Toyota did in Japan into the 1980s, provided direct access to the market. But it was too expensive and was abandoned. In 2000, Toyota established the Gazoo business division that operates the gazoo.com internet portal for Toyota customers, providing used car prices, maintenance tips, shipping for devices to keep kids entertained during long rides, and road trip recommendations. To my knowledge, no other car company has done anything similar. According to Alexa, Gazoo ranks 799th among all web sites in Japan. Toyota does not explain the motivation to start Gazoo, but it is not difficult to guess that it strengthens the bond between the company and the car owners, while their clicks provide the kind of first-hand market information the company used to get from door-to-door sales.
  • eCommerce. Online sales also establish a direct link between end-user and supplier, providing information that is easier to get than to interpret, and not as rich as an in-person, direct human interaction. Also, when selling through an online retailer rather than directly, the information is shared with that retailer, which may be better equipped to exploit it than the manufacturer.

As manufacturing performance improves, so does the business’s ability to respond to the market in at least the following ways:

  • With timely market information and short manufacturing lead times, the business is both better able to dial aggregate production volume up and down, and to adjust the product mix. The months-long lag you often observe between changes in demand and in production cause companies to pile up finished goods during industry downturns and miss out on sales during booms. Reducing this lag to one week directly translates to more cash available to weather downturns and more income during booms.
  • Sales often receives requests for small runs of new products for test marketing. A responsive manufacturing organization is also able to promptly produce them, and then ramp up to high volume when the tests are successful. This alone can drive explosive growth.

 

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