Sales v manufacturing

Dear Doc

For the last twelve years, we have been building our business successfully through manufacturing interior units for developers. The quality of our kitchens, walk-ins, offices and dining rooms is one of the best in Queensland and as you can see from the figures, we are growing steadily and profitably.

When we began in 1995, the salesman sold sufficient units for our cutting machine to handle. Now we have grown to four types of cutting machines and a team of six sales people. For some reason, although we have tried to keep the same proportion of sales per machine, the workshop is not as busy as it used to be and we cannot understand why this is the case.

Our production system focuses on keeping the cutting machines working at full capacity. Sales people can see that we need 40 hours work per machine. When the sales team think they have sold sufficient hours, they ease up. Yet, for some reason, whilst we have plenty of work to produce, the work is spread over a long period, so we are never busy enough. Why is that?

Answer:

“The problems that exist in the world today cannot be solved by the level of thinking that created them.” Albert Einstein (1879 – 1955)

It may be seen from the information I have received from you, that you have a strong cash flow base with which to develop your continuing growth. You are clearly using the same thinking that was used on the commencement of the firm, with your sales to production plan.

The underlying problem of so many firms is that the way they organised the business when they first started, is no longer relevant in today’s environment. This is why successful organisations are under-performing, in financial or productivity difficulties today.

In nearly every case, the root cause is not that the wrong things are being done, or even that they are being done badly. The reason is the outmoded assumptions on which the organisation was built and is still being run.

These assumptions are about the way that the organisation views the market and identifies the production capacity. They are the principles that the company uses to value its strengths and weaknesses and its ability to evaluate its strategic vision. It is these very ideas, which were perfect when the business started, that no longer work.

In your case, I think that a Key Performance Indicator program should be prepared for the sales team and they should no longer be focused on production capacity, but on sales requirements.

Communication between the departments will continue, but the sales force of a developing enterprise should be directed through the business plan, not through their understanding of what is required by other departments.


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