Tag Archive: finance

The Value of Alignment: Sales, Operations & Finance

May 30th, 2019

Alignment might sound like a fluffy concept, but it delivers bottom line results. Our most successful clients have achieved the most substantial results from alignment. Although SIOP (Sales, Inventory, Operations Planning) gets a wrap as a technical topic, in our experience, it is the alignment portion of SIOP that delivers the bacon!

For example, in one client project, the Sales Leader was concerned about service levels. He knew that service was the differentiator in the marketplace, and if they didn’t have quick lead times and responsive customer service, it would negatively impact his ability to grow the business. On the other hand, planning knew that sales tended to come in dramatic spikes which were hard to predict in advance and so strategic inventory could make sense. Operations wasn’t too keen on inventory since they had a lean mentality with the view that inventory was ‘bad’, and they were concerned about capacity and staffing. Accounting set rules on overhead rates as a percentage of sales on a monthly basis which caused HR and Operations to hire and fire temps continually (and sometimes full-time resources). Overtime wasn’t used as a rule of thumb and was seen as costly by management, In fact, it was the only client we’ve ever worked with that didn’t use at least some percentage of overtime on a continual basis. And, of course, R&D created new products and had no idea about the volume and the impact on capacity and staffing. In essence, no one was on the same page!

We created a demand plan based on historical forecasts with sales input, confirmed the capacity and staffing levels required to meet that forecast and determined that if we level loaded the forecast over a quarter, we could create a win-win: improved service during the sales spikes with improved margins (lower temp turnover, improved efficiencies etc.). But it didn’t matter if we didn’t align the team. That was the 80/20 to creating success (and is ALWAYS the hardest part). Fast-forward 3-6 months down-the-road: We shortened service dips from the sales spikes, increased the service levels and reduced costs.

These types of client results are commonplace with alignment no matter your position in the supply chain or the world. Have you considered whether your teams are saying they are aligned or whether they are truly using the same playbook? It often will make the difference between a happy customer and a disgruntled one (which isn’t something anyone wants in today’s on-line era), let alone the profit impacts. If you are interested in an alignment assessment, please contact us.

 

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Why Financial Acumen is Relevant to Operations

September 6th, 2016
budget binder

Have you put your organization under review to look for ideas and solutions that may be right in front of you? Take a step back and look for those strategic weapons with an eagle eye at improving performance and your bottom line.

When I was a VP of Operations and Supply Chain, we constantly were pursuing how to reduce costs while improving the performance of the product and service to our customers. Understanding how to get to true costs — not double or triple counting cost improvement programs isn’t as easy as it seems like it would be. Costs are also critical for thinking strategically about pricing, what focus to put on certain products or customers, etc.

Thus, having this financial acumen is essential and noteworthy. Fortunately for me, I had a finance mentor early in my career path; thus, I decided to get an MBA with an emphasis in Finance. Of course, although quite valuable, I learned 100 times more from a Finance Director who worked for me later in my career. He was invaluable because he knew costs, how to analyze capital investments, and what was important when it came to variances, contribution margins and cash flow. What else could you want in a superhero? Thanks, Marty!

Thus, we have evolved this unique formula to the “right” combination of people (culture, change, leadership, etc.), processes and protocols (inclusive of systems, finance, etc.) — and it has a great alliteration of P’s to boot!

 

Did you like this article? Continue reading on how to strengthen your Eagle Eye:

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