In manufacturing, for example, typically one order on the floor can be pushed up and given first priority, he adds. "You can do it for one order, but not 10 at this special rate," Hausman adds. It's not necessarily a sales rep over-promising, either, he notes. Timing changes when the economy picks up and you need to make sure your sales team understands the changes in lead times that naturally occur. When salespeople are up to date on lead times, many conflicts can be avoided.
Dig Deeper: How to Manage Conflict
4. Give joint incentives to sales and operations.
At Triumvirate, CEO McQuillan acknowledges the tensions. "An abrupt restarting of the machine carries with it some friction," he says. His answer? Salespeople are compensated in part on customer satisfaction scores. Operational decisions are also based on those scores. That bond helps to eliminate tensions. In addition, the company holds twice-a-year retreats for operations and sales managers and staff. The most recent conclave in May took on renewed importance as the company hustled to meet the new demand.
Shannon Scott of TaxBreak has been known to resort to some more extreme measures to get sales and operations working together. Last summer, with a major deadline looming, the CEO challenged the whole company to a series of goals for new-client revenue, applications processed, and customer-service rankings. Scott told the employees that if they could hit the targets, he and the other executives would roast a pig and do a hula dance in grass skirts at the company picnic. He gave them 30 days. Not only did the staff win but the executives ended up with pie on their faces, literally.
Dig Deeper: Finding the Right Incentives
5. Prioritize your new orders.
Customers are not all equal. A sales surge might be brief, so you can't ignore your long-term, big-volume clients. In fact, they should be your first priority. Be willing to quote longer-than-normal response times to lower-priority customers, recognizing that some of those orders may be one-offs or go away over time. A more appealing option, though, is to offer some customers a "split lot" when they don't need the whole order at once. "They might like it all at once but maybe just one-tenth of the order is needed right away," says Hausman.
Dig Deeper: How to Find New Customers
6. Improve your sales forecasting model.
"Sales spikes aren't easy to handle," says Diane Parente, an operations expert and management professor at Pennsylvania State University. "But they are not as unpredictable as we think," she adds. "You can forecast sales, and even sales spikes can be historical." She urges entrepreneurs to make use of statistical models for sales forecasting, available on the Internet and through local university courses on operations management.
There are even forecasting models good for products with no history—such as the Bass Model of Innovation that takes into account factors such as innovation and imitation to project demand for a new product.
The key is to be able to weigh the trade-offs of several different scenarios. "What is the cost of holding inventory – just in case? What is the cost of lost orders? It is this type of analysis that will help us answer the questions before the situation becomes an emergency," says Parente.
Dig Deeper: A Passion for Forecasting
7. Take a stress test.
Many companies have survived brutal declines in revenue through aggressive cost cutting and generating cash via reducing receivables and inventory and stretching payables. Unfortunately, such survival tactics can backfire when sales finally pick up. That's the thinking behind the Plante & Moran Liquidity Stress Test. Plante & Moran is a certified public accounting and business advisory firm based in Southfield, Michigan. The liquidity test, which is a free online tool, helps growing companies project their longer-term cash flow needs.
"A lot of people have their own strategy for predicting short-term capital," notes David Priestley, a consulting manager in restructuring and operations management at Plante & Moran. "They might say, `I have this in the bank, I know I have this receivable coming in next week and these payables for the next two weeks.'" But Plante's liquidity test looks months down the road. A typical scenario: You have to buy a bunch of inventory and you've got customers who might not pay for 60 days. Do you have enough working capital or the ability to borrow to meet those needs? The test can help you see just how unhealthy your cash situation might become. Priestly likens the cash-forecasting tool to "a home medical test that tells you if you really need to go see the doctor."
Dig Deeper: Understanding the Pressures on Your Business
8. Plan for special cases.
A sales spike should not be a total surprise if the communication between customers, salespeople, and production is good. In her research, Parente found the relationship between sales and operations to be most critical in the case of "make-to-order" or "assemble-to-order" products. That's because salespeople transmit customer specifications directly to production. A strained relationship between the two departments can lead to miscommunication and ultimately lower customer satisfaction.
Dig Deeper: The Benefits of Sales Coaching
