Integrating Sales and Operations Management: A Best Practice Approach

The value of a corporate organization is its ability to seamlessly blend a range of functions so that they all work together to create more value for the customer and the business. The ability for a range of functions – sales, marketing, product development, finance, operations, logistics, and so on – to work harmoniously offers exceptional opportunities for growth and business agility.

However, achieving this level of corporate perfection takes time, effort, and commitment, and can test even the best-run organization. Under pressure – whether for time or budget – it’s easy to fall back into the traditional silo mindset, where one team achieves its goals at the expense of another team it’s meant to partner with.

This situation is sub-optimal for the business. It adds cost, slows decision-making and execution, and takes a business’ focus away from the person who matters most – the customer.

In this blog, we’ll explore one of the key corporate relationships – the relationship between the operations and sales functions. We’ll also explore sales and operations planning and show why this is often key in ensuring a harmonious relationship between a business and its customers.

Get this relationship right, and everyone can look forward to a fruitful and long-lasting relationship. Get it wrong, and the recriminations take forever to resolve.

So, how can sales and operations planning be integrated, and how does technology help facilitate this?

  1. Operations Management: Seeking the Best Outcome
  2. Sales Management: Delivering the Impossible Every Quarter
  3. Sales vs. Operations: The Eternal Tug of War
  4. Aligning Sales Planning and Operations Planning
  5. Revenue Intelligence Capabilities

Operations Management: Seeking the Best Outcome

The operations function, especially operations planning, lies at the heart of the value chain of every business. It’s responsible for taking all the inputs – whether raw material, data, people, or components, for example – and transforming them into the outputs that generate revenues for the business.

The operations function focuses on planning and executing the delivery of outputs for the business, whether in manufacturing, logistics, content creation, or data analytics - whatever activity the business focuses on.

The operations team of any company is often the Cinderella department of the business. It’s easy for people to take it for granted and assume that it’ll be able to perform the everyday miracles that senior management keeps asking of it. It’s easy to forget that a well-run operations function is central to the success of any business. As well as underpinning the company's value chain, it’s also a source of many of the operational efficiencies that any CFO will crave.

These efficiency savings come from endlessly repeating key operational processes so that they can become more streamlined and automated while maintaining quality standards. This situation requires consistency, standardization, organization, and the ability to plan effectively. This is especially important because of the long lead times involved in changing production systems and processes. It’s rarely possible to ramp up production quickly; it can take months for additional capacity, resources, and skills to be sourced and recruited, often at a high cost.

This situation can present a risk to the business in two ways. Sourcing the additional capacity may take too long or may be prohibitively expensive. Equally, it’s possible that the real demand isn’t as great as the sales and marketing team had anticipated, so all that time and money invested in scaling up capacity is potentially wasted. This is the key reason we all need to understand how sales and operations planning can be integrated.

None of this is to say that an operation manager will say ‘my way or the highway’ to the business. Still, everyone involved across the business needs to recognize that an operation’s team’s prized expertise and flexibility come with constraints that need to be accommodated. These constraints and risks can put the operations team on a collision course with the sales team, whose priorities are focused on providing their customers what they want, when they want it, in the way they want it.

Sales Management: Delivering the Impossible Every Quarter

It doesn’t require a vivid imagination to see how the need for standardization, detailed planning, and consistency will conflict with any sales team's priorities. A sales team’s relentless focus on the customer's needs can quickly drive them toward the need for the customization of goods and services to provide a uniquely compelling offer to their customers and prospects. Equally, they’ll try to find ways to align their customer’s timescales and budgets with the needs of their own sales incentive plan.

For sales managers, this can translate into a very different challenge compared with their peers in the operations team. Deals can slip from one quarter to another in response to changes that a sales team has no control over. Sometimes a competitor may heavily discount their offering for whatever reason. Sometimes the business case can change overnight, removing that compelling driver that made your offer ideal, unique, and valuable. Sales managers will have a sales plan to help manage these challenges and more.

So what is sales planning, and how does it help?

Sales planning is designed to address these problems. As part of a sales plan, sales managers normally ensure their sales team has a 3-times sales quota pipeline so that their salespeople have a plentiful supply of leads and opportunities they can pick and choose from that align closely with the needs of the business.

However, while a sales team will do everything in its power to deliver what the business needs, it can’t control all the variables involved, which is precisely the opposite of what an operations team needs for it to be effective. This can create friction between the operations function and the sales function.

Sales vs. Operations: The Eternal Tug of War

The very different needs and challenges of a sales team and an operations team can create a host of problems in the business, from the CEO down. An unexpected uptick in demand or opportunity, unanticipated by sales and marketing functions, can overstretch the capacity of an operations function and slow the delivery of products or services. This creates a headache for the CFO, as delays in deliveries can create cashflow problems and revenue recognition issues which can negatively impact shareholder reporting. It can also create reputation management problems for the sales and marketing team.

Over-optimistic demand projections from the sales and marketing functions, perhaps to meet an unrealistic sales target, can create a range of different problems. Firstly, there’s the cost of unproductive resources. A company can’t justify having raw materials or production equipment standing idly by. It either needs to be redeployed – which is expensive and time-consuming – or it needs to be written off, which is costly.

The scale of these issues can be significantly amplified if a business is being restructured at the same time, whether post-acquisition or after a spin-off, for example.

Clearly, any company has a significant premium in ensuring that its sales and operations functions are working by the same plan. Let’s explore this in more depth and answer the question: What is sales and operations planning?

Aligning Sales Planning and Operations Planning: A Best Practice Approach

The first – and most obvious– step in ensuring that the sales and operations functions collaborate effectively is to share the sales forecast, where practical. This provides some form of guidance that help operations managers understand the anticipated level of demand they’ll face in the near term.

There are, however, issues with this. Forecasts become increasingly inaccurate the further out they look. Accurately forecasting a month out is the bread and butter of every sales team. Doing the same over the next six months is much harder and is often more a matter of judgment by the sales leadership team rather than anything based on data analytics and feedback from the market.

For the operations team, this creates the issues we explored earlier. It takes time to recruit staff, secure raw materials, re-tool production lines, and add additional logistics capabilities. Having a forecast covering only one month – in meaningful terms – is too short notice to change operational plans in any practical way.

Somehow, the sales and operations teams need a more systematic view of the opportunity and market to plan for success.

The smart move is to secure deep insight into the market opportunity open to the business, whether it covers a specific region, country, or defined business sector. The logic works equally well for B2B sales to specific industries and sales to defined B2C demographics. Revenue intelligence capabilities are the ideal tool to deliver this.

What Can Revenue Intelligence Capabilities Give You?

The true value of revenue intelligence is its ability to show you how a market is structured, how company ownership and its subsidiaries are related, how companies make their buying decisions, what their typical buying cycles are, what their average order value is, and how this varies over the business year. You can see how customers respond to different sales incentives and how seasonality or product launches and upgrades affect buying decisions.

This insight offers the opportunity for sales managers to create sales plans and incentive plans that are realistic and achievable while providing operations teams with likely sales volumes based on real-world data.

While this may sound like a wonderful pipe dream, the practicalities are straightforward.

Many companies have vast amounts of data covering all aspects of their market and customer engagement. This can cover website activity, information from online order systems, automated marketing platforms, CRM platforms, and finance systems – the list is almost endless. You can also add a host of external third-party data sources that allow companies to enrich their own data sources to provide a feature-rich view of their target market.

This insight into past market and customer behavior can help inform business decision-making about likely future behaviors, opportunities for the sales team, and sales volumes for the operations team.

How Can This Help Sales and Operations Teams?

These capabilities allow both sides of the equation to have an in-depth, long-term, and synchronized perspective view of the market opportunity they’re each addressing - albeit in very different ways.

For a sales team – and their peers in the marketing function – it helps them identify, define and engage their addressable market. This is central to ensuring that a sales team is adequately resourced for the opportunity and that the marketing team is engaging the right people, in the right way, at the right time.

Drilling down further, the capabilities allow you to understand the tempo of your sales process; how many leads you need to fill your pipeline, what the average sales cycle is, where the seasonal peaks and troughs are, and how specific sales and marketing initiatives – product upgrades, new product launches, product discounts and so on – affect the sales volume.

For the operations team, it provides deep insight into likely sales volumes based on objective data rather than ‘hunches’ from the sales team. It helps build the business case for investing in the right resources at the right time, helping the operations team maximize the value it creates for the business.

What Does the Right Solution Look Like?

Previously, implementing something like this would have required significant investment in time, staff, and technology. However, modern SaaS-based and AI capabilities mean that companies of all sizes can utilize these capabilities in a way that works for their business.

How can you create a suitable platform to help your business?

As we’ve already touched on, data lies at the center of this capability, with the ideal platform being able to integrate data from a range of internal and third-party data sources.

Powerful analytics capabilities can review this data – either automatically, using AI, or with human guidance - to start drawing insights about issues like sales cycle length, the optimal prospect contact model, customer sales incentive insights, and more. It can use practically anything that’ll help sales leaders grasp the numerous threads that make up their sales process and strategy. These insights can be shared with the operations team to help them with their planning process.

This consolidated approach to data consolidation and analytics also helps with the presentation and sharing of insights and information, making it the ideal platform to share and develop ideas based on the opportunity open to the business, now and in the future.

Learn more about integrating sales and operation management in our eBook, Unleashing The Future Of Sales Operations With Technology.