At many companies, sales generation activities have become disconnected from the operational activities required to fulfill that demand — resulting in conflicting objectives and foregone business opportunities. Bringing the supply and demand sides of an enterprise together can represent a significant opportunity for efficiency and value creation.
Many companies compete in multiple product or customer categories, each of which requires a distinct supply chain capability. Such companies are challenged to develop capabilities in both cost leadership and product or service differentiation — a tall order, given that the ability to compete in different strategic segments at the same time requires precise coordination of the sales side of the company with supply chain operations. This is especially tricky given the fact that in many organizations, the two sides are completely disconnected, a perennial problem that management thinker Peter Drucker considered one of the “great divides” in management. The divide between demand and supply is a key reason that companies are so often trapped into selling excess products well below market rates or losing sales because an inventory shortage makes it impossible to fulfill demand.
As remarkable as it might seem in this age of big data and just-in-time delivery, our research suggests that the divide between demand and supply is as serious a problem today as it was in Drucker’s time. Despite all of our technological and managerial advances, most companies are still trying to play off of three different sheets of music — the financial plan, the marketing plan and the operations plan — with results that seldom end in three-part harmony. Our research suggests that most companies still do not know how to serve their most important customers in a way that maximizes the value to their customers and to themselves.
To understand more about how a few companies have managed to bridge this divide, we conducted interviews with managers and senior executives at eight different organizations who worked at different roles on either side of the gap between sales and production. We found that value requirements often vary significantly across customers or segments of choice, demanding cost efficiency in some cases and product and service differentiation in others. Unlike sales, which has learned to tailor its offerings to the customer, the operational side of the enterprise is often incapable of altering its service proposition.