We Mean It When We Say "Underpromise, Overdeliver"

We Mean It When We Say "Underpromise; Overdeliver"

?Over the past two years, many black swan events have thrust global supply chains into the spotlight. Starting with the COVID-19 crisis, followed by the blockage of the Suez Canal, and now the war in Ukraine, all highlight the growing complexity of supply chain management and serve as a wake-up call for companies that fail to bridge the gap between sales, marketing, and operations.

Sales and operations are always at loggerheads, with the former focused on meeting targets and earning commissions and the latter constantly fighting fires dealing with volatile demand and sudden spikes in orders. When things go awry, the blame game begins between these functional groups in the ordinary course of business at most organizations worldwide.

Different functional groups need to understand how their roles harmonize with an increasingly complex and fragmented supply chain with innumerable factors and uncertainties. After all, no matter how wonderfully the sales machine functions, the final handoff remains the most critical aspect of the customer experience, potentially converting a one-time transaction into recurring sales.

In a crowded marketplace, credibility is an indispensable asset and something earned over time by consistently overdelivering and beating customer expectations. There are two ways to go about this, either put in the effort to go above and beyond promises regularly or underpromise, lower expectations, and leave customers delighted with enhanced value.

Neither option is actionable without aligning incentives across teams and functions with the common goal of delivering customer satisfaction. In fact, at times of large-scale supply chain disruptions like the present, it is recommended that the operations teams take the lead, at least until the situation improves and the various bottlenecks resolve.

?To do anything to get the sales, often observed that sales teams constantly undermine the supply chain, but if you want to imbibe the principle of 'Underpromise, Overdeliver' it is necessary to bridge gaps and collaborate, especially when dealing with trade-offs and constraints. In this article, I want to take a deep dive into restructuring an organization to reflect best these ethos and the challenges and best practices for the same.

Supply Chain Versus Sales

Operations and supply chain teams are constantly logged in a battle against volatile demand, and frequently, it has less to do with macro headwinds or unforeseen events and more to do with the mismatched incentives between supply chain, marketing, and sales. The first step towards 'underpromise, overdeliver' is getting all groups aligned to deliver value to customers.

When these groups work together in collaboration with one another, it not only brings an end to the repeated blame games but the overall experience results in a better understanding of cross-functional challenges. Over time, groups develop a heightened ability to respond to challenges in a concerted manner, which is critical with the ever-increasing supply chain uncertainties.

The following scenarios should better illustrate this predicament. The first example includes a consumer electronics store, where the sales team has bonuses linked to quarterly targets. Owing to the scramble that ensued towards the end of each quarter, customers started gaming the situation by holding off their purchases to take advantage of steep discounts during specific periods.

This resulted in substantial supply chain issues, with demand remaining abnormally low during the first eight to ten weeks before spiking towards the last two weeks of each quarter. The sales and purchasing teams at the retailer collaborated to alter sales incentives, along with newer discounts and customer loyalty programs to make demand more predictable.

Similarly, a global consumer goods manufacturer witnessed persistent demand volatility that undermined its supply chain. The culprit was a long-running promotional campaign by the marketing team to maximize sales. The company substantially reduced demand volatility by staggering the promotions and aligning them with baseline demand patterns.

Problems such as these remain endemic across most global supply chains, and as seen above, the only way to work around them is a collaboration with different functional groups, with customer experience being the main rallying call. Getting rid of the supply chain versus sales mindset is the first step toward dealing with the increasingly uncertain global supply chain.

Post-COVID Overhang & The Base Effect

A significant challenge for sales teams and organizations worldwide is the tough YoY comparisons and base effect arising from the post-COVID overhang. Over the past two years, consumer and household goods have witnessed an exponential growth in sales owing to shortages, panic-buying, and stay-at-home orders, resulting in skewed benchmarks.

Without the necessary corrective action or accounting for the unique circumstances that resulted in the volatility during the pandemic, sales teams will be held accountable for unviable targets, putting them out of order with the supply-side equation. This, coupled with the bottlenecks and constraints on the supply side, are a recipe for disaster, with the potential to permanently tarnish customer experience.

We've seen numerous other tangential supply chain components behaving erratically in recent months. Without contemplating such changes, organizations are likely to witness cost overruns, reputational damages, and even lost sales in the coming months. So ideally, the new reality must be factored into the pricing, delivery, and promises companies make to customers.

Supply-chain teams need to take the lead at times like this to build a truly resilient organization. This is far from a one-off event, and such discrepancies are likely to arise numerous times over the lifecycle of an organization. An essential best practice to contend with such situations is collaborating with supply and operations teams while setting benchmarks and incentives for sales and marketing.

The present scenario that we find ourselves in is the culmination of a perfect storm, starting with the suppressed consumer demand over the past two years coming to fruition all at once, the loose monetary and fiscal policies the world over further fueling inflation and demand, coupled with the general deficit of goods and services with production limping back to normalcy following a two-year interlude.

The only winners in recent quarters have been ocean freight carriers, who have witnessed rates increase by over 800% in a short period. In such conditions, even prudent supply chain plans go haywire, making strategic alignment, data sharing, and collaboration between sales and operations more critical if an organization wants to keep keeping its promises to customers.

The thought is that this base rate disruption will skew data and benchmarks throughout this decade and possibly more. Historians in the future will likely give special footnotes on the impact of COVID-19 and how it is clouded with data. Businesses, however, should account for this abnormality for planning, budgeting, and incentivizing during the coming here.

Shared Vision & Common Goals

A common drawback among modern organizations is the siloization of different functions, losing sight of common goals and objectives. This is further compounded by differing role-specific objectives and incentive structures, resulting in turf battles. In the absence of a shared purpose or a result, the situation can further decay to the detriment of an organization's long-term vision.

Functional groups, especially sales teams, usually meet their objectives, often overpromising, giving untenable deadlines, and overselling the product or service to make the same. In the process, they severely hamper supply chain resilience and the reliability and brand image of the entire organization.

Most organizations are perfectly aware of the need for integration of different groups, but sifting through the corporate bureaucracy and red tape to get everyone on the same page is often a herculean task. This can only be achieved by imprinting a company-wide shared vision, short-term objectives, and shared goals.

Companies are now using advanced analytics to set targets to align the sales team with more significant organizational concerns. All yearly budgeting, benchmarking, bonuses, and other incentives must be tracked and aligned with these common goals. For example, sales commissions must be linked to customer feedback, cycle-stage specific events, and other KPIs that reflect the long-term vision.

The key is to go beyond just sales and customer acquisitions towards other relevant KPIs such as customer retention, satisfaction scores, recurring orders, and customer order cycle time, among others, to ensure the total customer experience is reflected and remains in the interest of sales teams. Ideally, payment of sales commissions should be linked to meeting these other goals.

There are no precise answers, but redesigning structures, objectives, and incentives is a critical building block for customer experience management and the goal of 'Underpromise, Over Deliver.' Getting this in order not only compels different groups to stay on top of company-wide constraints or issues, it even facilitates greater collaboration.

Emphasizing such shared common goals goes a lot further, giving employees a perfect understanding of how their contributions measure up on a macro level while clarifying their core priorities and the objectives they are on the hook. This also further imbibes the individual psyche that they are all collectively responsible for customer satisfaction.

Unified Customer Experience

Once common goals and a shared vision are in place, it becomes critical to bridge the gap and reduce friction. This is only possible with rigorous internal communication, free flow of information, and a unified view of data. While sales and supply chains remain within their operations, such measures should provide them with enough plot to maneuver in pursuit of common goals.

To build storied brands, it remains essential to deliver a consistent customer experience across each touchpoint. This ranges from sales, supply chain management and even after-sales. The only way to execute this seamlessly is to ensure all key stakeholders remain on top of critical factors all through the value chain.

This also includes a unified channel for customer interaction, where feedback, queries, and other customer issues are visible to all relevant stakeholders to respond and take corrective action when necessary. Traditionally, most companies have a fragmented approach to customer interactions, resulting in information silos and lost data that fail to make it up through the proper channels.

For example, a salesperson in the field with direct interactions with customers has access to a wealth of knowledge and information that can be pretty valuable. This can be about specific issues about the product, customers' wants and desires, and even certain aspects of competing products and solutions, all of which can provide great insights to various relevant teams in the organization.

Similarly, communications with customers across support desks, social media, email, or any other avenue must be appropriately channelized to keep all relevant parties in the loop. The same applies on the other end, and if the order fulfillment team is aware of any supply-side challenges, the sales team should be made aware so that the promises and commitments made to customers can reflect the same.

Given the abundance of various integrated customer experience solutions, setting up processes and systems for a unified customer experience is quite simple. The data generated by the efficient use of such solutions can unlock valuable insights for the company, creating substantial moats against newer entrants and competitors in the market.

Such systems can make your supply chains more resilient by helping predict trends, customer habits, and requirements, which can be used to plan and support decisions across various functional groups throughout an organization. They can also help pinpoint bottlenecks and sources of variances, acting as a feedback loop for relevant departments and teams to take corrective action.

Sales & Operations Planning

Sustaining credibility, building supply chain resilience, and constantly over-delivering to customers require persistent planning in the right direction. Following best practices in integrated sales and operations planning is essential to creating a truly customer-centric organization. This goes further in achieving synchronization among all crucial functions, with supply chain drivers taking the lead.

Often done monthly, the S&OP process should lead to a sales plan, production plan, inventory data, fulfillment, and customer backlog plan, among other things. The planning is done using data and insights collected historically and includes tracking and reviewing variances regularly to take corrective action.

While it is essentially a monthly planning activity, the S&OP takes precedents from an Annual Operations Plan (AOP), covering the medium to long-term goals and objectives that the company wants to achieve. Even though this system has remained widely rooted in managerial practices for over three decades, the onset of COVID-19 brought it to the forefront. Here are some of the undisputed best practices for S&OP,

?????Executive Presence remains critical for developing and successfully implementing an S&OP system. Given its planning across functions, a CEO, director, general manager, or P&L owner can add substantial value by facilitating and leading the process.

With a strong executive presence, functional groups and their heads will work to further their interests, resulting in friction, collisions, and wide planning variances.

Ideally, an executive must be someone with sufficient experience to overcome conflicting interests, red tape, and corporate bureaucracy to get all cross-functional teams onto the same page.

This also helps prevent blame games when things go awry since impartial third parties participate in facilitating discussions while taking stock of results and performances across different groups.

?????Track External Factors that remain outside the sphere of control. Usually, most organizations already have external factors that will likely impact their plans. This includes competition, potential disruptions such as lockdowns, weather or natural disasters, and anything else that may stand in the way.

Remember, these have to be beyond your sphere of control; you cannot avoid these factors no matter how well you plan or take precautions; you can only plan around them.

When such situations come realized, they can wreak havoc on even the most carefully crafted sales and operations plan. All you can do is a hedge against them by maintaining sufficient buffer stocks or creating contingency plans to minimize the impact.

?????Focus On Key Information and not on raw data or insights generated from existing analytics systems. Ideally, the S&OP session should rely on stories created using extensive past data collected.

Making sense of raw data isn't just time-consuming; it can even result in errors and false conclusions. A long, drawn-out planning session can keep productive business activity on hold, so it is best to keep it focused and to the point.

It also remains essential that companies make use of relevant information, not just any information that comes their way. Most data, when wrongfully curated, can result in false conclusions and, ultimately, faulty planning.

?????Track Variances & Resolve Issues regularly to keep the overall variances small. Over time, with sufficient data and planning experience, most conflicts will likely be positive, although there is always the risk that executives are going above and beyond to create conservative plans to make themselves look better after achieving them.

Over the course of its implementation, many issues will come to light, which has to be recorded and resolved quickly. The proper tracking of these issues remains crucial for future planning activities.

Alan Mulally, the former CEO of Ford and Boeing, strived to create an S&OP meeting filled with candid and constructive discussions regarding issues and challenges. This helped Ford consistently overcome constraints throughout his tenure as CEO.

Sales and operations planning has since become a closely examined field of study in managerial sciences, with numerous studies and best practices coming to light each year. Here again, there is no one size fits all, and executives should dive deep into this process before adopting a system that best suits their requirements.

Currently, there are numerous software solutions focused entirely on S&OP and integrated business planning. Filled with a host of features to help facilitate effective planning, tracking, and execution, software solutions such as Anaplan, SAP IBP, and Oracle, make it easier to get this started for your small business or company.

In A Nutshell

"Underpromise, Overdeliver" remains essential to building brand loyalty, consumer confidence, and reputation. As organizations get more prominent, with increased siloization, and functional groups lose sight of the big picture, adopting certain best practices to get everyone on the same page is critical in successfully implementing this.

The digitalization of businesses, processes, and systems has been brought to prominence ever since COVID-19, and with digital strategies and methods, it is increasingly easier to build synchronization between different teams and groups, mainly between sales and operations. With customer centricity becoming the rallying call, digital solutions can help unify an organization towards a common goal.

Software packages designed explicitly for such purposes can only go this far; they must complement an effective incentive and objectives strategy to best guide teams towards the shared vision of customer experience. It also remains critical that the sales and marketing teams don't undermine supply planning, which can only be ensured with an all-hands S&OP each month.

While cross-functional alignment and collaboration remain ideal for accomplishing long-term visions in an organization, the operations team should take the lead in addressing and overcoming key bottlenecks in times of large-scale supply chain disruptions. Customer centricity should still rule the roost at times such as this, making it necessary to defer the sales maximization efforts of sales & marketing teams.

Former Amazon CEO Jeff Bezos once said that while it is impossible to predict the future, the customer demand for faster deliveries, a more comprehensive range of options, and cheaper pricing is never likely to change. With this, 'Under Promising & Over Deliver' is expected to get exponentially more complicated as time goes on, with supply chain complexities following suit.