Who Holds The Key To Successful Cost Savings?
All companies keep their eyes on the cost development and in general try to minimize their cost base. Some do it via projects looking into specific areas whereas others who have to cut down on costs every year need to have it as an ingrained mindset. Typically it’s the Operations department that is responsible for maximizing the savings as they manage the capacity available and optimize the operational setup in general. However, the key to doing successful continuous cost savings is not Operations, but rather Sales as they hold the responsibility for filling up the capacity Operations put at their disposal.
Your Operations team will do whatever you ask of them
As a Sales person selling the company’s products, you are selling the company’s ability to deliver the product on time and at the agreed quality. You are dependent on the backbone and infrastructure of the company typically provided by Operations. In order to sell the product, you might even over-promise what your company can do for a certain customer knowing that surely Operations can find a solution post mortem. Most often that is also the case as your Operations team can do whatever you ask of them however it comes at a price. If you have sold the customer something that requires excess capacity or a different form of delivery such as transporting by truck instead of rail it all costs money. As a Salesperson, you might operate with a standard cost in mind when selling the products however it’s very important to remember that standard costs are only valid for standard products. Every time you sell something more than standard the price also needs to be premium.
Only at full capacity can beggars be choosers
At least this would seem logical, however, to begin with it’s even more important to fill up the capacity Operations is providing based on the company’s planning process. In industries where capacity is not overly flexible, this becomes very crucial due to the high fixed cost base. Therefore, in many cases, it might make sense to do whatever it takes to sell the product even though you are given away premium features at a standard price. This will ensure that you utilize the fixed cost base better and at a highly utilized capacity it’s also easier to optimize operational flows. Once you are fully utilized however it becomes more important to make sure to charge for all the features you are selling. So if the sales person doesn’t know the cost implications of what they are selling the costs will quickly run out of hand.
Sales and Operations must team up to go for the win
In fact, there is a significant potential in letting Sales and Operations team up to ensure that Sales are aware of all implications on cost