Academic journal article The Journal of Business Forecasting

How to Build a Relationship between Sales and Logistics for an Effective Demand Planning

Academic journal article The Journal of Business Forecasting

How to Build a Relationship between Sales and Logistics for an Effective Demand Planning

Article excerpt

EXECUTIVE SUMMARY | The article shows that the best way to bring Sales and Logistics together is to find common ground. The quick sell to Sales is product availability, and to Logistics, having the right inventory at the right time. Once they understand their mutual interests, their relationship will grow. Good communication is also important. Salespeople are on the front line, and know fairly well the customers' promotional plans. If they communicate this information to Logistics in a timely manner, it would help to improve product availability.

In the business of manufacturing products, building revenue boils down to two factors: being able to sell products, and minimizing the risk of holding the wrong inventory.

TYING SALES WITH LOGISTICS

In orderto understand how we can tie the Sales team with Logistics, we need to understand the mindset of both. When evaluating performance of each group, we need to focus on how performance is measured. The performance of the Sales team is measured on the basis of how much it sells, the level of service it provides to its accounts, and its ability to maintain healthy margin.

The Logistics team has its own set of measurements for success which, in certain aspects, overlap with those of Sales. For example, key performance indicators for the Logistics team include shipping on time and customer service. Inventory quality is another measure that means a lot to Logistics. These are equally applicable to Sales, because they also aim for good customer service, and they want to be sure products are in stock when orders come in.

The relationship between Sales and Logistics blurs when we see how they communicate with each other. Their relationship would be strengthened if they were to talk in terms of net sales (Sales minus projected returns and other related expenses) on a monthly call. Sales may raise an important question: "why aren't we hitting our monthly sales target?"The answer lies with good forecasts. With good forecasts, we can have right products at the right time.

The forecasting process plays an important role in business. With the right process, forecasts improve. Selling is equally important. But Sales' dayto-day interaction provides valuable insight about their accounts to Logistics. The Sales are on the front line. They know better than anyone else what is happening in the marketplace, and what plans their customers have. All these have an impact on the retail traffic. If Logistics is not informed about these changes, they would have a damaging impact on forecasts and, consequently, on inventory. Stock outs will result in lost sales, and excess stocks will cave into margin.

Improving the flow of communication is the key toan efficient process. When you break down the walls that separate them, you will find both Logistics and Sales look at trends, though somewhat of different variables. …

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