1. Sales and Production
Coordination of sales and production activities is essential. Whereas at one time production was started only after orders were on hand, today most production is in anticipation of future sales. Similarly, although some products, such as defense materials for the armed forces, are manufactured to specifications established by buyers, most products today are manufactured according to specifications set within the company itself.
Coordination is important both in planning and operations. In planning, joint consultation is required when deciding the products to manufacture, the quantities to produce, the production schedule, inventories, and packaging. But even carefully made plans rarely work out as originally visualized. On the sales side, the sales estimate (on which production schedules are based) may prove in error, or the sales department may accept rush orders, necessitating reshuffling of production schedules, addition of extra shifts, or payment of overtime wages. On the production side, output may not conform to planned quantities because of labor difficulties, material shortages, adverse weather conditions, and the like. These and other operating situations require changes in plans that must be worked out jointly by sales and production personnel.
There is a natural tendency for the two departments to work at cross-purposes, and this makes coordination more difficult. Much has been written about the conflicting philosophies of “production-minded” and “sales-minded” executives. It is sufficient to say here that production executives are naturally concerned with such matters as product line standardization and simplification, and achieving manufacturing economies through long and continuous production runs. Sales executives are naturally concerned over “having something for everybody.” Thus, their inclination is to argue for wide selections of products and models, adapted as nearly as possible to the preferences of individual customers. The marketing concept, however, rejects these extreme positions, and top management works to integrate both departments’ interests into unified company policies.
The cooperation of the sales department helps the production department. Sales estimates, prepared by or with the assistance of sales executives, are needed for efficient planning of production and purchase schedules. The sales department has a reservoir of market knowledge that is invaluable to production executives seeking more efficient utilization of plant facilities. Sales executives keep production executives informed of changes in market demand for different products, and this increases the chances of attaining optimum production levels. Sales executives recommend elimination of slow sellers, addition of promising new products, and changes in product specifications. For all products, present and proposed, the sales department gives its appraisals from the standpoints of price and potential volume. Moreover, when inventories of raw materials, goods in process, or finished products are excessive, the sales department assists by pushing sales of the products affected.
The production department helps the sales department. It provides selling ammunition in the form of detailed technical information on products and assists in training salespersons in product information. When drafting promotional plans, sales executives draw upon production executives’ know-how on such matters as manufacturing costs at different output levels, limitations of production facilities, and the practicality of building given characteristics into products. By relaying information on unused plant capacity and work-in-process to the sales department, the production department helps in stimulating sales personnel to greater efforts. The same information is useful for detecting the need to change the sales emphasis given different products.
Methods for achieving interdepartmental coordination vary, but, because sales and production are both of critical importance, top management generally retains the primary responsibility. If the company has a separate merchandising department, top management delegates to it the authority to coordinate many sales and production activities through staff
channels. In other companies, merchandising committees with representatives from both sales and production obtain formal coordination. Formal Coordinating mechanisms are valuable, but close informal contacts between personnel at many levels are important in handling many complex problems arising in the course of operations with minimum expenditure of executive time.
2. Sales and Research and Development
In large firms and in most firms oriented toward product innovation, research and development (R&D) is organized as a separate staff department. In smaller and more conservative firms, responsibility for R&D may be placed in the marketing or production department. Research and development work consists of scientific and engineering efforts to develop new products and to improve established products. It is related to merchandising, that is, structuring the product line and adjusting product features to fit customers’ wants, which is of prime concern to the sales department as well as to the production department. Because engineering and design characteristics affect the salability of products, synchronization is required of research and development, sales, and production departments—all of which are involved in product innovation. Among the means of achieving this synchronization are
- New Product Departments—charged with responsibility for developing new products through coordination of R&D, production, and sales and marketing personnel.
- New Product Managers—one-person units responsible for developing new products through coordinating R&D, production, and sales and marketing personnel.
- New Product Project Management Team—composed of persons home-based in other departments brought together to work on a new product.
- Product Development Committee—similar to (3), but with a permanent existence and dealing with continuing problems of innovation relating to a given product group.
Whether main reliance is placed upon formal or informal mechanisms, coordination should take place at lower organizational levels. Department heads find it difficult to keep abreast of the multitude of rapidly changing factors that must be considered in the day-to-day process of developing new products. Specialists have the detailed knowledge of markets and technologies that enables them to make the frequent decisions innovation requires.
3. Sales and Human Resources
Because of the unique problems in managing employees located away from company offices and facilities, most human resource (HR) departments are ill-equipped to service sales personnel. Sales departments ordinarily handle nearly all their own personnel problems, and the HR department acts mainly in an advisory capacity. HR department specialists in job analysis, recruiting, selecting, training, and motivation often are consulted by sales executives. Some routine personnel work, such as maintaining records or personal data, is performed by the HR department. The two departments cooperate in formulating policies on pensions, vacations, sick leaves, safety, health checks, and similar matters. Formal coordination is through top management, and there is significant informal coordination.
4. Sales and Finance
The sales department assists the finance department by furnishing sales estimates for the company budget, by developing the sales department’s budget, and by assisting in control of selling cost. The finance department assists the sales department by providing rapid credit checks on prospective accounts, keeping sales people informed of customers’ credit standings, helping locate prospective accounts, and providing credit information on candidates for sales positions. In some firms, salespersons represent the financial department in making collections and securing credit information. These interdepartmental activities require good communications, consistent policies, and close working relationships. Most organizational plans provide for formal coordination through budget and executive committees.
Coordination of sales and finance takes place informally by personal contact, in a mutual effort to overcome the natural conflict of interest in credit policy. Credit terms are significant factors in obtaining orders. Length of the credit period, size and nature of discounts, relative liberality in granting credit—all can be instrumental in persuading prospects to buy.
Good reasons exist for keeping control over credit policy and its implementation away from the sales department. Some sales executives, and far too many salespeople, are more interested in obtaining orders than in collecting amounts due, resulting in a tendency to grant credit to below-average risks. Furthermore, salespeople shy away from making collections, especially from slow-paying accounts, for fear of antagonizing customers.
But credit terms should be set to permit their use as selling points. And there is a need for tact in credit negotiations, both by salespeople and by credit personnel. When a customer’s credit must be shut off, a situation arises requiring not only tact but coordination to avoid buck-passing and resultant loss of goodwill. Generally, the sales department, wanting to increase sales, favors liberalizing credit policies, whereas the credit department, wanting to control credit losses, favors tightening them. Close coordination and communication strike a balance between these inclinations to serve the best interests of the whole company.
5. Sales and Accounting
Traditionally the sales department relied upon the accounting department to bill customers, handle the department’s payroll computation and disbursement problems, and provide data for sales analysis and marketing cost analysis. With development of companywide management information systems, performance of these functions shifted away from the accounting department. That department, however, may retain primary responsibility or even, organizationally speaking, have the centralized data-processing unit under its jurisdiction. More and more companies have set up such units, sometimes called “computer centers,” to handle data-processing and analysis functions for all, or nearly all, departments.
6. Sales and Purchasing
The sales and purchasing departments cooperate in three main ways. First, the sales department provides purchasing with sales estimates so that adequate stocks of raw materials, fabricating parts, and other items can be procured in advance of scheduled production runs. Sometimes these data are furnished through an intermediary such as the production department or data-processing unit. Second, the purchasing department informs the sales department, again sometimes through an intermediary, of material surpluses and shortages, so sales emphasis can be changed with regard to products made from these materials. Third, data on sales department needs (for example, office supplies and fixtures, and company cars) are furnished the purchasing department so that purchases can be made on advantageous terms.
A fourth point of cooperation exists in companies where reciprocity is approved policy. The two departments coordinate their efforts, buying as much as possible from customers and selling as much as possible to suppliers. Coordination is achieved formally through top management and informally through personal contacts.
7. Sales and Public Relations
The sales department works closely with the public relations department. Public relations is consulted on any contemplated moves that might have public relations repercussions, and the sales department assists public relations personnel by relaying information, secured through its contacts with various publics, that has public relations significance. Relations between the two departments are normally informal and with frequent personal contacts, with formal coordination being the responsibility of top management.
8. Sales and Legal
Legislation regulating and affecting marketing activities makes effective coordination of the sales and legal departments imperative. Every sales department activity has, or can have, legal implications. Sales executives require legal advice on contracts with sales personnel, pricing, relations with competitors and trade associations, salesperson recruiting policy and practice, and disputes with customers. Sales executives and legal officers are in continuing communication to avoid costly litigation and unfavorable publicity. Formal coordination of the sales and legal departments is achieved through top management, but interdepartmental coordination on legal matters is informal.
Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.