Would it surprise you to learn that, if you’re running a company with total revenues greater than $5m per annum, there’s likely to be around 15 to 20% of net margin lying around your business, undiscovered?
A Shared Responsibility
Most often, this margin erosion will be associated with the over-servicing of your largest two or three customers and it’s probably being written off as an overhead or operational variance.
It’s common practice for suppliers to leave the management of their “big” customers in the hands of their sales team. Customers can be demanding, sensitive, aggressive and a little scary sometimes—especially when something has gone wrong in their relationship with your company. So, this is why most functions within a supplier leave the management, reporting, negotiation and difficult conversations with their customers to their sales team.
They’re paid well to deal with tough or awkward situations, so why not let them handle it?
The problem with this thinking is that the sales team have very little hands-on participation in the routine daily fulfilment of a customer’s requirements. They don’t know all that’s going on below the surface of the business to keep the “customer supplied on time.”
Every function in your business has an inherent responsibility for customer compliance and profitability, not just the sales team.
To better understand the ramifications of completely leaving your sales team to spearhead the management of your customer agreements, without consistent input from other functions in your business, it’s worth pausing and considering “the bowtie effect.”
I’ll be discussing that in Part 2 of this article. …
