Production scheduling and short-range sales forecasting. If capacity is too high relative to sales, they are upset because costs are too high.Ģ. If capacity is too low, marketers are upset because they are losing sales. Since the manufacturing people are insulated from the marketplace, their forecasts are often no better, and are sometimes even worse. In self-defense, manufacturing people often second-guess the marketers and operate from revised forecasts. When business is down, the salespeople perceive it as even worse than it is when business is good, they become ebullient. The sales forecasts are often wrong partly because of the inexactness of the forecasting act itself and partly because the salespeople who are closest to the customer often react emotionally to market prospects. Here the sales forecast must not only be precise in total, but each part must also be precise.Ĭapacity planning is an area in which both marketing and manufacturing are seldom perfect. In these situations, either capacity is a function of product mix, or different manufacturing processes require different facilities or labor input. In many companies, the problem is much more complex than just a gross sales forecast. And, because sales forecasting is not a science, the marketing and sales executives who forecast sales can’t be expected to be right every time. Thus the solution is clear: have exactly the right capacity at the right time.īut that requires precise long-term sales forecasting.
Mortgage payments, rent, taxes, depreciation, unemployment benefits, wasted training, and so on eat into profits when sales are lowest. In addition, excess capacity is expensive. Usually, most companies want to build plants, buy equipment, and hire employees at the very time when the construction industry is busiest, the equipment backlogs longest, and the labor market tightest. The problem is further exacerbated by the business cycle. Even the hiring and training of additional employees to staff existing physical capacity can take as long as from one year in fairly typical industries to several years in fields requiring great skill and experience such as tool and die making or advanced welding. The addition of new equipment can take up to two years in most industries. If such a change requires a new or enlarged building, design and construction can take several years. It often takes a long time for a company to change its manufacturing capacity. Beyond the day-to-day issue of what product do we make tomorrow or next week, one of the strategic areas of cooperation is capacity planning and long-range sales forecasting. Capacity planning and long-range sales forecasts. Let us start by taking a closer look at each of these problem areas.Įxhibit Marketing/Manufacturing Areas of Necessary Cooperation but Potential Conflictġ. The accompanying Exhibit lists eight general areas in which there is a strong likelihood of conflict in managing the marketing/manufacturing interface in an industrial company.
Finally, I will recommend an approach for strengthening the two functions. Next, I will suggest ways of managing the conflict by increasing cooperation and minimizing antagonism between the marketing and manufacturing functions. Then, I will consider the causes of conflict. In this article I will begin by detailing the areas of necessary cooperation but potential conflict. While some consumer goods companies, particularly those in fashion industries with broad product lines (e.g., apparel, furniture), experience antagonism between these two key functions, the need for cooperation is much greater in the typical industrial goods company. Marketing personnel in companies that manufacture industrial goods often complain about the activities and attitudes of their manufacturing counterparts with laments such as: “Why can’t they become market-oriented or customer-oriented?” “Why are they so provincial?” The manufacturing people, on the other hand, lament like this: “The marketing people have no understanding of costs, profits, plants, or operations.
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