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As the CEO or COO or CFO; or the Head of Sales or Marketing or Logistics of your company, this article will ring a strong bell for you. It is about something which is a deep malaise and most people don’t even recognise it as a problem! I call it the sales-skew problem. I promise you the next 10 minutes will be very well-spent

Shocking is the number of companies where 50% or more of the sales happens in the last few days of the month! Managers are clueless till the last moment of the last day on whether they will meet their target, or how huge a shortfall they will have. In many companies, the last day ends at 11.59 pm. That full day, warehouses become invoice- printing presses, printers spewing out invoices at break-neck speed. Does this happen in your company? If yes, do you recognise sales-skew as a problem? If you do, you are among the few who do so. Most companies don’t! It’s a way of life for them! Many of them even don’t realise that it’s bad, because Sales-skew is something everybody experiences, everybody thinks ‘my boss also knows about it, so it’s okay’. But, it is not at all okay! It’s a very inefficient and ineffective way of utilising our plants, our people, our working capital, our brands, our distribution network. Let me explain the anatomy of a Sales Skew

What’s a Sales skew: A Sales skew exists if a large part of your sales gets bunched over just a few days; for example, if your measuring period is the month, and say 50% of your sales happens in the last week (or in any one week.) I see this in many companies selling through Distributors. I see in many Project Companies huge billing in the last week of the quarter. If your measuring period is week and say half the week’s sales happens on Saturdays, that too is skew

How does a Sales skew get created: A Sales skew gets created mainly due to 2 reasons:

  1. Dumping of stocks to meet sales targets
  2. Bunching of purchases by customers to take advantage of promotion schemes, credit terms, transportation savings, etc.

Can you see that both the reasons are company-created? Whereas, the common myth is that this is due to the market?

Why is a Sales skew bad: Because it negatively impacts every element in the supply and delivery chain, every aspect of a company’s operations. To understand this fully, it will be useful to see what exactly happens in the field in the last week, in your & your Distributor’s Warehouses, in your factories when there is a huge month-end skew

Let me start with the last guy in the chain: Distributors’ Sales Reps. In the last week, they are running helter-skelter for orders-begging, pleading, cajoling to somehow get an order. Offering higher credit or discounts, quite often without authorisation. And for the moment, not even talking of payments. He collects orders on phone, on pieces of paper, on anything and conveys them over phone so that the Distributor’s printing presses can go on overdrive

Let’s see what happens to the next guy in the chain, the Company Sales Executive. He or she, starts pushing his Distributors, bullying the small ones, cajoling the larger ones. And if none of these works, forcing them, i.e. dumping stocks on them. Tremendous wear and tear happens as resentment gets built on both sides. The company person thinks the Distributor is not co-operative and must be cut to size. The Distributor resents that every rookie Sales Executive thinks he can dump on him just to meet his own targets or incentives

Now let’s now see what happens at the Distributor’s end. The Distributor has double-trouble. On one side, trucks are arriving from the company at a furious pace, he has to unload them. And on the other side, orders from customers are also being fed in large numbers by his Sales Reps and they have to be invoiced and dispatched. Often, an item that a customer has ordered is not in stock but is in transit from the company. Also, to dispatch all the orders in just a few days, his own trucks will be insufficient and he will have to hire trucks from the market. For the first 3 weeks, his trucks idle but still incur cost. Come last week he has to hire extra trucks!  The Distributor’s warehouse will become a madhouse if he manages such skewed arrivals and dispatches at the same time. So, what does he often do? He simply prints all invoices but dispatches to his customers over a week, so that he can utilise his own trucks better than hire costly trucks from the market. His dispatches happen in Week 1 of the new month. If your company does all its measurements and incentives on secondary sales from Distributors, this means the Distributor’s Sales figures and market outstandings are grossly overstated. And, Inventories are grossly understated! So, the 3 most important measures every Sales team discusses are wrong! Weeks 2 & 3 are for Operation Collections, he is after his Sales guys to collect money. And, his Sales Reps are back to cajoling, begging, pleading, but this time it is for money!  Sales is forgotten for the first 3 weeks. Suddenly, it is the last week of the month, and it’s back to begging for orders for this month. And so, the cycle continues!

This cycle has its impact on production plants too. Since warehouses are full and Distributors are not ordering in the first half of the month, plants are on go-slow then. And suddenly, orders go up to meet targets and they have to work overtime to produce, to dispatch. Truck sourcing also becomes difficult and more expensive. Trucks reach late, incur demurrage

Sales blames their favourite whipping boy—Supply Chain—for loss of business. Supply Chain blames their favourite whipping boy—Sales. Sales then blames Marketing that prices have become too high and consumers are shifting to competition in droves. Under pressure, Marketing declares a big bang trade scheme or Consumer Scheme. If it delivers more volumes, Sales claims “I did it!’. If Sales doesn’t achieve higher volumes, whatever be the real reason, Sales blames Marketing and puts pressure for higher schemes. This hit the bottom-line. And, Finance blames Sales & Marketing for poor realisation, and skewed cash flows, making a case for yet another price increase as ‘margins are under pressure’. HR is put under the wringer for not getting or creating Sales people with the right competencies. Under pressure, HR gets the nearest training company and creates a ‘Comprehensive training program’ over many man-days; and a Team-building program at the nearest hill-station. And, so the saga continues, to next month, to next year. Sounds familiar?

A Company with Sales skew is wonderful only for Banks. When more than 50% of sales happens in one week, companies & Distributors have to utilise high working capital limits to survive the spikes in inventories and outstandings. It’s the Company that ultimately bears the cost of these inefficiencies through interest costs and higher trade or Distributor margins; or more promotions. All this is big value lost!

Want to extract this value? Yes, you can!

Actually, Sales Skew is just a symptom, the root cause is something else. As I mentioned earlier, it is a myth that this is due to the market. Most skews are company-created! The root cause for Sales Skew is nothing but wrong Customer, Sales & Trade Promotion Policies of a Company. To correct Skew these have to be set right. Setting these right is a Top Management decision as there may be some short term pain, for permanent, recurring, month after month, year after year gain

To get the best out of skew-busting, you need to take two steps:

Step 1: Correct skew through identifying Skew-buster policies tailored to your company and industry.   This will make the entire value chain lean & efficient, extracting great value for the company. Thus, improving the bottom-line directly

Step 2: Define and train on aligned, simple new ways-of-working for the Sales team. This is because, skew–busting will free up time for the Sales force to do their real job—market development & pull creation. It will lead to much improved sales, sales productivity. Thus, improving the top-line and the bottom-line further

And, work-life balance for all employees across Sales, Marketing, Supply Chain, Manufacturing, Finance

Unleash the power of your brand, people and partners by banishing Sales Skew! Want help, call us