Two instances popped up recently where clients' growing pains involved balancing production and production capacity. In both cases, the incoming sales opportunities were challenging their ability to fulfill the requests. It's a good problem, but a problem nonetheless.
In his business classic The Fifth Discipline, Peter Senge writes about growth resembling a snowball rolling downhill - it is natural that the snowball grows and gains momentum unless there is some obstacle or opposing force preventing it from continuing on its path. Sales tend to generate sales, either from repeat business or from referrals and marketing tactics that generate new customers. So what's blocking the path of the snowballs in these two client situations? Lack of capacity.
Good sale - can't get product out the door
Imagine this: a customer asks you to fulfill an order or a request for service. You currently don't have enough bodies to physically do the work. You have posted job openings, but have had difficulty filling the roles you need to fill. You don't have enough capacity. Your plate is so full that you have no choice but to deliver late.
A few days or weeks later you fill the empty job opening, but you and your team are so busy pushing work out the door that you don't have time to train your new person properly! This can create disengagement, lower quality work from the new team member, or even premature turnover, and you're back to square one in the capacity department.
You don't always need more people
Production capacity issues might not be from unfilled slots. As a matter of fact, hiring more bodies is the quick answer to capacity problems but often unnecessary. You might be able to deal with capacity shortage by improving work processes using your existing team and resources. Cut out unnecessary steps, delays, duplication and waste of various sorts, and thereby reduce the cycle time.
You might be able to outsource to gain capacity. If you are experiencing a temporary surge in demand, this option prevents you from having to make a longer term financial commitment to equipment or staffing. If you outsource, though, you do lose some control over the work product.
Customer implications of capacity problems
Your prospective client is not thrilled by the delay in service or product delivery. The timing of delivery is often as important as the product or service itself. It's not a great place to start the transaction when your goal is to build a mutually beneficial relationship for the long haul. And your customers have choices - if you lose them over your current capacity issues you might not get them back.
When to build capacity
The time to build capacity is before you need it. BUT - excess capacity can create a drain on cash flow. To manage capacity well you need to be able to project what the business is expected to generate in sales. Are you looking at your financials merely to see how you performed during the last quarter or last year? Instead use that data to help you take a realistic look forward and make sure you have the resources (or a specific game plan) in place to fulfill customer needs next month, next quarter, next year.
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