Although Sales and Operation Planning process (S&OP) is a well-established-proven tool, nearly a quarter of companies still do not use it, and they do not intend to try it shortly, according to AMR Research. Increased complexity in the value chain is putting pressure even on well-run S&OP processes, making accurate forecasting and planning more complicated.
S&OP is a vital tool to improve communication, build-up service levels, reduce costs, and improve on planning competence in all parts of a Supply Chain. However, due to the increasing challenges caused by complexity within the value chain, S&OP is becoming much more problematical to implement, requiring a new look at the level of granularity and the analytics needed to establish precise and meaningful forecasts and analyse business transactions.
Key parameters when revitalising the S&OP approach:
• Pair objectives to processes.
• Embrace an integrated value chain outlook.
• Display made-to-measure business issues in policies.
• Leverage technology.
• Get closer to demand.
• It makes the description for variable elements in new product and promotion cycles.
• Align to important synchronised performance indicators.
There are many actions that any industry can take to make sure that S&OP:
In addition to bringing stronger results to individual companies:
it makes use of newly available Point-of-sale (POS) data and the tailored business streams operating model to better integrate collaborative, coordinated decision-maker teams of retailers, manufacturers, suppliers and customers and, involving them in any negotiations, in such a way that the conjunction of different points of view could avoid missing the benefits S&OP process can bring.
S&OP commands that Sales, Marketing, Operations, Finance, Research and Development (R&D), and Information Technology (IT) should know what the other departments are doing, discussing how to better integrate each of their strategies, capabilities, and goals. S&OP serves as an agent process to allocate products by aligning policies and procedures that take into account trade-offs across different functional groups and financial objectives.
How does S&OP work?
It helps to alleviate underperformances in the first place, by proactively managing supply and demand.
Cross-functional executives from Sales, Marketing, Operations, Finance, R&D, and IT meet every month (or even more frequently if necessary,) to align Marketing and Sales programs with Operations production and capacity plans.
The S&OP process could evaluate and decide which customers or products should get priority.
The S&OP process focuses on making decisions that are best for the business, balancing customer service, inventory, and cost-to-serve.
S&OP sets policies in place and aligns the company toward making more integrated decisions.
It gives the organisation a disciplined process for focusing straightaway on tough choices.
The process authorises the cross-functional team to make necessary decisions through clear decision rights, metrics, and incentives.
S&OP becomes an instrument for senior management to drive the business to desired outcomes. Such planning is decisive for ensuring supply and fulfiling demand at the shelf.
It offers clear benefits concerning reduced costs, an increase of in-stocks, and more efficient operations.
Summing up: growing complexity challenges affects S&OP process truthfulness. This complexity is manifested in multiple forms — products, manufacturing technologies, weather, promotions, and consumer requirements. Some other causes could be sourcing, outsourcing, shorter time to react in the marketplace due to competition, timelines, time variable, service requirements, customisation of products and services; data granularity, customer and consumer segmentation, Point of Sales (POS) availability by item, by store, by day.
Refreshing the capabilities needed for an advanced S&OP will help companies to overcome industry complexity and collaboration challenges.
Dave Food
