Sales and Operations Planning (S&OP) has evolved into a critical component for businesses to create a predictive and nimble operating methodology. Supply and demand are at the core of most S&OP strategies. We’d like to provide an overview of how your operations can take advantage of strong S&OP processes to ensure maximum, predictable success with your business undertaking.
S&OP Needs to be a Company Wide Effort
Effective S&OP strategies cannot be done in silos. Developing a proper strategy typically includes the following:
- Operations
- Finance
- Sales
- Marketing
- Other groups as deemed necessary
All planning should be executed as a collaborative effort, with input from all stakeholders. This way the major pillars of an effective S&OP strategy are developed with collective input, to develop:
Regular and accurate reporting. This includes demand inputs, supply inputs, and other projection data to aid in decision making.
Analysis prior to work scheduling. This is where any changes to supply or demand are recognized and provided to management for consideration before a final plan is approved.
Presentation of all decision criteria. This step takes into account any impacts on indicators including supply chain costs, customer service levels, revenue, etc.
Product decisions. This would include the potential for new product introductions, or removal of products or product lines. In some instances, it could also include introduction of new products from mergers and/or acquisitions the company has made.
Distillation of large amounts of data. The end S&OP decisions need to be condensed from the multiple sources and inputs into actionable reporting information, as a support for the ultimate decisions to be made.
S&OP Starts with Data
We’ve established that a proper S&OP strategy must be a multi-department effort, with everyone’s input, and information shared with all the stakeholders. At its very core, any S&OP initiative must begin with useful data. This will include both current sales and production data, as well as past performance data and indicators. The raw data is analyzed to determine appropriate benchmarks as to where the business currently is as it relates to S&OP. Some of the typical points to include for such analysis would include:
- Past accuracy of forecasts – and identifying areas for improvement
- Inventory and supply levels, current and past
- How raw materials and finished product intersect and compare
- Order fulfillment processes, lead times, overall delivery performance
Putting the Plan into Action
The next step is taking all of the analysis you’ve completed, deciding on a plan, and finally executing your S&OP strategy. This again will need to involve active participation and input from all stakeholders. If you’ve utilized digital technologies to assist with parsing of the raw data, you will likely also need to rely on tools such as advanced analytics algorithms to develop the final estimates of demand, and all the sub-processes that are generated from it. This combination – interdepartmental cooperation and sharing of data, and technology-enhanced analysis, will go a long way to creating a successful and effective S&OP plan for an organization.
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