Sales and Operations Planning
Many companies find that there is a market requirement for new and better products and also for faster delivery and at a lower price. The company have to balance high delivery service in relation to its customers and the capital bound in stock which gives high demands for the cross functional planning in the company. Especially if you have a set up with global supply chains, and the uncertainty it brings in terms of longer and more uncertain lead times.
The challenges can be seen a large number of places
Without the right set up in place the company will face a number of different challenges:
• Deliver service to customers is too low in combination with too many backorders
• Poor utilization of capacity – for own production and for suppliers as well.
• High capital bound up in stock, which gives an inadequate cash flow, and leading to reduced earnings in the company.
There are many reasons as explanation
Not a single reason alone can cause all the challenges, you will normally have to find answer among several:
• Insufficient and not standardized processes in relation to the cross functional planning (sales, logistics, production and Finance) - even at top management level. In addition you will discover insufficient IT support and lack of KPI reports
• Large and growing product portfolio with long lead times and large batch sizes from suppliers.
Overall, it means that you are strongly disconnected from making the right decisions.
Improve the cross functional planning
The answer for many companies is a process that focus on the cross functional planning - S&OP. It is a planning and decision making process, which balances the demand and product supply. It is normally a monthly process in which top management must attend and make decisions based on the same basis (KPIs and other reports) for a time horizon between 12 and 24 months.
There are many benefits related to a S&OP process
The potential is depending on the company’s starting point and ambition with S&OP process, but in general the benefits can be described as:
• Decision making is more accurate and supported by appropriate information
• Demand and supply is in balance with business plans and by that reduced capital bound in stock, improved customer service and higher productivity
• All planning activities are aligned and based on the same set of plans, which also can link it to the overall strategy
How we do it
S&OP process must be developed to meet the company’s starting point and ambition for the process. The first phase will be to set up the process (reports, KPI, organization, meeting structure). Next will be a launch of the S&OP process, with a continuously improvement of the process in 3 to 4 turns. Throughout the project there will be a very close interaction with the people who are going to drive the process subsequently.