Sales & Operations Planning (S&OP) is foremost the senior managements eyes on the future of their business giving them the latest view of how customer demand is being met by their supply chain and the impact on delivering the overall strategy for the business.
Sitting below this high level process is the execution layer made up of a series of processes which together form the integrated supply chain. Typically this consists of a demand planning team, a supply planning team and a short term process group. All teams integrated around 1 set of numbers and managed by performance measures suitable for the business.
Until the late 1980’s many businesses viewed their supply chains as being nothing other than a number of silo departments within their own organisations; who looked after planning, inventory management and materials handling. Some may have extended the concept to purchasing. As a result in some cases the supply chain was the last to know about the ‘exciting new product’ being developed by R&D with a launch date already set – and no one looking at the resources or sourcing opportunities. Few looked at suppliers as ‘partners’ and often treated customers with disdain.
In the 90’s companies began to see the benefit of having their supply chain functions joined up as single department but often still within the operations directorate. Still having little voice or involvement in major decisions the supply chain were still left to try to deliver corporate strategy without the benefit of being involved up front.
From the mid/late 1990’s supply chain was beginning to evolve to include the suppliers – often just to beat them into price reductions! Then it became apparent that the supply chain should attempt to integrate with the suppliers and the customers. On some occasions the planning teams from customers would spend time with suppliers in an attempt to smooth out material flows to avoid back orders or log jams.
In more recent times this thinking has extended from the suppliers supplier up to the customers customer and in some cases beyond. The next stage in this will be the era of ‘co-creativity’ where suppliers are recognized as having technical knowledge and will be invited to play a part in the evolution of new products or routes to market. As technology increases the concept of the fully joined up ‘thinking’ supply chain will emerge with customers finally being able to get true on demand supply.
The concept of the integrated supply chain with supply chain leaders often having a director role is now more common. Supply chain thinking is applied at the beginning of new product or new market strategies in order to understand the limitations which may be found when launching that brand new item only to find out the raw materials are not available or not at the right quality.
The benefits of having an integrated supply chain are;
1 All departments working to a single set of numbers
2 Performance measures which are valid for the business and regularly reviewed
3 High levels of customer service
4 Lower inventories
5 Lack of blame culture
ISPM has been involved with several supply chain integration projects both in private and public sectors. At ISPM we define the supply chain as being from ‘the supplier’s supplier to the customer’s customer’. To deliver this we develop the concept of ‘company 2’ which is preferred to attempting to redesign company 1. By making company 2 an attractive proposition we believe others will want to be a part of it and quickly move towards this better place rather than spend time debating how to fix the current models. We believe that you need to have knowledge of this overall picture and be able to integrate the whole into your own business plans; if not then your business will struggle. The business landscape is becoming more a battle of supply chain versus supply chain.