Sales and Operations Planning, S&OP, Integrated Enterprise, IEL, Integrated Business Management, Integrated Supply Chain – there are numerous ‘Google’ references to the subject; the important thing is to understand what it means, the potential benefits to your business and how to make it real for the organization and the people in it.
To explain the concept we use the term ‘Integrated Common Sense’; the overall objective being to align supply (people, materials and equipment) to meet customer demand and take a holistic view of the end to end supply chain.
In the turbulent and unpredictable business world of today it is becoming increasingly important to align business reality with operational capacity and financial plans into a cohesive strategic plan. Sales & Operations Planning or S&OP is highly regarded by business as the most reliable process to do this. This applies to all business sectors both private and public; with S&OP applicable in any situation where there is a need to balance supply with demand.
“We already do something like this”; that’s the cry I hear too often but in my experience something like is not the same as doing it for real!
Many businesses do have parts of Sales & Operations Planning; however many are failing to recognise the importance of the holistic integrated approach and drive the business towards success linking performance to business goals. As a result many businesses are struggling with back orders, unhappy customers, blame cultures and poor cash flow. Sales & Operations Planning is foremost a decision making, information and communication process that enables companies remove the covers and get to the heart of the issues.
The key elements to success with Sales & Operations Planning (S&OP) are;
Historically the process was simply about balancing supply with demand – (or in some cases managing demand to fit supply!); the process has evolved and continues to evolve to include new innovations, financial requirements and linking true demand for business products & services to the needs of the customers. S&OP is no longer just for manufacturing and supply companies it is being developed into service industries with great success, including hospitals, the NHS, catering and maintenance repair companies.
Some businesses have evolved the process and are using S&OP to reduce the time wasted each year in the ‘budgeting process’ they understand that through continued evaluation of the market needs over a horizon of 18 to 24 months – what more can a business really know! In addition businesses who are developing lean strategies are finding it important to plan which projects should be tackled first.
The benefits of Sales & Operations Planning (S&OP) are typically;
1. Reduction in working capital (inventory) of 25 – 45%
2. Increased customer service (OTIF) and satisfaction levels to above 98%
3. Increased sales revenue – through increased reliability
4. Increased visibility of the end to end supply chain
5. Inventories managed at the right levels and in the right places
6. A Reduction in effort and duplication from improved business intelligence and use of a single set of numbers.
7. Performance accountabilities correctly aligned and a continuous improvement culture
Implementation doesn’t need huge investment in IT (although that may help in the medium to long term to resolve demands for increased knowledge). It is important to understand the process is about behaviours and a focus on making it real for the people; be passionate about supply chain improvement, get behind a drive for a single version of the truth and lead from the front.
Start by defining what it will mean to the business; focus on outcome not the process.
Having someone external on the team who has been there and learnt from the mistakes can pay off in the medium term. However this has to be your process not the external help who owns it; if not when they leave the process goes with them!
ISPM has significant experience of developing Sales & Operation Planning (S&OP) across a wide spectrum of industry from Fine Chemicals, Pharmaceuticals, Biologicals, FMCG and commercial products; also more lately the public sector. We understand the process and the difficulty involved with the cultural and behavioral changes needed to implement and sustain the process.