Sales and operations planning (S&OP) involves every aspect of supply chain operations; a cross-functional process consisting of aligning strategic operations, demand planning, inventory, and distribution with supply chain capacity. We like the definition offered by the founder of Supply Chain Insights, Lora Cecere:
“It is a cross-functional process for manufacturers/distributors to make trade-offs between go-to-market strategies and operational plans […] Based on maturity, the goal of the process shifts. The goal changes from matching demand and supply at a volume level to maximizing profitability and orchestrating plans as markets shift.”
It’s no simple task to implement a mature S&OP, but the companies that do will enjoy a few significant benefits to their operations planning.
1. Get More Insight Into Financial Data
There’s more pressure on companies than ever before to create lean supply chain processes that minimize cost and maximize service delivery—admirable goals, but difficult to achieve amidst the uncertainty inherent to complex supply chains. S&OP processes provide a necessary backbone for these goals and help companies integrate data streams for better financial forecasting. For example, the right supply chain resource-planning tool can help companies pull data from their sales departments, channel partners, ERP systems, internet-of-things sensors, and vendor platforms to fuel analytic reviews.
2. Increase Growth By Predicting Demand
Poor demand sensing is a common culprit in costly supply chains. Suppliers may under-order stock, forcing them to rely on expensive expedites to meet unexpected demand, or there may be unanticipated buffers during inventory handoff, causing delays in shipments as orders travel though supplier touchpoints. A structured S&OP process helps subvert these issues by providing a system for demand sensing based around specific business goals. Of course, the company needs to work this into its supply chain resource-planning system, but with the right help, the benefits are substantial:
- Reduce inventory levels
- Expedite shipments
- Eliminate stock-outs
- Increase fill rates
- Better customer service
That’s just to name a few.
3. Lower Costs Through Transportation Management
The 2018 CSCMP State of Logistics Report spoke to the growth of eCommerce in S&OP, with new technologies driving a 7% increase in parcel shipment volume from 2017 to 2018. With shipment volume increasing, companies need to ensure that their S&OP processes accommodate this demand through transportation management. With the right visibility platform behind them, companies can see which transportation channels are most efficient, from OEM part delivery to warehousing to last-mile distribution.
4. Master Inventory Planning
Inventory levels and supply shaping are critical inputs in supply chain profitability. Mature S&OP processes help businesses understand inventory optimization by establishing a framework that companies can use to consolidate goods into optimized shipments (reducing import/export fees), mode-shifting transportation to the most cost-effective vendors, and generally reducing inventory levels as low as possible.
5. Better Touchpoint Visibility
S&OP improvements speak to a broader goal in supply chain management: Process visibility. Although S&OP proper relates to process alignment and overall strategy, it’s a fundamental part of understanding the supply chain and how various processes influence performance. Improving visibility is an obvious benefit of S&OP, but it’s only the first step towards accurate supply chain visibility. Companies that want a true “control tower” approach to supply chain optimization need a platform that outlines the supply chain from end-to-end and provides performance data on every touchpoint.
The Right Processes for Operations Planning
S&OP strategies certainly help companies better allocate resources and more proactively manage supply and demand, but the structure itself is only part of the equation.
To get the most mileage out of an S&OP process, businesses need a resource planning platform that acts as a dashboard for supply chain planning, financial metrics, and implementation progress — in other words, taking a proactive approach to supply chain planning with a platform like ketteQ. Our supply chain planning tools offer all the visibility you need to take a comprehensive, integrated approach to supply chain optimization.