An understanding of Sales and Operations Planning can help ensure that your business can easily cope with supply chain fluctuations.
Maintaining a balance between supply and demand is one of the key factors in a successful business. However, in a world of pandemics, shipping route disruptions and raw material shortages, the task of managing supply chains is becoming increasingly complex.
In order to manage the large amounts of supply chain data that we now have available, you need an effective Supply and Operations Planning (S&OP) process that will help your company to keep a balance between supply and demand. There are two separate, yet interlocked, components involved in accomplishing this. These components are:
• Volume Planning: This takes a longer-term view of supply and demand, customer trends and seasonal cycles.
• Mix Scheduling: This sets out the mechanics involved in responding to your customer’s short-term needs in the most cost-effective and efficient way.
By ensuring that your company’s volume planning is undertaken correctly, and provides the correct data, your mix scheduling should be a simple process. Once you have this information correlated, and the various metrics separated out into easy-to-understand segments, you can then apply the principle factors of S&OP to work out your demand parameters and your supply chain constraints. This will allow you to map out your production strategy for the upcoming time period.
So let’s take a look at the individual factors that should be included in your S&OP system.
Appropriate Time Cycles.
Your S&OP cycle should be monthly. Even if your production schedule is spread out over a longer period, having a monthly S&OP meeting will enable you and your management staff to keep an eye on how things are functioning and make requisite changes if necessary.
Sales and Operations Planning is a process that involves hands-on participation between several levels of management. You need to ensure that all members of your S&OP are able to easily access and manage the data that applies to their part of the business. This will avoid having to reschedule your S&OP meetings while missing information is found.
An Overall Focus.
A successful S&OP process needs to take an overall view of the factors that affect your business. It should balance supply and demand constraints at an acceptable level and be able to marry these two factors according to parameters that are achievable.
Unless there are some specific details that can only be addressed by a group effort, your S&OP meetings should not get bogged down by looking at issues such as customer orders, stock volume and inventories, or individual products.
Alignment Between Volume and Mix Planning.
A tight alignment between Volume Planning and Mix Scheduling is vital to ensuring that your supply lines stay open and that shipping to your customers remains on time. This is especially important if you have tight turnarounds or your company needs to respond quickly to emerging trends or fashions.
Your S&OP must be able to function across multiple units of measurement. These will include demand, supply, logistics and financial planning. Each S&OP meeting should set a tactical direction for the next production period and generate a strategic plan to achieve this.
Effective Sales and Operations Planning is a cross-functional and interdepartmental process. So while you will need to be careful that your S&OP committee does not become too top-heavy, you will need to ensure that it represents a broad spectrum of your company management.
At the very least, your S&OP team should include staff from the following departments.
• Sales and Marketing.
• Supply Chain and Inventory.
• Product Development.
• General Management.
By its very nature, S&OP will generate disagreement between the departments of your business. So your organization will need to learn how to welcome these debates and find ways to overcome differences of opinion.
S&OP puts a spotlight on accountability. The commitments that your sales team and your operations team place on setting out goals and achieving them, need to be evaluated at each S&OP meeting and ways found to address any shortfalls. Approaching these in a constructive way, without finding fault or apportioning blame, will lessen the chance of your different departments forming “silos” due to being unfairly blamed for events that may have been out of their control.
A car manufacturer Henry Ford once said, “Quality means doing it right when no one is looking.” To ensure that your business is able to maintain its high standards of product quality, attention to detail and guaranteed customer satisfaction, Sales and Operations Planning should be the lynchpin of your management strategy.
To find out more about S&OP and how you can employ it to improve your bottom line, check out our website at johngalt.com