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Expert Insight: Guest Contribution

By Karin L. Bursa
VP of Marketing

Logility

Date: April 21, 2011

Supply Chain Comment: S&OP: Are You Prepared to be Productive?

A Truly Successful S&OP Process is Based upon Compromise and Working Towards Common Business Goals

Sales and operations planning (S&OP) is a process that by nature is supposed to unite all key constituents across the enterprise to a single goal. Senior level executives responsible for sales, marketing, materials/procurement, manufacturing, transportation, supply chain, and finance (to name a few) meet to consider the needs and constraints of each of their respective areas in light of overall company objectives, and agree on an operating plan for the next month, quarter and year. With so many cooks in the kitchen it can be challenging to make sure your department is heard and all parties agree on the direction forward. Don’t get caught up in the ego game. A truly successful S&OP is based upon compromise and working towards common business goals.

 

To construct the best overall plan based on sound business decisions, the S&OP team must have accurate, reliable and consistent information – the current status, future conditions, constraints, and concerns about demand, production, inventory, procurement, and finance. They must know how decisions in one area impact performance in another. And, they need the flexibility to evaluate multiple business scenarios—optimistic, pessimistic and realistic. Without this information, executives must rely on experience, intuition and risk assessment.

 

Leading companies have tackled these challenges head first and have transformed their supply chains from cost centers to customer service and profit centers. Speaking with these companies and working with them through the process, we have identified 5 critical steps that help companies successfully navigate the S&OP meeting.

  1. Innovation and Strategy Review – understand what products to introduce to the market and when, and strategically identify the optimum time to retire others and
  2. Demand Review – dig deep into the factors for demand and how they relate to your company/product, be flexible to changes and sense these changes to prepare for them
  3. Supply Review – identify how to meet the demand through production/procurement optimization along with inventory optimization
  4. Financial Integration – no department can afford to be disconnected from finance and the comprehensive plan needs to translate into multiple units of measure – most notably financial and volumetric views
  5. Executive Business Review – ensure you leave the meeting with a list of actions and an operational plan for everyone to follow

The best performance in inventory investment, that is, the lowest inventory level, will not yield the highest customer service. High customer service is expensive. The most efficient production will likely increase inventory and may not coordinate with sales shipment objectives. This balancing act is at the heart of the S&OP process to get the right product at the right place at the right time.


Agree or disagree with with our guest contributor's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the website. Upon request, comments will be posted with the respondent's name or company withheld.

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Feedback
2011-04-18

Excellent content in the S&OP newsletter and excellent interviews and analysis generally. It`s as relevant here in the UK as it is in the US.
 
Keep up the good work
 
Peter Cutler
BA, MBA, MCIPS and MCILT

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About the Author

Karin L. Bursa is vice president of marketing at Logility, a provider of collaborative supply chain management solutions. Ms. Bursa has more than 20 years of experience in the development, support and marketing of software solutions to improve and automate enterprise-wide operations.

For more information, please visit www.logility.com

 

Bursa Says:


The best performance in inventory investment, that is, the lowest inventory level, will not yield the highest customer service. 


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