Supply Chain Trends and Issues : Our Weekly Feature Article on Important Trends and Developments in Supply Chain Strategy, Research, Best Practices, Technology and Other Supply Chain and Logistics Issues  
 
 
  - April 30, 2008 -  

Supply Chain News: Key Trends in Sales and Operations Planning

 
 

After Getting the Basic Processes Right, Companies are Expanding the Breadth and Depth of S&OP

 
 

 

SCDigest Editorial Staff

SCDigest Says:
Organizations are placing increasing emphasis on new product introductions (NPI) and end-of-life (EOL) planning, areas often somewhat disconnected in many earlier S&OP efforts.

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The following article was adapted from our SCDigest Letter on Sales and Operations Planning. To download an electronic copy of the full hardcopy newsletter, and access other S&OP resources, visit our S&OP resources page.

S&OP is one of those interesting supply chain areas in which many companies are just starting with the basics, using principles developed many years ago, while S&OP leaders are starting to push traditional S&OP processes to new levels.

The SCDigest Letter is seeing a number of S&OP trends among S&OP leaders, including the following:

Process Ownership: While often initiated within the company by an executive within the supply chain organization who acutely perceives the pain and opportunity, an increasing number of companies are turning ownership of the process over to an executive in sales, marketing, or business unit management.

Inventory Management Perspective: There is a growing interest in what is sometimes called Sales, Inventory and Operation Planning (SIOP). While some argue that inventory inherently should have been part of the S&OP process all along, the reality is that in many companies using S&OP, specific decisions about target inventory levels have not been included in the decision framework and plans.

An increasing number of companies, such as Honeywell and Bell Helicopter Textron, are formally using the SIOP term, and many are including so called “Inventory Optimization” software to support the process.

Focus on Shareholder Value: Companies are also using analytic tools not just to rally around a consensus demand and supply plan, but to determine which strategies will maximize profitability and shareholder value. This is actually an entirely different lens. This approach, for example, might mean adjusting sales and marketing incentives to ensure the success of a strategic new product in the market, or developing supply and demand strategies that will maximize margin, not just revenue.

Demand Management: Relatedly, companies are increasingly adopting the concept of demand management, which means moving beyond just demand planning and forecasting to more proactively working to shape and influence customer demand in a way that meets supply realities and company objectives.

(Supply Chain Trends and Issues Article - Continued Below)


 
 
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Collaboration: There is also an increased emphasis on getting customer and channel input into the process. While receiving forecasts and inventory information from customers is a constant challenge, new collaborative tools from supply chain software vendors combined with organizational focus on receiving better customer input is enabling a growing number of companies to gather valuable input from collaboration.

Managing NPI as Part of S&OP: Organizations are placing increasing emphasis on new product introductions (NPI) and end-of-life (EOL) planning, areas often somewhat disconnected in many earlier S&OP efforts. There is a clear tie between NPI, EOL strategies, and inventory planning (another trend as noted above), and need for tight alignment between demand and supply execution for NPI and EOL effectiveness.

Researching Beyond the Data: There is a growing focus in the demand planning phases of the process on “finding out what we don’t know.” In other words, what knowledge is out there about market conditions, events, competitive actions, changes in customer plans or other factors that might influence actual demand but are not known by demand planners or captured in the software tools they use?

Companies that have nailed the S&OP basics frequently look to this insight as the next area for improvement.

Communication Effectiveness: Companies are putting more effort into communication of the plans created by the S&OP process to all functions in the company, and improved, formal linkage between their tactical execution and metrics and the strategies and objectives developed from the S&OP process.

In total, these trends simply say that in many companies S&OP is being taken to a new level that is more comprehensive in scope and pervasive into the organization.

What’s your reaction to our S&OP trends? Anything else new we should include? Let us know your thoughts at the Feedback button below.

 
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