How Better S&OP Can Drive Supply Network Management Improvements

Sales & Operations Planning (S&OP) is structure/process that many organizations put in place to translate upstream data, intelligence on customer demand, from the front office -- sales and marketing -- into actionable and profitable operational plans used by logistics, manufacturing, and procurement organizations. When done correctly, S&OP is a collaborative, cross-functional process that aligns capabilities and exposes opportunities within a defined business strategy. In our most recent survey of SMB manufacturers, we found a surprisingly high number of SMB companies indicating that they had formal Sales and Operation in place today. Although these teams at smaller manufacturing companies do tend to have less experience (50% of SMB S&OP teams have been in place for three or more years, versus 70% at larger companies), the fact that current deployment is high suggests that even smaller organizations are thinking proactively about how to better synch demand with supply -- and are being pulled into demand-driven environment (see chart). There are several key factors that drive the need for establishing S&OP as a strategic priority among SMB manufacturers. The strategic importance of establishing an effective S&OP process will be critical if any of the following issues apply to your company:

• Constrained supply: S&OP offers a solution for companies that participate in industries with constrained supply, like chemicals, metals, industrial equipment, and some sectors of high-tech and electronics, demand is outstripping supply. The process focuses on the development of a constrained plan that is feasible and recognizes the realities of limited and unpredictable supply.
• High use of outsourced, or contract, manufacturing: The planning horizons are longer in an outsourced manufacturing environment. As supply chains stretch out across the globe, they become even more extended. Manufacturers outsourcing to Asia typically need to to add seven to nine months to their planning horizons. S&OP becomes critical because this additional time means riskier decisions and a greater need for coordination.
• The need to coordinate a global supply chain: S&OP enables companies to plan globally and execute locally. Today's technologies support S&OP collaboration that allows geographically dispersed employees to better collaborate and seize regional opportunities while maintaining corporate control and visibility.
• New product launch: S&OP helps companies accelerate time to market. Being first in the market is critical to developing and sustaining category leadership. An effective and experienced S&OP team and process can help speed time to market by guiding the cross-functional discussion, and helping supply chain and R&D teams jointly make better business decisions.