S&OP Becoming Essential to Supply Chain Management

As more companies outsource their manufacturing processes, Sales and Operations Planning (S&OP) processes are being applied more often, according to Ralph Cox, principal of Tompkins International and co-author of a new whitepaper, Sales and Operations Planning in Manufacturing: Manage Collaboration Across the Entire Organization. Increased lead times, distances, and the number of organizational entities and languages involved in outsourcing are the primary drivers.

“Using multiple sub-contractors which ship semi-finished product to one another in a sequential manner just exacerbates the need further,” the author writes. “Further, the benefits of S&OP are being recognized and applied in distribution and retailing. In the future, S&OP will likely evolve to become the foundational supply chain planning process and, for some firms, the foundational management process.”

Decisions at each level in an enterprise are coordinated using S&OP tools. The author cites the following examples:

Executive Level Decisions
• Re-shaping demand to match supply by modifying pricing, promotions, advertizing or specific customer agreements;
• Liquidating inventory;

Management Level Decisions
• Changing plant product production capacities through shift changes or equipment acquisition;
• Moving planned production between plants.

Operations Level Decisions
• Modifying open purchase orders or manufacturing work orders;
• Expediting, de-expediting and/or changing inbound transportation modes.

“Achieving optimal results [by applying S&OP tools] is difficult largely because of the nature of the organization’s past management decision-making processes,” the author concludes. “In an enlightened, flexible organization, the formula for success would involve a balance of approximately 50% process, 30% change management and 20% technology. For others, the balance may need to be quite different. Change management is a large part of any Sales & Operations Planning implementation effort. … A strong, unified vision is essential.”

Related Editorial:

Companies Are Spending More on Planning and Forecasting

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