Using S&OP to create organization-wide valueRazor thin margins, deterioration of long-term customer loyalty, and industry disruption by low-cost, private-label substitutions have put increased pressure on supply chain and operations groups to drive consistent annual savings, while also managing a quicker and more complex value chain than ever before. These industry and customer complexities often cause the need for frequent changes to organizational plans. These changes are pushed upon functional stakeholders to make manual adjustments, without understanding the full impact to other stakeholders, while focusing on maximizing short-term KPIs, at the expense of long-term organizational success.
Taking an end-to-end S&OP approach allows key stakeholders to cyclically and collaboratively develop enterprise-wide plans that segue throughout the tactical and strategic operating processes of an organization.
A connected, streamlined planning process
West Monroe helps supply chain organizations develop cross-functional, decision-making S&OP programs focused on gaining alignment across an organization’s key functions. By developing a cohesive strategy and interrelated organizational plans, visibility is created throughout the supply chain network, enhancing an organization’s key performance metrics, and resolving the intracompany disputes that arise from disparate data sources.
To gauge your current planning effectiveness, consider the following:
- What does your current planning process look like (stakeholders, cadence, key outputs, KPIs)?
- How do your month-end inventory projections compare to your annual operating plan financial targets?
- How do your functional goals or metrics compare to overall company goals and profitability?
- Are marketing and sales stakeholders held responsible for the execution of an organization’s promotions?
- Do you have one source of information that drives organizational planning and decision-making?
- Are key support functions (IT and Finance) included in your strategic and tactical planning processes?
If the answers to these questions do not provide a clear picture of your planning functions, then it may be time to conduct a review of your planning process to identify how S&OP would work for your organization.
Back office strategy that directly improves front office and sales effectivenessBetter end-to-end planning reduces in-house obsolete inventory, provides a more accurate location-level product mix, and creates a systematic focus on an organization’s safety stock policy, allowing for a data-driven customer and/ or SKU-level prioritization strategy. Further, S&OP can help reduce the forecast errors that cause last minute changes in manufacturing schedules, minimizing the need for unplanned overtime labor, and reducing the need for frequent line changeovers to meet small batch production runs.
When implemented correctly, S&OP helps organizations to reduce lost sales due to unfulfilled customer orders, better anticipate existing customer demand, improve customer service levels, and provides a more optimal strategy for new product introductions— enabling organizations to transition from reactive to proactive from the inside out.