Maine Pointe: Sales & operations planning at the core of successful firms
In a recent paper, global supply chain and operations consultancy Maine Pointe dove into the challenges related to effective sales & operations planning (S&OP), and key factors in getting the critical business process right.
Sales and operations planning (S&OP) allows executives to achieve focus and alignment across all business functions, utilizing strong communication and collaboration across functional teams, customers, and suppliers.
A support function of S&OP is demand supply integration (DSI), which matches demand information to supply capability and financial objectives to drive top-level strategy – integrating marketing and sales, financial, and supply operations into a unified whole.
“An effective S&OP process goes straight to the heart of improved business performance, enabling greater responsiveness and a more informed supply chain ecosystem,” said Steve Bowen, CEO of Maine Pointe. “The best companies’ S&OP process unifies everything from the customer’s customer to the supplier’s supplier.”
Companies without an effective S&OP process will see demand/supply imbalances, leading to higher working capital requirements, according to the Maine Pointe report. Firms will also likely have sup-optimal end-to-end supply chains, with higher logistics and inventory carrying costs. Organizations might also exhibit the presence of functional silos and cost savings fatigue.
Firms that have S&OP and DSI practices will find themselves in level four or above in Maine Pointe’s five-level TVO Maturity Pyramid. Total Value Optimization (TVO) occurs when an organization can dynamically anticipate and meet demand through the synchronization of its buy-make-move-fulfill supply chain – delivering the greatest value to customers and investors at the lowest cost to the business.
Companies can move up the pyramid from subpar performance at the base, to level five (total value optimization). The three ‘legs’ – procurement, logistics, and operations – are the core components of supply chains, and each is built on a foundation of data analytics and leadership.
Leadership & organization is the backbone of the TVO Pyramid, since organizational culture is most likely to drive S&OP results, and leadership is central to the delivery of deep cultural change.
“In pursuit of S&OP excellence, it is hyper-critical all four leadership pillars of a company—CEO, CFO, chief demand officer (may be sales or marketing or a combination of both) and the chief supply officer (may be a combination of manufacturing, procurement and logistics) behave in full support of the objective,” the report notes.
S&OP is important to business success for a host of reasons. For one, it helps the seller consistently provide the right product, at the right time, in the right place, at the right underlying cost. S&OP also imbues firms with nimble responsiveness, allowing them to anticipate and properly react to changes in supply and demand. The process also lifts businesses to a collaborative “single number” planning and execution plane, unlocking true competitive differentiation, according to the report.
Six key enablers of successful S&OP implementation
Firstly, firms need a demand signal that’s sufficiently accurate to enable correct anticipatory decisions. “Whether that signal comes in the form of a demand forecast, point-of-sale (POS) data, or some other data analytics source, it has to be, a) accurate; b) timely (allowing time to react operationally); and, c) sustainable,” the report relates.
Integration and synchronization across the supply chain functions is the second key element, though internal functional barriers can be particularly stubborn.
A perpetual learning function is also integral, allowing firms to insightfully dissect period operations and correct failures for the next sales and operations plan. Learning from past mistakes means not making the same ones over and over again.
As with most business applications, data and analytics can be a critical factor. If you need leaders across functions to believe in “one number,” big data and advanced analytics can give a better shot at that number being correct.
The report also recommends “an unbending dedication to TVO,” since the backbone of S&OP is an ability to anticipate and meet demand though a “synchronization of the buy-make-move-fulfill digital end-to-end demand/supply chain.”
Finally, a multi-level building block of a single-number business plan, full consensus ownership by cross-business leadership, and clear decision making hierarchies will help drive S&OP success.
Maine Pointe clients that have implemented the S&OP process have seen substantial real world benefits. A supplier to the oil & gas industry saw a production increase of 3% over forecast, while improving production and on-time delivery. A manufacturing company, meanwhile, was able to improve its responsiveness to real demand and reduce legacy inventory by 20% in three months.
The full report is available on Maine Pointe’s website.
