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By: Edith Oyen, Supply Chain Consultant & Team Leader
Over the last decades, market dynamics have changed significantly, and the Sales & Operations Planning process (S&OP) has evolved along with it. In the early years, the process was often limited to Silo Forecasting: multiple functions preparing their own forecast without alignment or shared goals. Facing different sets of forecast numbers made it difficult to align supply with demand. This led to the next maturity step: Consensus Forecasting, in which cross-functional collaboration and achieving common goals are key. Although this resulted in improved forecasts, it was not adequate for managing a business. Here S&OP came into play: balancing supply and demand in an end-to-end supply chain, involving executive management. When business strategy and financial planning are incorporated, the highest stage of maturity is reached: Integrated Business Planning (IBP).
Even though the concept behind S&OP/IBP seems simple, the implementation and execution of these processes might raise some challenges. Here is a set of tools to get most value out of your S&OP/IBP process:
Without support from senior executive management, the process will never take off. Get buy-in from executive management and involve them in the process.
Use powerful tooling to drive S&OP/IBP: Improve your forecast using statistical forecasting tools, calculate safety stocks using statistical models, work out ‘what if’ scenarios using different models. Also include relevant metrics and KPIs.
Not all products are equal. Some bring higher volumes, some bring higher value, some are more strategic. Segment your products and focus first on the A-products. Also treat new products and end-of-life products differently.
Hold your S&OP/IBP meetings with a fixed regularity. Implement proper protocols and embed the process into the business. Use S&OP/IBP to look at long-term horizon, rather than getting focused on last month’s sales.
Cross-functional collaboration requires good communication. Ensure your S&OP/IBP process is led by a strong communicator who facilitates and builds bridges and trust.
These tools will bring your S&OP/IBP process to the next level, which comes with multiple advantages, such as improved forecast accuracy, inventory and safety stock reduction, increased productivity and financial gains. Our Modis Supply Chain experts will be your partner to guide you through your challenges.
– Edith Oyen