By embracing Sales & Operations Planning manufacturers are better able to take a 'high-end' view of all critical data and thus determine the very best route for balancing demand and supply, argues Richard House (pictured), managing director, FuturMaster.
With the need to fulfil ever shorter lead times, carefully balance inventory levels with production requirements, manage tight budgets and interact with an increasingly complex supply chain the modern manufacturer faces more daily challenges than ever before. As in any business, it is critical that all financial and operational decisions are made with both cost and time efficiency in mind. However, a frequent mistake among senior management is to make important decisions without considering all known data concerning customer orders, materials cost, inventory requirements and production capacity. The price paid for such inefficiency can be dear, including excess stock, poor forecasting and planning on the shop floor and resultant inefficiencies concerning workforce and machinery optimisation. Such constraints can prove irksome enough at any stage in the sales or production cycle; but when faced with the additional challenge of planning budgets and capacity over the longer term for seasonal demand spikes or product promotions, a poor view of each business and operational process can result in the manufacturer making particularly costly errors of judgement. In essence, it is impossible to ensure the most informed decisions are made without a 'high-end' view of all key business and operational data, from the customer facing front end to the array of back-end data related to bills of materials, production planning, warehousing and delivery, etc.
One of the most common reasons for such decision making inefficiencies is the continued reliance on disconnected silos of information held within each separate department. This can understandably result in separate sections within the business becoming primarily concerned with managing their own affairs rather than seeing themselves as part of the bigger picture. Having a lack of the means to share important data across the whole company and (often just as importantly) collaboratively with supply chain partners is problematic enough. However when such a methodology also results in late deliveries to the customer, and a subsequent loss of reputation, the problem takes on an even graver complexion; indeed the manufacturer's very survival could be at stake.
So what is the ultimate enabler for manufacturers to make the most informed business and operational decisions? Sales & Operations Planning (S&OP) as a concept has been around for some years. However it is only comparatively recently that it has been fully embraced by the software vendor community. By exploiting all relevant data held within the organisation's suite of software solutions (ERP, Demand Forecasting & Planning, CRM, etc.), S&OP functionality points the way to business and operational best practice, saving the company money and tightening up efficiencies on the shop floor, in the warehouse and among the supplier network. S&OP considers the broader picture to help senior management formulate a coordinated set of plans to be executed by each aspect of the organisation.
By also securing the commitment of supply chain partners to participate in such a positive sea change in the decision making process, the manufacturer has in place a truly collaborative business and operation infrastructure, enabling it to make the most informed decisions possible. On the business side, S&OP can help improve financial management and cash flow. On the operational side, it can ensure optimum performance regarding all operational activity.
Balancing demand and supply
Through embracing proven S&OP functionality, the manufacturer can optimise visibility of both the demand and supply sides of the business, thus making capacity planning a simpler process, whether the capacity in question relates to labour hours, machinery, warehouse space, loading bay throughput or fleet availability. By being able to review short, medium and long-term views of supply and demand for critical resources, senior management is better equipped to make better informed, efficient and cost effective decisions in a timely manner. S&OP enables demand and supply data to be reviewed in the most effective way in order to benefit every aspect of the organisation, including the activities of supply chain partners and other stakeholders. In summary, S&OP is the ultimate facilitator for effective supply chain decision making.