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In successful FMCG and other companies, Sales & Operational Planning (S&OP) is the flexible glue that holds numerous processes together ensuring demand and supply are balanced along the chain and most importantly, everyone operates to the same set of unambiguous sales, volume and financial numbers. Without such a process in place, it is highly likely you will be experiencing a number of issues that will be holding your business back.
If you have not been exposed to S&OP you may be rightly sceptical that this is just another management consultancy phase. No. S&OP has been around since the 1980s and most of the world’s largest and most successful companies are using this process in some form.
So, what benefits could S&OP provide to your business?
- A key enabler of growth. You may have the best innovations or marketing campaigns but if your product is not in front of consumers at the right time and at the optimum cost, you will not succeed. If you publicise growth ambitions you must back this up with robust processes.
- Risk mitigation. Poorly organised or poorly performing supply chain operations can significantly hinder growth and hide imperfections that could lead to lost sales, inventory shrinkage, parallel or grey trade and reputation damage.
- Sales uplift. When you improve customer service, reduce stock outs and improve distributor performance you inevitably experience an increase in sales. These sales may always have been available but without S&OP you were unable to see and/or fulfil this demand.
- Lower supply chain costs. Rigorous S&OP processes will allow you to operate cost effectively through doing things right the first time thus avoiding waste of assets, products and time. If you only store the right stock you need for the shortest possible time you will reduce internal warehousing or 3PLP costs.
- Reduced stock loss. The foggy reality of chaos and inefficiency without S&OP will provide opportunities for stock to expire, be damaged and even stolen. S&OP provides the assurance that orders can be fulfilled from accurate and appropriate inventory.
Balance Sheet Impact
- Lower working capital. Correct application of S&OP will optimise the inventory along the supply chain to support service levels. Generally, you will only produce stock that is forecasted for sale thus reducing your holding of slow moving and obsolete product.
- Accountability. S&OP requires all participants to know their responsibilities and for these to be clearly defined between functions. Decision making is taken at the correct level of the organisation and the senior team only hears about and deals with, serious issues and problems.
- Streamlined communication. The process defines fixed lines of two-way communication and the data and information required to enable actions to be agreed and executed. Deadlines for the transfer of data and information are set within the process and facilitate timely completion of critical activities.
- Improved skills. The structure of the S&OP process forces people to repeat their activities routinely in order to meet the process deadlines. Repetition will gradually see these new silks enhanced and openly benchmarked against improving Key Performance Indicators KPIs.
- Ways of working. Before implementation, staff often complain that S&OP will lead to more work but of all the myths surrounding S&OP this is the biggest. S&OP reduces work by allowing staff to focus on what really matters. Most companies experience far less work with S&OP as rework, endless debate and wasteful political conflict are minimised. S&OP calls for a different way of working which leads to far greater job satisfaction.
You may not achieve all ten (and many more!) benefits in full from day 1 but acting decisively and implementing an S&OP process will deliver on a majority of these top 10.
Not convinced? Please study some of our highly successful case studies which can be found here.
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