This article was first published several years ago but it is about time for a refreshed look at what S&OP brings to your business.

A reminder

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 on 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, particularly in the all-action Sales &Operational Execution (S&OE) horizon.

If you have not been exposed to S&OP you may be sceptical that this is just another management consultancy offering. 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 or other.

So, what benefits could S&OP provide for your business?

Strategic Benefits

• Growth Enabler. You may have a cutting-edge innovation record and slick 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. When you publicise your business growth ambitions you must back this up with robust and consistent processes.
• Risk Mitigation. Poorly organised or poorly performing supply chain operations can significantly hinder growth and hide imperfections that could lead to fraud, lost sales, inventory shrinkage, parallel or grey trade and reputational damage.

P&L Impact

• Sales uplift. When you improve Customer Service, reduce stock-outs and improve distributor collaboration and performance, you inevitably experience an increase in sales. These sales may always have been available but without S&OP you were probably unable to see and/or fulfil this demand. Key here is ensuring this newly won turnover is repeated again and again.
• Lower Supply Chain costs. Rigorous S&OP processes will allow you to operate cost effectively through doing things right first time thus avoiding waste of assets, products, materials and time. If you only store the right stock you need, in the right place for the shortest possible time, you will reduce internal warehousing and/or 3PLP partner costs plus expensive transhipments.
• 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 managed within an ERP or WMS.

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 actually forecasted for sale thus reducing your holding of slow moving, promotional and obsolete goods.

People

• 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. S&OP allows the top team to delegate to people who know what they are doing and routinely deliver on commitments.
• Streamlined Communication. The S&OP process defines fixed lines and scheduling of multi-way communication plus 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 (usually monthly) in order to meet the process deadlines. Repetition will gradually see these new skills embedded and enhanced through repeated and successful execution. Improvements will be openly benchmarked against continually 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 largest. S&OP reduces work by allowing staff to focus on what really matters to the business. Most companies experience far less work with S&OP as rework, endless debate and wasteful political conflict are minimised or preferably eradicated completely. S&OP calls for a different interactive and dynamic way of working which leads to far greater job satisfaction.

You may not achieve all ten (and there are 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. 

Perhaps we should be looking at a Top 11 as all of the above ensure ideal preparation for the critical short-term horizon of Sales & Operational Execution (S&OE).

Not convinced? Please study some of our highly successful case studies which can be found here.

Help! I need somebody!

If you have any Supply Chain or Route to Market problems or opportunities you would like to discuss, then please reach out to Enchange.com via telephone, email, or live chat.