When you pull together all the functional leaders from your sales, marketing, manufacturing, supply chain, and finances, you can predict your future performance and be done through the S&OP process.
Hence, you build an understanding of your organization’s priorities while increasing trust and improving consistency throughout your operating to financing plans. But how do you get high-quality results when optimizing your S&OP process? Well, stay a while longer to find out.
Align Your Business With Your S&OP Horizon
Most Sales and Operating Planning align supply and demand, and last-minute scrambling can still occur. The reason is that the management team needs to look further into the future. Hence, the timeframes managers use to measure accuracy must align with the business capabilities and priorities.
For instance, if you depend on material with long lead time deliveries of 24 weeks or longer, you need to understand that demand for that product is far out. The same applies if you manage demand swings, as it can take six months to hire and train staff, and you need to plan that far ahead.
Broaden The Understanding/Measurement of Forecast Accuracy
In the S&OP process, when it comes to demand management, everyone complains they need better forecasting accuracy. Still, you will never get there, but you can do better on it. Hence, many organizations measure accuracy within a lead time window.
But you still need to look at how accurate your forecast is with long timeframes. For instance, you may find 30% accurate over six months, 45% accurate three months out, or even 60% accurate in a month. Again, understanding the progression helps your operations to plan for it.
Understand The External Factors Influencing Supply and Demand
For instance, if you have a shipping retail outlet and a place like Walmart opens a new store. You can use your past history to calculate your demand impact on your existing clients in the area. The same applies to the supply side as you may find three months down the line, you may enter into a contentious contract, end up with union negotiations, or need to plan well ahead of time if plant workers decide to strike.
Show The Value of Supply and Customer Collaboration
These days partnerships with deeper collaboration with your suppliers and customers are essential. When you provide real-life stats, it starts with demonstrating your value of working together. If you cannot show your weight, then why make any effort?
For instance, take a retail client. The advantage of deeper collaboration is helping the customer improve their sell-through rates while increasing the gross margin per sq foot. While for the supplier, it is beneficial as it lowers inventory levels while reducing the work capital needs.
Add Modeling and Scenario Planning to Your S&OP Process
In your business, you need to factor in variables, including how much your existing suppliers can flex your demand changes and the lead times to ramp production. With finance, you need to consider scenarios with forecast profitabilities, working capital needs, payable accounts, etc.
Doing this helps improve decision-making. For instance, if you suddenly need to increase your capacity over the next three months. Your finance can help you work out those cost implications to show if the business will suffer short-term but will still drive the revenue to earnings growth.
S&OP Needs Centralization in How Your Business Runs
An effective Sales and Operating Plan process impact the business’s key performance metrics and financial statements. For this reason, S&OP must lead from the top as an essential part of managing your business.
Yet, functional leaders must still understand why attending meetings are necessary. For example, salespeople need to know the importance of their insight related to incoming orders to align with production operations to support customers.
Furthermore, the operations team needs to understand what is happening in marketplaces and customers’ needs.
As you can see, the S&OP process is essential for any business to succeed financially.
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