Sales and operations planning (S&OP) can be thought of as “top management’s handle on the business,” in Boyer’s words. It concerns the discipline of balancing demand and supply on a regular and formal basis. Companies follow specific formats and schedules, often tied to monthly cycles, to assess future demand.
The practice is a vital means of assessing customer demand plans, which get translated into supply plans and are then upstream to suppliers. “S&OP becomes the formal mechanism to communicate that information in a very fact-based way,” says Boyer.
S&OP, he adds, is the key to achieving supply-chain integration among multiple partners. Moreover, getting demand and supply into balance has the effect of minimizing the cost of doing business. Companies can greatly reduce their reliance on premium freight when stocks fall short of demand, or excess inventory when demand lags the forecast.
“When you get that balance, you have the best opportunity to supply product on time to customers,” says Boyer. “And the resources that you do have can be utilized as best as possible.”
Companies looking to implement S&OP need to demonstrate a strong commitment to the initiative, and spend the time required to make it work. It usually takes about six months to get into place, Boyer says, and another six “to get all the bugs worked out.”
Managers from all relevant areas need to be involved in the regular meetings. “You’re going to touch a lot of people in the organization,” says Boyer.
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