Executive Briefings

Sales & Operations Planning: Lessons Learned to Get Supply Chains Back in Balance in 2010

Analyst Insight: The recent economic turmoil has pulled into sharp focus the issue of how to manage increasingly volatile supply chains. Through late 2008 and 2009, many companies simply panicked and aggressively cut both production and productive assets. These companies are beginning to pay for those aggressive cuts as demand is now starting to increase -- straining diminished capabilities. For 2010, we offer guidance on how companies can get supply chains back in balance and get sales and operations planning right.

Particularly in volatile economic times, many companies fail at sales and operations planning (S&OP). Under stress, the process degrades to the level of a "blame game," with company staff working at cross-purposes internally.

In 2010, companies have an opportunity to get S&OP right, to move towards an integrated and agile demand and supply planning capability that creates sustainable competitive advantage. Here are some critical lessons learned -- guidelines and observations culled from Archstone's experiences across multiple industries. 

Observation 1: Goal alignment on the purpose of S&OP and its scope is critical. To truly improve the linkage between supply and demand functions, companies require a cross-functional, monthly process of evaluating and revising time-phased projections for supply, demand and the resulting financials. Collaborative decision-making is the key here.

Observation 2: Often, S&OP programs are missing the "S" in S&OP, focusing exclusively on operations planning. Operations gets what it can muster from sales -- generally without analytics behind it. But sales, merchandising and marketing are critical. They are equal players in terms of their effect on what happens. 

Observation 3: Capabilities of key network partners (suppliers as well as distributors) are often incorrectly assessed or not considered in the S&OP process. Many companies fail to involve key trading partners in the planning process. 

The Outlook

Today many indicators, including the latest ISM index, are beginning to show clear, global signs of economic growth. Regardless of the mistakes of the past, 2010 represents an ideal opportunity for companies to get S&OP under control. As companies start undoing the cuts they made through the downturn and begin to try and repair what may be weakened relationships with suppliers, S&OP becomes more important than ever. Companies that focus their efforts in developing more mature S&OP capabilities will benefit as they rebuild, and find themselves in a better position to weather the next surprise that the economy, competition or world markets may have in store.

Particularly in volatile economic times, many companies fail at sales and operations planning (S&OP). Under stress, the process degrades to the level of a "blame game," with company staff working at cross-purposes internally.

In 2010, companies have an opportunity to get S&OP right, to move towards an integrated and agile demand and supply planning capability that creates sustainable competitive advantage. Here are some critical lessons learned -- guidelines and observations culled from Archstone's experiences across multiple industries. 

Observation 1: Goal alignment on the purpose of S&OP and its scope is critical. To truly improve the linkage between supply and demand functions, companies require a cross-functional, monthly process of evaluating and revising time-phased projections for supply, demand and the resulting financials. Collaborative decision-making is the key here.

Observation 2: Often, S&OP programs are missing the "S" in S&OP, focusing exclusively on operations planning. Operations gets what it can muster from sales -- generally without analytics behind it. But sales, merchandising and marketing are critical. They are equal players in terms of their effect on what happens. 

Observation 3: Capabilities of key network partners (suppliers as well as distributors) are often incorrectly assessed or not considered in the S&OP process. Many companies fail to involve key trading partners in the planning process. 

The Outlook

Today many indicators, including the latest ISM index, are beginning to show clear, global signs of economic growth. Regardless of the mistakes of the past, 2010 represents an ideal opportunity for companies to get S&OP under control. As companies start undoing the cuts they made through the downturn and begin to try and repair what may be weakened relationships with suppliers, S&OP becomes more important than ever. Companies that focus their efforts in developing more mature S&OP capabilities will benefit as they rebuild, and find themselves in a better position to weather the next surprise that the economy, competition or world markets may have in store.