Executive Briefings

Tough Economic Times Shed Spotlight on S&OP

Uncertain economic times accentuate the importance of sales and operations planning (S&OP). Companies must doggedly monitor their return on investment (ROI) while maintaining a long-term perspective, and senior management must be unequivocally engaged in this process. One key success factor is fostering education in S&OP among professionals involved in financial planning, demand forecasting, product development, inventory management, marketing, and capacity planning throughout all levels of the organization.

Demand management becomes increasingly important in a recessionary environment as well as keeping sales & marketing, finance, engineering, operations, and the entire value chain on the same page and with reconciled holistic goals and metrics. TF Wallace, a frequently quoted authority on S&OP, has claimed in his numerous presentations and webinars that businesses that invest heavily in S&OP are able to make fewer excruciating but necessary cuts than those that do not, citing Lehman Brothers, AIG and Citibank as bad extreme examples of the latter cases.

S&OP also facilitates marketing promotions, new product development (NPD) and launches, and higher levels of involvement of each component of a supply chain at the various stages of a launch. For example, there is an apparent overlap of marketing and demand planning in product launches. These two factions of a company must work closely in tandem to execute a successful product launch, continuing throughout the entire lifecycle of the product.

The renaissance of IBP and S&OP tools comes from their ability to allow all of the corporate participants to learn from the past and understand which assumptions have (or have not) worked, and why. They are also able to better assess the future by sensing the market drivers and evaluating risks and opportunities scenarios. Finally, everyone has to arrive at a consensus after analyzing trade-offs between the "Make", "Source" and "Deliver" options.

The importance of change management when implementing or revising S&OP processes in an organization cannot be over-emphasized.

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Uncertain economic times accentuate the importance of sales and operations planning (S&OP). Companies must doggedly monitor their return on investment (ROI) while maintaining a long-term perspective, and senior management must be unequivocally engaged in this process. One key success factor is fostering education in S&OP among professionals involved in financial planning, demand forecasting, product development, inventory management, marketing, and capacity planning throughout all levels of the organization.

Demand management becomes increasingly important in a recessionary environment as well as keeping sales & marketing, finance, engineering, operations, and the entire value chain on the same page and with reconciled holistic goals and metrics. TF Wallace, a frequently quoted authority on S&OP, has claimed in his numerous presentations and webinars that businesses that invest heavily in S&OP are able to make fewer excruciating but necessary cuts than those that do not, citing Lehman Brothers, AIG and Citibank as bad extreme examples of the latter cases.

S&OP also facilitates marketing promotions, new product development (NPD) and launches, and higher levels of involvement of each component of a supply chain at the various stages of a launch. For example, there is an apparent overlap of marketing and demand planning in product launches. These two factions of a company must work closely in tandem to execute a successful product launch, continuing throughout the entire lifecycle of the product.

The renaissance of IBP and S&OP tools comes from their ability to allow all of the corporate participants to learn from the past and understand which assumptions have (or have not) worked, and why. They are also able to better assess the future by sensing the market drivers and evaluating risks and opportunities scenarios. Finally, everyone has to arrive at a consensus after analyzing trade-offs between the "Make", "Source" and "Deliver" options.

The importance of change management when implementing or revising S&OP processes in an organization cannot be over-emphasized.

Read Full Article