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Companies that have endured a prolonged economic downturn often do not see, or refuse to believe, early signs of recovery, putting them in even greater danger, says Sujit Singh, COO at Arkieva (formerly Supply Chain Consultants). Sales and operations planning, if rightly applied, can prevent this oversight and enable companies to be ready when demand returns, he says.
Singh explains that on the front side of a downturn, companies focus on reducing inventory, but typically this is done across the board rather than selectively. As a result, some products are cut that should not be and others are not cut enough. When the economy starts to come back, since all inventories have been reduced, any rapid spike in demand creates problems for the company and its suppliers.
A sound sales and operations planning process can help avoid these problems, but Singh says that many companies are not sufficiently rigorous in their use of S&OP, even if they have a process in place. "When the economy hits a downturn, the pressure is to just cut costs and ignore S&OP, but that is the time when companies should give S&OP increased attention, Singh says. "S&OP provides a means for a company to keep its eye on the market so they can see when demand is turning and be prepared for it," he says. Singh says Arkieva has seen companies ignore input from their sales teams about an increase in demand because they can't believe the economy is really improving. "If they had had the proper sales and operations planning process in place, they would have been able to discuss these inputs, along with other factors, and perhaps been more willing to accept that changes were on the way," Singh says. "The purpose of S&OP in these times is to keep the ship right and also to make sure you catch the turn at the best possible time so you can again build up capacity and inventory."
Singh also explains why Supply Chain Consultants changed its name to Arkieva, noting that since introducing its Zemeter software solutions in 2002, the company's business has become entirely devoted to developing and implementing these solutions. "Arkieva is a concatenation of the words ark and achieve," he says.
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