The journey began around three years ago, says Rafael Soto-Amaro, manager of supply chain and materials operations. Initially, the company focused on one internal customer and commodity. About a year ago, with the first project proving successful, it added seven more.
PG&E adopted S&OP because it wasn't getting from its internal customers the early demand signals that ensure service quality, Soto-Amaro says. With constraints from those constituents removed, it could proceed to working with outside vendors.
Expanding beyond its four walls was "a kind of natural process" for the company, Soto-Amaro says. It was able to work more closely with vendors and get the most out of its contracts. "You'd be amazed by the commitment you get from your suppliers when they hear directly from your internal customers," he says. In the process, PG&E could forge more collaborative relationships with trusted vendors.
Benefits accrued quickly. PG&E was able to optimize its inventory by more than 20 percent, even if that didn't result in a net decrease in materials. It has achieved a customer-service level of better than 95 percent, and recently found itself in the top quartile of utility companies with respect to inventory returns.
For companies looking to embrace S&OP, Soto-Amaro recommends approaching the process in stages, setting specific goals along the way and celebrating achievements as they occur. "You get a lot more customers excited about joining," he says, further stressing the need for "strong executive buy-in."
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