Wells views sales and operations planning as "a decision process with several sub-processes." Chief among them is the anticipation of market requirements, through such disciplines as demand planning and forecasting. But companies need to remember that S&OP requires the participation of multiple partners, including those responsible for supply and contract management, in the chain. The challenge, Wells says, lies in making sure that they are fully involved.
S&OP is all about eliminating the unscientific assumptions that tend to guide decision-making. They need to be replaced by a full understanding of the constraints that exist in a given sourcing situation, along with the opportunities that can be realized as a result.
Visibility, of course, depends on good communications among supply-chain partners. S&OP provides companies with the excuse to achieve it. In looking at supply management, Wells says, companies need first to analyze the current sourcing situation, in terms of both risk and opportunities. They should consider the full range of terms and conditions that apply to a sourcing relationship. At the same time, those in supplier management need to be having an ongoing conversation with sales, to discuss how constraints should be factored into the picture.
Given the natural tendency toward turf protection, sales could be threatened by such an approach. The solution, says Wells, is transparency. Sales and marketing must understand where the constraints are, and supplier managers need to stress their interest in working with them to reach a common goal. "That's what gets their attention," he says.
A certain amount of business-process change is required to implement an effective S&OP initiative. Technology, says Wells, can help to enable such change. One key to success is aligning the metrics and incentives that guide various functions. In addition, participants need to address the full range of relevant topics: working capital, finance, products, brands, marketing, channels and demand planning among them. Armed with such intelligence, marketing can understand how its goals to boost sales or enter new markets will be translated in terms of manufacturing, distribution and sourcing.
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