Sales and operations planning (S&OP) has been a working management concept for at least 25 years. But companies have yet to derive full value from the exercise. It's time to move to the "next generation" of S&OP systems and processes, according to Yehiav, vice president of sales and strategy with Oracle.
The problem up to now, he says, is that many companies have run S&OP systems within discrete functions. Communications between departments them have been minimal, so that sales and marketing, finance and supply chain aren't sharing data and acting in the manner of a single organization.
Integrated business planning is essential, says Yehiav. Often various corporate "silos" will operate as separate profit centers, with performance incentives at cross-purposes. Sales will be driven by the revenues that they generate. Finance will be concerned with the resources it needs to commit to orders within a given reporting period. Supply chain will be focused solely on how to get goods to market. An integrated process synchronizes those disparate activities and ensures the free flow of data and demand forecasts. What's needed, says Yehiav, is a core system that can translate and share information so that "everybody is actually driving to the same goal."
Good internal communications are especially critical at times like now, when the economic downturn could be abating and renewed consumer demand about to kick in. If supply chain isn't talking to sales, it might not be prepared for the surge. Similarly, when launching promotions, sales might be forced to expedite product if the supply chain side of the house isn't ready to match the effort with goods in the pipeline. Such disconnects can serve to erode already-thin profit margins.
The main issue of one of proper business process, but technology can help. The right system, serving all corporate functions, can boost operational efficiency and minimize excess inventory.
As with any such effort, support from top management is key. Otherwise, Yehiav says, "that will never happen."
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