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Best Practices in S&OP

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Enterprises in the post millennium era have been severely challenged by a set of irreversible marketplace factors — including shrinking profit lifecycles, demand for personalized solutions, and the rise of the distributed network enterprise — that have transformed the global competitive environment into one with fundamentally more uncertainty and risk, but also one with great opportunity. These pressures have compelled companies to redefine winning business models, processes, and technologies and have catapulted the sales and operations planning process into the single most important tactical process to manage risk and profitability.

Dynamic sales and operations planning (S&OP) is that set of business processes and technologies that enable an enterprise to effectively respond to demand and supply variability with timely determinations of the right market and supply chain mix, all through the S&OP time horizon.


AberdeenGroup has extensively researched the sales and operations programs of a variety of large and mid-size companies, in order to identify and capture the essence of the best practices that are most responsible for enabling superior business performance through S&OP. A number of companies have risen to the top as practitioners of a fundamentally different and competitively superior approach to the sales and operations planning process, in many cases taking a novel approach to the deployment of new business practices and enabling technologies.


Six best practice leaders were selected (Table 1) to illustrate these success strategies, and to provide keen insight on turning adversity to advantage. Each best practice leader is represented by a case study that discusses the business challenge, S&OP strategy, technology deployment, lessons learned, results, and the conclusion drawn by Aberdeen-Group on what this could mean for your enterprise.

SOP Best Practices

 

Key Findings and Recommendations

Today’s dynamic S&OP business practices are fundamentally different and more effective than the demand/supply volumetric balancing approaches – i.e. balancing physical units of measure such as cases, tons, cubic feet, etc. – that were the hallmark and leading characteristics of these programs in the pre-Y2K era. Table 2 illustrates that every core tenant of traditional Sales and Operations Planning practices have been over-turned and replaced with a characteristic specifically designed
to cope and flourish in today’s chaotic marketplace:

 Tb2 SOP Best Practice Basics

Three elements of a successful S&OP program have outshone the others as providing the most business benefits and the best capabilities for managing risk and uncertainty:

• Explicitly linking supply and inventories to demand dynamics
• Contingency planning to shape demand and harmonize supply
• Tightly managing the demand process and not just the numbers

Aberdeen’s S&OP best practice checklist can be used to verify that a company’s sales and operations planning roadmap is reflecting current best practices. Sales and operations best practices reflect a deep understanding of the business forces
that drive risks and opportunities – the “systems dynamics” of their competitive marketplaces. All winning approaches are based on a tight integration of business processes and practices taking advantage of new capabilities in their deployed technologies to take better control of their destiny – proactive rather than reactive management.

 

For companies contemplating a sales and operations planning transformation program,recommendations for action include:
• Focus on the areas where the greatest risk currently lies in achieving your business objectives. In 90% of the cases, this starts with, or at least includes, demand
management. Improving demand has a marvelous way of making even largescale “supply” problems such as excess inventories, expediting and changeover costs, and low customer fill rates sharply decline or even disappear.

• Identify and focus upon your “levers of power” to shape demand and align supply – relying entirely on manufacturing and supply “responsiveness” is a one way ticket to the ash heap.
• Include your business network partners in the design of the processes and the success metrics – left to themselves you are guaranteed to be working at cross purposes.
• Align your functional metrics to the overall profitability objectives – bottoms up metrics are inherently wrong and will assure huge losses in profitability, responsiveness and excess investment in fixed and working capital.
• Deploy a contingency planning approach based on multiple “what if” scenarios to determine the “hot spots” of risk and opportunities – and then develop and deploy tactics to preempt the competition.
• Plan a three month roadmap to achieve specific business value objectives and keep the roadmap dynamic – you cannot effectively plan more than one or two steps ahead as actual results from your previous and current steps should significantly
change your perspective of the next best opportunities.

Download full white paper below.

Last modified on Tuesday, 02 October 2012 11:46

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