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Sales & Operations Planning – why should you care?

August 26th, 2008

In a more recent topic of discussion last week, I touched on one of the more significant efforts that we had kicked off – an extensive S&OP initiative. In my opening commentary I touched on the reasons that caused, and in some cases, necessitated our commitment to this process. But for those that had not gone through this process previously, myself included, we needed to have a clear understanding of what the process meant and the efforts we would need to commit.

S&OP 101: As a group that had a a high number of newbies, we had to know the basics. At the most basic level, S&OP is an Executive Decision making process that involves all key areas of the organization, including Sales & Marketing, Manufacturing, Design / Engineering / R&D, Finance, and Logistics, which are then coordinated to optimize the planning and forecasting efforts of the organization to efficiently utilize available resources. Depending on the size and nature of the organization, some of the functional areas may change, but bottom line, it involves EFFECTIVE communication among all functional areas. It comes down to an achieving an effective balance between the Supply and Demand forces placed on the firm.

For the firm and the participants involved, this is not a project that involves capturing some improvements in cost, but a firm commitment to the changing of processes and almost retooling the input process in your forecasting. But this should involve only a few areas….right? Let’s take a look at some of the areas that will likely be targeted for review in this process:
1. Statistic, Marketing, and Management Analysis.
2. Review of the Analysis for use within long-term and short-term forecasting efforts.
3. Review of the demand plan, supply plan, shipments, deliveries, and scheduling efforts.
4. Review of bills of materials, bills of resources, and capacity constraints.
5. Assessment of materials and resources in support of short-term and long-term capacity planning.

So when it comes down to Sales & Operations Planning, any member of executive management should care that their resources are being deployed in the most efficient manner. Although results might be good, and on Budget, how much better could company be performing if this effort were undertaken?

Thanks for reading . . . .

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