The Value of Sales & Operations Planning
Sales & Operation Planning (S&OP) is a process to make sure sales, finance, operations and supply chain are aligned, so customer service and profit are maximized. When done well, S&OP allows business to capture efficiencies because it can proactively adjust sales, operations and supply chain as forecasts change. However, this value is only captured when the company uses the “Plan” to make decisions. In this enewsletter we share some common decisions that are the result of the monthly S&OP process.
The tactical value of S&OP is improved forecasting which can lead to reduced lead times, improved sales conversions. As we like to say, visibility creates opportunities and our focus is on using S&OP to increase sales and customer satisfaction.
This month we will feature one of our Clients, TerraSource Global, in a Free Webinar. The Supply Chain Manager will discuss how they benefited from improved visibility and cohesiveness across the organization. Specifically:
· Visibility into potential lost sales and the opportunity to win them back
· When a large forecast is calculated by a forecast algorithm, but the Sales Representative has not heard from that customer it becomes a trigger to connect. Demand for TerraSource’s products is cyclical over multiple years. It is hard for a sales representative to remember when planned maintenance is coming due to a machine. Here the forecast can be a reminder, avoiding the customer going to market.
· Visibility into upcoming demand and the opportunity to influence the customer to purchase an products already in inventory
· When the Sales Rep is talking to operations and there is visibility into an order before it is entered, there is an opportunity to influence what the customer buys. For TerraSource, an alternative, viable product may be aging in their warehouse. If the Sales Rep understands they can provide the customer significantly shorter lead time and reduce aging inventory — a win win!
· Improved timeliness and reaction to issues
· A robust S&OP process requires multiple cross-functional meetings every month. This creates discussions on issues in the moment rather than after the fact, after the month-end financial close. Prior to this process TerraSource typically waited until the end of the month and then reviewed the health of their supply base, sales and inventory. With the S&OP cadence, this changed to reviews, discussions, and actions taken throughout the month, not after monthly finances are completed.
The strategic value of S&OP is cohesiveness across all functions of a business. This creates visibility, and visibility allows the organization to see (sales) opportunities. Once the opportunities are visible, they become achievable.