Management briefing

Closing the loop on sales and operations planning systems

SALES AND OPERATIONS PLANNING

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CLOSING THE LOOP ON SALES AND OPERATIONS PLANNING SYSTEMS

SALES AND OPERATIONS PLANNING

Most business executives would agree that effective sales and operations planning (S&OP) should lead to competitive success. But S&OP means different things to different organizations. For some, S&OP is software oriented toward planning for demand and/or capacity, while others expect their S&OP systems to develop business scenarios or to provide a platform for integrated business planning.

As a set of decision-making processes that balances demand and supply; integrates financial and operational planning; and links strategic plans with day-to-day operations, S&OP may be implemented in a variety of ways. In all cases, however, S&OP links the supply chain to business strategy. An effective S&OP implementation can give prompt answers to questions such as:

• What assumption is driving this spike on the forecast revenue graph?

• What is the range and probability of this forecast?• What are we doing to close the gap between

forecasts and actual results?

While each company’s S&OP process may be unique, fundamental similarities exist. Data gathering, innovation, and product management feed into scenarios for demand and supply planning. At the same time, they must take into account supply constraints such as capacity, inventory, and critical materials. Planners then develop optimized scenarios, which lead to pre-S&OP revenue forecasts and gap analysis. Finally, the system formulates an actual plan and operational decisions that reflect all the previous findings in light of an organization’s strategic goals.

The opportunity

CLOSING THE LOOP ON SALES AND OPERATIONS PLANNING SYSTEMS

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SALES AND OPERATIONS PLANNING

Running your S&OP on a system that incorporates so many variables can bring a clear competitive advantage. Researchers have identified improvements in metrics like inventory reduction and revenue increases at companies that have implemented S&OP. Other documented improvements include:

Increased forecast accuracy 18-25%Increased sales revenue 10-15%Increased on-time delivery 10-50%Inventory reduction 18-46%Safety stock reduction 11-45%Increased productivity 30-45%

Source: Oliver Wight, study of customer results and benchmarks

Of course there are challenges and obstacles that can prevent organizations from achieving their supply chain goals. Some of the common obstacles include lack of executive engagement with supply chain management, inaccurate forecasting, difficulty in coordinating end-to-end supply chain processes, challenges in collaborating across functions, and lack of visibility across the entire supply chain.

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CLOSING THE LOOP ON SALES AND OPERATIONS PLANNING SYSTEMS

SALES AND OPERATIONS PLANNING

CLOSING THE LOOP ON SALES AND OPERATIONS PLANNING SYSTEMS

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SALES AND OPERATIONS PLANNING

Despite its historic emphasis on the supply chain, S&OP is a cross-functional process dependent on input from sales, marketing, finance, manufacturing, and logistics; as well as from product, workforce, and executive management. Not surprisingly, such a thorough integration of organizational activities to be successful requires strong executive sponsorship and a commitment to process education and continuous improvement. Other challenges that organizations often face in implementing S&OP include harnessing global data, linking supply and operational plans, integrating them with financial plans, and achieving effective collaboration with sales departments.

Closing the loopOther organizations may find it difficult to integrate siloed hierarchies. Or to transfer operational knowledge across product categories, sales regions, and market segments. But liberating data from departmental confines is necessary in order to make it available according to its usefulness to specified roles. This is the essence of integrated business planning — connecting the volume plan to the value plan. When data flows freely along functional paths, quarterly or monthly S&OP supply planning melds with weekly or daily master production scheduling, allowing the shift-sensitive factory scheduling or operational plan to be more responsive to the market factors that drive the supply plan. You finally connect production capability to supply and operational capacity.

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CLOSING THE LOOP ON SALES AND OPERATIONS PLANNING SYSTEMS

SALES AND OPERATIONS PLANNING

To improve your S&OP process, you must identify where the investment is likely to bring the greatest return. Consider your organization in terms of people, process, and systems. If you already use S&OP but it doesn’t work for you, you should focus at the intersection of people and process. If you already have S&OP in place but are failing to realize its full benefit, focus on process. If you already have S&OP in place and it works, but you want to increase the maturity of your process, you should focus at the intersection of process and systems.

Knowledge of S&OP best practices can improve your process dramatically. Five critical areas include:

• Tighter collaboration between sales and marketing• Orienting the S&OP process toward profit-and-loss

rather than the supply chain• Aligning value-based KPIs and other metrics with

organizational strategy• Focusing on time horizons from the short-term

out to two or three years• Implementing an integrated SCP/S&OP system

rather than relying on ERP systems and/or spreadsheets

Improving your S&OP process

Quintiq provides S&OP solutions that facilitate the realization of S&OP’s value, regardless of how your organization defines that value. For organizations that need to propagate their plans through the organization, Quintiq can configure top-down or bottom-up demand and supply planning systems that aggregate data throughout the organization for presentation on a detailed, unified platform. For organizations that need scenario optimization, Quintiq prioritizes KPIs to identify best-results scenarios that drive profitable decisions. And for organizations that need an S&OP foundation for product life cycle management, Quintiq seamlessly feeds into the S&OP process to maximize new product profits.

Although each organization may find a different path to S&OP success, the technology underlying the Quintiq solution has the capability to integrate data throughout the organization, transfer operational knowledge to the destinations where it is most useful, and chart the progress your organization makes as it implements and iterates its plans.

CLOSING THE LOOP ON SALES AND OPERATIONS PLANNING SYSTEMS

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SALES AND OPERATIONS PLANNING

CLOSING THE LOOP ON SALES AND OPERATIONS PLANNING SYSTEMS

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SALES AND OPERATIONS PLANNING

Offices: www.quintiq.com/locationsEmail: info@quintiq.com | Web: www.quintiq.comCopyright © 2015 Quintiq. All rights reserved.

About QuintiqEvery business has its supply chain planning puzzles. Some of those puzzles are large. Some are complex. Some seem impossible to solve. Since 1997, Quintiq has been solving each of those puzzles using a single supply chain planning and optimization software platform. Today, approximately 12,000 users in over 80 countries rely on Quintiq software to plan and optimize employees, logistics and production. Quintiq has headquarters in the Netherlands and the USA, and offices around the world. For more information, please visit www.quintiq.com.