The supply chain is now more important to corporations than ever before. Costs have increased and volatility has gone up, as tumultuous world events and increasing globalization combine to create difficulties for supply chain managers. As such, supply chain planning is of paramount importance for keeping down costs and guarding against any potential risks that could arise.
Sales and Operations Planning (S&OP) is one of the central components of effective supply chain management, and integral to improving corporate performance. S&OP is a process of planning that integrates customer-focused marketing plans for new and existing products with the management of the supply chain. It is one of the most important horizontal processes in a company, connecting the organization to give it structure and purpose. Of 117 supply chain executives from over 50 companies who were quizzed in an online survey conducted by Supply Chain Insights, 90% reported that they believe S&OP improves supply chain agility.
The most important way it helps to reduce supply chain inefficiencies is by aiding inter-functional collaboration and creating a holistic culture in the company. In an S&OP culture, openness and trust between departments replaces a silo mentality. All departments enter into discussions in a constructive manner, and executives work based on the idea that they need to do what is best for the company as a whole, as opposed to trying to protect their own department.
S&OP enables people to innovate more effective processes by creating a safe environment for people in which questions can be asked and decisions challenged. The focus is on problem resolution as opposed to punishing people for errors, and as such people are more willing to point out any issues as soon as they arise. In some ways, this draws on Japanese business culture, where they are constantly looking forward.
Improving communication between departments and across the supply chain enables firms to reduce the waste that can arise as a result of breakdowns. The knock-on effect of delays that can occur in the supply chain can cost companies huge sums, and in SMEs and start-ups especially. Cutting down on these could be the difference between failure and survival.
The ability to get everyone working together and ending inter-departmental rivalry is greatly aided by the data-driven decision making in S&OP, placing the onus on the quality of the information as opposed to uninformed opinion. The holistic culture that is existent means that everyone is responsible for the data too, which means that it is of a far higher quality. Meetings are therefore streamlined because there is little debate as to different people’s perspectives, there is only the data’s perspective.
All of this enables a company wide shift away from reactive to proactive decision making. This helps to mitigate risk in the supply chain - cutting down on the costs that can arise from shocks to the chain, and helping drive value across the corporation. The changes have ramifications outside the supply chain too, helping to create a culture of collaboration across the company that facilities innovation, creativity, and profit.