The website Supply Chain Insights recently published a report of a study carried out on Sales and Operations Planning (S&OP). Despite the theme being well known and discussed by operations managers, the experiment of classifying and comparing companies with different degrees of maturity in their S&OP processes is worthwhile, in an attempt to identify their potential benefits.
As the main conclusion of the study, companies with effective S&OP processes, that is, “that use Supply Chain, have greater alignment between sales and operations based on analyzes such as 'what-if' and better model the processes of Supply Chain to optimize executable operational plans”, tend to:
- Have greater alignment between organizational areas, which in addition to being the cause of a more effective S&OP process, also results in a greater ability to adapt to possible upheavals in the market. Figure 1 presents a graph that shows the misalignment between the importance and the performance of the integration of several areas.
Figure 1 - Importance versus Performance in organizational integration
Source: Supply Chain Insights
- be more agile, which would be the ability to maintain levels of customer service, costs and quality given the high levels of volatility in the Supply Chain. Figure 2, from another recent report by Supply Chain Insights on inventories, illustrates the enormous challenge of dealing with volatility in demand and supply.
Figure 2 - Volatility of Demand and Supply as major challenges
Source: Supply Chain Insights
Figure 3, in turn, shows how effective S&OP is capable of improving chain agility.
Figure 3 - Supply Chain Agility Performance
Source: Supply Chain Insights
- Better balance Sales and Operations efforts, which generates a balance that leads to more profitable decisions for the company in the long run. Figure 4 shows how companies with a more effective S&OP are better able to balance sales and operations efforts than those with a less effective S&OP process.
Figure 4 - Balancing business and operations plans
Source: Supply Chain Insights
5 years ago, ILOS carried out an extensive study on S&OP in Brazilian companies which resulted in a similar attempt to classify the maturity levels of the S&OP process in our country and, from there, compare their performances. It is quite interesting to notice, with the results of this research, illustrated in Figure 5, that some of the suggestions made today, such as focusing and allowing time for the preparation of plans, guaranteeing the availability of correct data for those involved in the process and involving the financial area, were already among the conclusions of the study 5 years ago, which shows the difficulty of evolving and surpassing the stage in which many companies that use S&OP find themselves.
Figure 5 – Main Challenges of the S&OP
Source: ILOS Demand Planning and S&OP Research
References
<http://supplychaininsights.com/what-is-the-value-proposition-of-sales-and-operations-planning/>
<http://supplychaininsights.com/what-drives-inventory-effectiveness-in-a-market-driven-world/>
<https://ilos.com.br/web/analise-de-mercado/relatorios-de-pesquisa/planejamento-da-demanda-e-sop/>
Leonardo Julianelli
https://ilos.com.brExecutive Partner of ILOS. Graduated in Production Engineering from EE/UFRJ, Master in Business Administration from COPPEAD/UFRJ with extension at EM Lyon, France, and PhD in Production Engineering from COPPE/UFRJ. He has several articles published in periodicals and specialized magazines, being one of the authors of the book: “Sales Forecast: Organizational Processes & Qualitative and Quantitative Methods”. His research areas are: Demand Planning, Customer Service in the Logistics Process and Operations Planning. He worked for 8 years at CEL-COPPEAD / UFRJ, helping to organize the Logistics Teaching area. In consultancy, he carried out several projects in the logistics area, such as Diagnosis and Master Plan, Sales Forecast, Inventory Management, Demand Planning and Training Plan in companies such as Abbott, Braskem, Nitriflex, Petrobras, Promon IP, Vale, Natura, Jequití, among others. As a professor, he taught classes at companies such as Coca-Cola, Souza Cruz, ThyssenKrupp, Votorantim, Carrefour, Petrobras, Vale, Via Varejo, Furukawa, Monsanto, Natura, Ambev, BR Distribuidora, ABM, International Paper, Pepsico, Boehringer, Metrô Rio , Novelis, Sony, GVT, SBF, Silimed, Bettanin, Caramuru, CSN, Libra, Schlumberger, Schneider, FCA, Boticário, Usiminas, Bayer, ESG, Kimberly Clark and Transpetro, among others.
