Process innovation and change are intricate always due to
the complexity involved in altering the decisions, tasks, and skill sets of the
people involved in the course of action. Sales and Operations Planning (S&OP)
is an integrated business process which enables the organization to formalize
and integrate the planning process, achieve focus, and co-ordination among all
managerial functions. Updated sales plan, production plan, inventory plan,
backlog, financial plan, and new product development plan are a part of
S&OP. It helps the management to understand the current position of the
company, anticipate the future consequences, and plan necessary actions
accordingly.
This is a core business practice which is applied to
conserve a margin and simultaneously satisfy the market demand. In any
business, a well established S&OP process is the mark of excellence. A
sales and operations plan is generally prepared on the basis on the Annual
Operations Plan (AOP) which is based on sales and supply. Accordingly, an S&OP
plan is solely to accomplish the AOP targets of the business. Each and every
company does some form of S&OP already.
S&OP to enhance Supply Chain Management:
Supply chain in an organization is under tremendous pressure
due to its increasing complexity, and supply chain volatility which makes it to
face challenges that exceed those of the past. These mounting pressures make
the business face difficulties in achieving the desired outcomes. Therefore,
increasing number of organizations today, are opting for S&OP to align
their demand plans, and achieve desired performance results.
There are many organizations that do not directly produce
products. Instead they procure products from various sources and offer them at
a higher price, short lead time, and higher delivery fidelity comparatively
over other sources. Risk of obsolescence and overstock of inventory are avoided
for these companies. They are better beneficiaries of a robust S&OP
process. Through this process, the company is able to minimize or avoid
inventory and cost risks.
Benefits of the Process:
- Improved customer service
- Lower inventory
- Shorter lead
time for delivery
- Minimized
obsolescence
- Stability in
production rates resulting in higher productivity
- Minimized
premium freight costs
S&OP for Textile and Apparel Industries:
Textile and apparel industries deal with many variables such
as seasonal demand, multi channel demand, and drastic changes in fashion,
styles, and colors. Apart from this the economic complexities also influence
the buying power of the consumers ultimately affecting the apparel industries
and their profit margins. So, good statistical tools are needed to review the
past performance of the industry, and forecast for the future possibilities.
This helps the apparel industry to perform sales,
operational, financial, and supply chain analytics, making it easy to identify to
identify potential dilemma spots, foresee approaching trends, and improve
results. A recent research report reveals that with appropriate S&OP,
revenue can increase from 2% to 5%, and reduces inventories from 7% to 15%
lesser. The profitability of a new product launch can be up to 20%.
S&OP prospers on the collaboration and honest
communication among organizational players. Implementing the process enhances
teamwork both at the executive level and operations management.
References:
- Larry Lapide,
Sales and Operations Planning Part III A Diagnostic Model, The Journal of
Business Forecasting, Spring 2005, http://ctl.mit.edu
- Donald H.
Sheldon, World class Sales and Operations Planning, http://books.google.co.in
- http://en.wikipedia.org
- http://www.partnersforexcellence.com
- http://www.demandplanning.net
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