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.
- Larry Lapide, Sales and Operations Planning Part III A Diagnostic Model, The Journal of Business Forecasting, Spring 2005, &sec=article&uinfo=<%=server.URLEncode(2094)%>" target="_blank">http://ctl.mit.edu
- Donald H. Sheldon, World class Sales and Operations Planning, http://books.google.co.in
- &sec=article&uinfo=<%=server.URLEncode(2094)%>" target="_blank">http://www.demandplanning.net