Johannesburg, 19 Oct 2011
Today's competitive manufacturing and retail environments necessitate the need for detailed planning over a number of business functions, including sales, production, inventory, finance and procurement.
All these business units need to be integrated in order for leadership to be able to make decisions based on information from across the organisation.
Research shows that companies that implement a Sales and Operations Planning (S&OP) process outperform competitors.
S&OP is an integrated business management process, which continually aligns, focuses and synchronises leadership among all business functions, enables effective supply chain management, reviews customer demand and supply resources, helps an organisation understand how performance was achieved, but focuses primarily on future actions and anticipated results, and monitors the execution of company strategies.
Outputs from S&OP include an updated sales plan, production plan, inventory plan, customer lead time (backlog) plan, new product development plan, strategic initiative plan and resulting financial plan. Plan frequency and planning horizons depend on the specifics of the industry. Short product life cycles and high demand volatility require a tighter S&OP versus steadily consumed products. Done well, the S&OP process also enables effective supply chain management.
“Developments in S&OP are seeing it expand towards integrated business planning, to fully integrate financial planning and execution processes into S&OP. This change is moving S&OP to the next logical state of excellence and a more mature model,” says Softworx supply chain director Neil Cormack. “There is also a need for S&OP to fully link planning and execution processes, including better integration of planning, execution and ERP software systems; improved feedback loops to improve the quality and speed of understanding actual results; and improved performance metrics that better link higher level goals with downstream execution. In this way, S&OP is starting to merge with execution into one integrated process,” Cormack explains.
“Most companies, until fairly recently, did not consider inventory plans and targets to support a given supply and demand plan in their S&OP. It was usually left for middle managers to determine those inventory targets - with major cash and customer service implications. However, tactical inventory planning needs to be included as part of the S&OP, because this includes major decisions that can impact supply chain networks and capacity designs,” says Cormack.
“In addition, the retail sector historically did not conduct S&OP, but this is starting to change as retailers begin to look at demand in a time-phased view. The process is usually a bit different in retail and may be called marketing and merchandising planning, but at its core, the objective is the same,” he says.
Technology plays an important role in effective S&OP and is essential to support S&OP activities. It is very difficult, if not impossible today, to reach higher levels of process excellence in S&OP without a commensurate investment in technology support. While technology alone cannot deliver S&OP, evidence and case studies indicate it is difficult to reach best-in-class levels of S&OP today without the right software tools.
A comprehensive S&OP software system needs to include both demand planning and supply side planning tools. Infor's demand planning applications use historical demand to generate a base forecast of the most likely sales figures. It aims to ensure the right product, in the right place, at the right time, delivering optimal customer service at minimal cost. Infor Demand Planning includes sales forecasting by gathering data on past sales, analysing trends and reporting forecasts, as well as validating forecasts, understanding sources of demand, and revising inventory and customer service policies.
“Manufacturers in the process of completing the deployment of Infor Demand Planning, including the demand forecaster, inventory planner and replenishment planner modules, are able to predict and shape customer demand with greater accuracy. Benefits experienced include increased service levels and reduced stockholding. Integrated demand forecasting with inventory planning has helped sales and marketing teams to become more in-step with the supply chain, and this has brought the two teams together and improved communication between the disciplines,” says Cormack.
On the supply side, Infor provides Infor Enterprise Planner for discrete manufacturers that make to order, and Infor Advanced Planner for process manufacturers that produce for stock. Infor Enterprise Planner is an ideal constraint-based operational planning solution for manufacturers producing many items with multiple model variations, complex manufacturing processes, separate operational areas, long manufacturing cycle times and distributed multi-tiered supply chains. It helps manufacturers determine work priorities; provide ATP/CTP information to customer service; have global visibility of the status of orders, inventory and resources; set and maintain constraint buffers on resources; simulate changes to the existing plan; make sure supply and demand balance at all times; and synchronise and optimise on resources.
On the other hand, Infor's Advanced Planner enables the simultaneous solving of multiple planning constraints, including capacity, supply sources and materials. It is ideal for manufacturing environments with a continuous repetitive production process such as the food and beverage, consumer goods, chemical and pharmaceuticals markets. Infor Advanced Planner enables multi-plant planning of manufacturing and distribution, multiple plan variations using different scenarios and finding solutions to capacity problems.
“Manufacturing customers using Infor Enterprise and Advanced Planner have experienced integration of planning and scheduling across their various production plants, dynamic sourcing of demand on all production and distribution facilities, and enhanced visibility of demand and supply across the supply network,” says Cormack.
“In the end, S&OP will be the business planning process that a company uses to link supply and demand, set inventory policies and answer supply chain related questions. However, there are large differences in the level of maturity and process excellence in S&OP between companies. This will make all the difference in a company's level of success,” concludes Cormack.
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