Is Sales and Operations Planning (S&OP) dead?
[Also posted on LinkedIn]
Are supply chain planning processes still relevant in the new normal of community quarantines, lockdowns and work-from-home employment? Is Sales & Operations Planning (S&OP) obsolete or dead?
Wikipedia defines Sales & Operations Planning as an “integrated business management process through which the executive/leadership team continually achieves focus, alignment and synchronization among all functions of the organization. The S&OP process includes an updated forecast that leads to a sales plan, production plan, inventory plan, customer lead time (backlog) plan, new product development plan, strategic initiative plan and resulting financial plan.”
S&OP balances supply and demand in the medium-term. It links the strategies, goals and objectives of the organization to the detailed executional planning and scheduling process. S&OP is normally done monthly and has proven to be effective in most organizations.
The question then is – is S&OP still relevant today as global supply chains experienced unreliability coupled with unprecedented volatility in consumer demand?
I think yes, it still is. S&OP is more than ever important, especially with all the uncertainties in supply and demand. I believe, however, that the assumptions which underlie S&OP are no longer applicable to the current business environment and that there is need for fundamental change in how we plan for demand and supply.
Demand has become distorted as forward-buying behavior and brand switching by consumers have muddled product offtakes to the extent organizations are unsure of the data as semblance of demand history. Traditional sales channels aren’t any more worthy sources of demand indicators as consumers opt for alternate avenues such as e-commerce and direct selling.
On the supply side, manufacturing and logistics efficiencies have become unreliable as:
Mr. Jovy Jader is a Supply Chain Advisor, Consultant, and Regional Speaker on Supply Chain Management. He has directed and implemented Business Improvement projects both local and international which have resulted to company-wide improvements in revenue, working capital, total cost, and customer service levels. Mr. Jader is the co-author of the book Speed Kills … your Competition: Driving Growth Through Supply Chain Excellence – a book on Supply Chain Insights and Best Practices. Should you have questions or comments, please e-mail to firstname.lastname@example.org.