S&OP Maturity Series, part 1 of 5

In an ideal world, S&OP (sales and operations planning) empowers businesses to drive performance, beat the competition, and maximize profits. The on-ground reality is, most businesses have an S&OP process, but few have the right solution to support it.

The difference between companies that have a robust S&OP process and those that don’t is a technology engine powerful enough to optimize plans and support decision-making that meets production targets and maximizes revenue.

Over the next few weeks, I will be writing about the different stages of S&OP maturity and how optimization technology can multiply its effectiveness. Giving us an insight into the S&OP process is Andrew, a production floor manager working with Q Co., an OEM (original equipment manufacturer).

Opportunity to profit

Andrew has just clocked in for work when he receives an urgent call from Angela, the sales manager. She pleads for him to put in a new order of 1,000 units for ASDF. This is a company that they have been courting for eight months. The order alone is worth $400,000, and the potential sales from gaining ASDF as a regular customer is huge. Q Co. has an invaluable opportunity to impress ASDF and land the account as ASDF’s regular supplier is unable to meet the demand.

Decisions, decisions

But to meet that order, something’s got to give. Other orders in line would need to be delayed. What should Andrew do? Say ‘no’ to Angela and lose out on new business, or say ‘yes’ and risk upsetting their loyal customers?

At times like this, Andrew is thankful for the company’s recent implementation of an S&OP solution. It is supported by a powerful decision-making platform that offers visibility of the company’s entire operations. The S&OP solution shows the projected resource utilization based on the current order book. Andrew is able to check the existing plan to see if there is sufficient spare capacity in terms of account material, workforce and machine capacity. The system’s optimization technology creates plans that make the most out of the resources available.

KPI- and resource-driven planning

Next, Andrew measures the suggested plans against his department’s business KPIs with particular interest in how they affect his volume targets. Visibility of the plan and resources, plus the optimization in the planning system allows Andrew to evaluate the plant’s production capacity. He discovers that the production floor could accommodate both the new orders from ASDF and the lined up orders from their existing customers if another line is opened up and an extra shift added over the next two days. There is enough staff who are willing to work those extra shifts. Andrew calls Angela with the good news.

But before he could sit down to his first cup of coffee and celebrate the planning puzzle solved, a message comes in from Jerome, the plant manager. Could they have a meeting that afternoon?

Since the implementation of the S&OP solution, production has been able to keep machine utilization high. But one of the lines has shown a drop in on-time delivery. They need to get to the root of the bottleneck before it affects the scheduled delivery to customers. Stay tuned for the next post in this S&OP series to find out how Andrew and Jerome solve this issue.

A truly optimized S&OP process can help you meet your business goals, or better yet, exceed them. Find out how it can empower your processes to help your company achieve higher performance and profit.