DOES YOUR BUSINESS PLAN EFFECTIVELY?

Do you operate a planning process such as Sales & Operations Planning (S&OP)?

 “Don’t we already do that?”

“We’ve been doing that for years!”

These are often the initial responses.

When asked, “Do you operate a process owned by the Chief Executive, which operates on a monthly cycle and balances the Demand and Supply of the major product families with a plan which is signed off by all departments including the senior executive team, that provides a “window into the future” for the business for the next 3, 6 to 12 months”, the answer will probably be a very different one.

Whilst working with a client recently, the introduction of an S&OP process was proposed in order to improve their ability to plan the business. 

The business regularly experienced shortages of materials in manufacturing, shortages of transport or transport in the wrong place because there was no visibility of future demand. There were orders already on their order book in a market where orders were confirmed close to delivery date and so frequently, large orders would catch Operations and Distribution unawares.  A strong Customer Service ethos would result in costly reactive actions such as short notice hiring of transport so as not to let the customer down. An attempt at a weekly planning meeting had been set up but it tended to focus on the week ahead and looked at the “Detail” rather than the “Big picture” and was a middle management activity.

Sales forecasting was being conducted monthly within the Sales Department but not being shared with Operations and Distribution – does that sound familiar? Indeed, when one Plant Manager was presented with the forecast, he described it as “a revelation”. Often, the only warning for operations/distribution of an unusual spike in demand was an informal conversation from a Salesman. The challenge for the business was to use this valuable information to plan its manufacturing, inventory and distribution activities.
An S&OP process has been introduced which balances Demand and Supply for the main product families. Large specific orders are planned well in advance of the start date with the plans being signed off by the relevant managers and directors. There is now a greater awareness of what’s coming at them and time to plan the “big” jobs. Communication and understanding between departments has significantly improved and now everyone is working to an agreed, single plan. S&OP is being used to understand supply chain costs before deployment.
The process has resulted in fewer meetings which focus the management team on the future plans of the business rather than “what went wrong”.

Gerry Cusack