Beyond the tactical: Five strategies for using S&OP to drive maximum benefit

Everyone’s talking about next-generation-S&OP solutions and the value they can bring to an organization. But how do companies actually drive the maximum value out of these solutions and turn S&OP implementation into tangible ROI? Here are five strategies for maximizing the benefits of next-gen S&OP.


Manufacturers and wholesalers-distributors are hard hit by an unprecedented confluence of economic conditions negatively impacting consumer spending. The economy is forcing companies to scrutinize their business strategies and better align their changing demand patterns with their capacities, resources, marketing programs, and budgets to ensure they are investing in those product lines and channels of sales that can deliver the highest profits during these volatile times.

Leading companies, recognizing the need to transition from disparate, decentralized business decisions, are rethinking the role that sales & operation planning (S&OP) can play in managing their businesses. They are moving beyond purely tactical approaches of using S&OP as a means of balancing supply and demand within their supply chains, and instead using it to align product launches, marketing & sales programs, production plans, and resource allocations to ensure their investments are being made appropriately to achieve business objectives.

Here are five strategies, based on industry best practices, which can help companies develop, implement, and maximize the benefits of next-gen approaches to S&OP.

1. Transition S&OP from tactical to strategic.
The view of S&OP as a means to tactically balance supply and demand within the short-term horizon in the supply chain is restrictive. Leading companies view S&OP more strategically, shifting from a purely tactical implementation to utilizing S&OP for strategic integrated business planning. A strategic S&OP orientation aligns all supply chain plans with the corporate financial objectives and strategy, eliminating internal and external silos and taking a company to the next level of planning.

Related reading: Filling the gaps in S&OP

A solution that has the information and workflows to support proven S&OP best-practice processes will then synchronize supply, demand, marketing programs, sales programs, financial goals, and the achievement of a strategic business plan. Using S&OP to focus on the medium- to long-term horizon where decisions can have a strategic impact has delivered significant improvements to companies that have truly adopted S&OP as an integrated business process.

2. Cross-functional people and process integration.

In an industry best-practices survey conducted in April 2008, 89 percent of respondents said they use S&OP or some other process for balancing demand with supply. For 38 percent of the respondents, the supply chain organization was taking the lead to deploy and facilitate the S&OP processes. A majority (60 percent) used their S&OP processes as a means of managing the supply side of their businesses.

Next-gen S&OP processes and solutions are bridging gaps between the demand and supply side of manufacturing operations, logistics, purchasing, and upstream suppliers while also integrating profitability analysis and securing senior leadership involvement to drive strategic business decisions. Synchronizing plans upstream and downstream leads to the best possible decision-making process for demand-side sales, marketing, financial, and supply-side operational plans—for a far faster ROI.

3. Leverage an integrated S&OP solution.

Companies traditionally employ a range of software applications to support S&OP processes, often requiring time-consuming data extracts and manually transposing data into multiple spreadsheets and reports. But disconnected software applications can place a company at risk without dated data lingering on desktops—fostering inconsistencies in terms of analysis assumptions. It doesn’t take long for downstream users to start questioning data integrity, allowing problems to arise. An integrated solution with built-in, best-practice workflows delivers significant benefits by reducing resources spent collecting and analyzing data, building spreadsheets, and transposing the data into presentable formats to support management review.

The right next-gen S&OP solution has effective capabilities for forward-looking views of the business to support the appropriate product, demand, supply, financial, and management reviews in a graphical orientation that quickly identifies business impacts, leading to rapid, informed decision-making.

4. Incorporate key corporate metrics and long-view forecasting and planning.
S&OP has the power to impact key corporate metrics, including improvements in customer service, inventory levels, as well as purchasing, production and expediting cost reductions. The process ideally provides continuous improvement in inventory turns, sales, cost metrics, and manufacturing efficiencies—with relevant benchmarks linked directly to individuals involved in cross-function processes and held accountable to a unified S&OP plan.

Industry best practices have evolved from short-term demand and production planning to a more strategic time horizon and attainment of corporatewide goals and financial commitments. Companies that previously may have had only a cursory understanding of current fiscal year projections are now able to expand their horizon to two to three years or more. Leading S&OP solutions offer unconstrained and constrained views of demand and capacity needs for proactive long-term planning—facilitating optimal responses, as well as shaping future demand to meet business objectives.

5. Formalize leadership structure and accountability for optimal S&OP benefits.
In JDA’s survey, nearly 75 percent of respondents cited corporate culture issues as barriers to effective S&OP implementation. In particular, there was a lack of leadership and support from executive ranks, with only 16 percent of CEOs regularly involved in the S&OP process. Accountability was low across the board. Additionally, demand and manufacturing plans were most commonly cited as the sole outputs of S&OP.

Cross-functional integration optimizes transparency and facilitates better communication from upper management, with clear lines between leadership decisions and their impact on departments and results. The process should be formalized and spearheaded by senior management on a monthly basis, evaluating and making decisions based on accurate time-phased projections that ensure corporate objectives and strategies are attained.

Forward-thinking companies are already implementing best-practice S&OP processes and technology to synchronize their supply, demand, and execution to achieve the desired financial results. While an ambitious goal, the process can be approached incrementally as resources permit. S&OP integration is applicable to virtually all enterprises—regardless of their capabilities, size, and industry. The right strategies can yield dramatic and brisk returns in terms of inventory reductions, improved fill rates to customers, reduced costs, and enhanced revenues. Those companies that succeed in planning beyond near-term forecasts and short-term goals will find themselves well positioned to compete despite volatile market forces and future economic conditions.

Author’s note:

To learn more about how JDA Software helps its customers leverage information to optimize Sales JDA site today.

No comments
The Top Plant program honors outstanding manufacturing facilities in North America. View the 2015 Top Plant.
The Product of the Year program recognizes products newly released in the manufacturing industries.
The Engineering Leaders Under 40 program identifies and gives recognition to young engineers who...
2015 Top Plant: Phoenix Contact, Middletown, Pa.; 2015 Best Practices: Automation, Electrical Safety, Electrical Systems, Pneumatics, Material Handling, Mechanical Systems
A cool solution: Collaboration, chemistry leads to foundry coat product development; See the 2015 Product of the Year Finalists
Raising the standard: What's new with NFPA 70E; A global view of manufacturing; Maintenance data; Fit bearings properly
Special report: U.S. natural gas; LNG transport technologies evolve to meet market demand; Understanding new methane regulations; Predictive maintenance for gas pipeline compressors
Cyber security cost-efficient for industrial control systems; Extracting full value from operational data; Managing cyber security risks
Drilling for Big Data: Managing the flow of information; Big data drilldown series: Challenge and opportunity; OT to IT: Creating a circle of improvement; Industry loses best workers, again
Migrating industrial networks; Tracking HMI advances; Making the right automation changes
Understanding transfer switch operation; Coordinating protective devices; Analyzing NEC 2014 changes; Cooling data centers
Upgrading secondary control systems; Keeping enclosures conditioned; Diagnostics increase equipment uptime; Mechatronics simplifies machine design

Annual Salary Survey

After almost a decade of uncertainty, the confidence of plant floor managers is soaring. Even with a number of challenges and while implementing new technologies, there is a renewed sense of optimism among plant managers about their business and their future.

The respondents to the 2014 Plant Engineering Salary Survey come from throughout the U.S. and serve a variety of industries, but they are uniform in their optimism about manufacturing. This year’s survey found 79% consider manufacturing a secure career. That’s up from 75% in 2013 and significantly higher than the 63% figure when Plant Engineering first started asking that question a decade ago.

Read more: 2014 Salary Survey: Confidence rises amid the challenges

Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Society for Maintenance and Reliability Professionals an organization devoted...
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
This article collection contains several articles on the vital role that compressed air plays in manufacturing plants.