Unplanned events: Rolling with the punches is the vital component in S&OP

Former boxing champion Mike Tyson once claimed, “Everyone has a plan until they get punched in the mouth.” In many respects, the same holds true for manufacturers. While a company may use sales & operations planning (S&OP) software to meet corporate objectives through better forecasting and planning, trouble comes in the form of an unexpected surge in demand—the figura...
By Jim Fulcher, contributing editor (jimfulcher@comcast.net) August 1, 2008

Former boxing champion Mike Tyson once claimed, “Everyone has a plan until they get punched in the mouth.”

In many respects, the same holds true for manufacturers. While a company may use sales & operations planning (S&OP) software to meet corporate objectives through better forecasting and planning, trouble comes in the form of an unexpected surge in demand—the figurative punch in the mouth.

The reality is front-line decision makers are challenged daily to execute to plan despite unplanned events.

“There’s a balancing act that’s necessary to ensure supply meets demand, but to do so profitably, which is why manufacturers put so much stock in S&OP,” says Noha Tohamy, a director of supply chain for Boston-based AMR Research . “Executives can plan as much as they want, but at the end of the day, someone still must perform triage to ensure supply meets demand.”

What that requires is a combination of visibility and ongoing analysis to enable optimally matching supply and demand with overall S&OP objectives, Tohamy says. In other words, manufacturers must respond tactically as the situation warrants, she says.

Kinaxis , for example, offers a real-time solution used to match supply and demand,” Tohamy continues. “The solution’s strength is the responsiveness it delivers as a result of a company being able to realize—in more-or-less real time—where it is in relation to plan.”

The Teradyne FLEX test architecture covers the widest range of technologies and test strategies, which is why Jim Wood, a company director, turned to the Kinaxis RapidResponse supply chain planning solution to enable Teradyne to take every order received while maintaining profitability.

Such functionality has become mission-critical at North Reading, Mass.-based Teradyne , a supplier of automatic electronics test equipment for the consumer electronics, automotive, computing, telecommunications, and aerospace & defense industries. According to Jim Wood, supply chain information systems director, Teradyne products are extremely complex, involve some customization, and production sites are scattered around the world.

“Product availability is a bigger selling point than functionality, so we accept customers’ orders even if they come in at the last minute with expectations for rapid shipment,” Wood says. “We use Kinaxis’ RapidResponse so we can give customers accurate delivery dates, meet those dates, and maintain profitability.”

When an order comes in, Teradyne staff members view current and scheduled production information, and determine the implications and cost savings of rescheduling jobs, or moving materials or production from one site to another, Wood says. The result is more profitable decision-making.

“We can’t miss delivery schedules, but at the same time, we can’t take an order on short notice and make its delivery at the cost of consequently missing other delivery dates,” Wood explains. “Kinaxis gives us the analytical capabilities we need to accept and meet new orders without sacrificing customer satisfaction on previously received orders.”

Randy Littleson, a Kinaxis VP, says Teradyne’s success story centers on responsiveness and profitability, allowing the manufacturer to strategically outmaneuver competitors.

“If a company can quickly identify options and the impact of those options, it can reduce costs and simultaneously improve customer satisfaction, which ultimately leads to winning new business,” concludes Littleson.