If it is about Sales and Operations Planning, or S and Op, there are a couple of perspectives. The first is the old school method, as some prefer to call it, and this involves formulating a plan that matches the demand for existing and new products with the present supply chain. Lots of organizations adopt this approach since it is the long-established model that has previously been successful.
With markets that are more volatile, such approach can be too risky. It can lead to missed opportunities as well as inventory issues. There are a number of potentially negative results when establishing the S & OP. The first is a result of sales and marketing that is very conservative.
Opportunities for sales are missed when production planned for a particular demand level is already exceeded. Production is unable to immediately ramp up enough to satisfy the requests of customers. Sales and marketing would smile and then say, “Is beating forecast not good news?” The answer is definitely a reverberating no.
Another likely scenario occurs when marketing as well as sales become too optimistic. They say sales is going to be at some level, however they fall really short. Production supplies output that satisfies the initial projected demand level. Then, you have some warehouse loaded with inventory restricting your cash. Also, the inventory takes the risk of turning obsolete. Soon, you will have to allocate reserves on your books for the protection of your company’s financial position.
Let us quickly examine moving towards some S & OP method that features additional agility. Sales and Operations, in this case, are on a similar level with sales and marketing, and the other way around. Neither side is greatly influential than the other. For instance, manufacturing is unable to order sales and marketing what they should sell, considering the manufacturing limitations.
Whenever balance exists between these two, agility takes place. Agility refers to the ability of switching gears internally in the presence of volatility in the market as well as supply. In addition to this recalibration, the business continues to have the ability of delivering products at the exact time and at the exact price along with quality, while still serving and meeting customers’ expectations.
The latest sales and operations planning model does not mean you can create widgets quicker than before. This new model calls for doing some planning for the unpredicted. In other words, that will happen. Understand the arrangements, and also develop plans that enable you to act quickly as well as easily to confront these changes. Contingency plans have to be developed for supplier catastrophes or hiccups. If you gather syringes, and something goes wrong with the barrel supplier, what should you do? Do you have an emergency supplier?
You are not going to turn out into a modern sales and operation planning california expert overnight. Developing and building models takes practice. It calls for strong partnerships not only with suppliers but with internal customers as well. Finally, you must understand the trade-offs of the supply chain in order to develop more agility.