By: John Skelton
The S&OP business process fits effectively within a wide range of businesses, including manufacturing, assembly, distribution, wholesale, retail, and service industries. Its many benefits include.
New Product Introductions: Time required to launch new products can be significantly reduced, and disruptions to the market for existing products can be minimized. Further, S&OP facilitates the development of exit strategies for items that are to be discontinued. The timing of new product introductions can be adjusted to minimize or eliminate carryover of obsolete inventory as exit/launch programs are co-ordinated.
Lean: S&OP supports Lean; it involves decision-making on future rates of demand and supply, integrates financial with operational plans, and generates high-quality forecasts at aggregate levels.
Low Cost: S&OP is a business process, not a software system to be purchased. Technological investment can be moderate to zero. A relatively small number of people will require training, and if the firm’s existing staff is skilled and motivated, implementation costs can be close to zero.
Customer Service: The collaborative nature of S&OP works to improve service levels while concurrently reducing inventory investment. Higher service levels in turn lead to improved revenues.
Inventory: By employing business intelligence from multiple functional areas, and through enhanced demand forecasts, overall inventory investment is reduced, while service levels increase. As potential trouble-spots are identified early, inappropriate procurement and production decisions are avoided.
Customer Order Backlogs: With proper joint planning, demand and supply come into balance and order backlogs are reduced, improving customer satisfaction.
Productivity: Rates of production can stabilize over time as supply and demand are kept in balance, leading to increased productivity. Confidence in system predictability increases. Production and procurement lead times can be reduced as uncertainties within the supply chain are eliminated.
Teamwork: S&OP means that better decisions are made in less time within a cooperative team environment. Channels of cross-functional communication are forced open and team members enjoy a higher degree of both control and accountability.