Execution of S&OP through a sales and operations execution process is what sets top brands apart.
Business planning is, of course, essential, but the real proof is in the execution. While sales and operations planning (S&OP) is critical to the creation of an overall business strategy to maintain a competitive edge, sales and operations execution (S&OE), along with a process to support it, should also be a top priority for your organization.
S&OP integrates plans for every department, combining the needs and opportunities facing customer support, sales, marketing, development, manufacturing, sourcing, and financial into one tactical strategy. Its intended purpose is to provide the information management needs to direct the business as well as create and sustain a competitive advantage.
The goal of S&OP is to create an overall strategy that helps resource allocation and management meet customer needs while controlling costs. It operates at a high level to optimize supply and demand issues, product life cycles, and new product introductions, assigning a monetary value to each activity so they can be counted in the revenue goals.
With S&OP, time horizons are relatively short – usually three months to a few years – and meetings are usually held no more than once a month.
S&OE Bridges the Gap
There’s an obvious day-to-day operational gap left by S&OP; you still need a way to deal with short-term issues for things like production, shipping, and equipment. The S&OE team has the primary goal of S&OP execution and solving problems to keep sales, supply, and production on target. This usually requires frequent as-needed meetings along with scheduled weekly gatherings.
Sales and operations execution acts on any issues that affect supply and demand issues immediately, or that are foreseen in the next few months, forming the link between strategic and tactical activities defined in the S&OP process. With an effective S&OE process, your operation runs more smoothly and costs are better optimized because problems are quickly identified and solved.
The Benefits of Integrating S&OP with S&OE
Predictability is important. The implementation of an S&OP/S&OE process sets companies apart and offers tangible benefits. Best-in-class organizations report consistent, repeatable superior performance after implementing complementary S&OP/S&OE processes.
Because S&OE supports the S&OP process by creating and disseminating an immediate plan that supports the overall strategy, the two processes together ensure clear and streamlined orders and a logical, achievable workflow. This keeps operational costs optimized.
Additional benefits include:
- Improve forecast accuracy: Inaccuracies in a demand plan will cascade through the supply chain and increase costs, which makes it crucial to driving your plan using a valid market-driven forecast
- Inventory optimization: Implementing S&OE can reduce inventory and safety stock levels up to 45%
- Improve on-time delivery: S&OE can drive customer and brand loyalty by improving on-time delivery by 10% to 50%
- Align planning, budgets, and financial goals: Set departmental goals that will add up to your top-level goals across all departments, divisions, and locations
- Increase working capital: More working capital allows for more efficient inventory, payables, receivables, and cash conversion needed to run the organization
Aligning S&OE with S&OP improves collaboration between departments and increases the involvement of middle management when making decisions. Companies can also build consensus between stakeholders on any changes to near-term plans and forecasts. This offers instant insight into the impact on revenue, manufacturing capacity, and inventory levels.
Designing an S&OE Process
The goal of a sales and operations execution process design is to create an end-to-end workflow that’s connected to the S&OP process. This means defining S&OE requirements, inputs and outputs, and data hierarchies. It’s also important to define the scope of S&OE – whether it begins immediately or with a specific use case.
After defining requirements, the next step is to design the process.
An effective S&OE process requires at least weekly meetings to review issues and decide on and perform the tasks to execute the tactical plan. This means including the right people, offering visibility where it’s needed, and using the right supply chain management solutions for both decision-making and data processing.
It’s also important to identify deviations that trigger the S&OE process and require immediate action. This means having the flexibility to call an unscheduled meeting to deal with these issues without delay. It also means including individuals in the process who can make informed decisions. These could be people in strictly tactical roles or executives in planning and operational management.
Essentially, S&OE requires data hierarchy granularity that isn’t necessary with S&OP. Mapping the S&OP plan to transactional data provides the visibility needed to understand if goals are being met and how deviations truly impact them.
Use the Right Supply Chain Solution
To effectively merge and implement S&OE with S&OP, you need a supply chain software solution to track forecast and inventory performance over time and allow you to visualize true rough-cut capacity and long-term capacity planning data.
The right supply chain platform will greatly improve the success of your integrated S&OP and S&OE processes by explicitly showing what needs immediate focus to keep your supply chain running at peak performance.
At Logility, we are committed to enabling our customers to operate the resilient and sustainable supply chain that will make them leaders in their industry year after year.
Hear how Logility customer Red Wing Shoes leverages Logility solutions to meet its ever-changing business needs and rapidly expanding product portfolio.
Daniel Bachar is VP of product marketing at Logility. Daniel brings more than 10 years of experience in sales, marketing, supply chain planning, and advanced analytics. He provides a unique blend of business and industry knowledge, leading successful efforts to integrate new technologies into effective supply chain solutions. His experience includes development, design and go-to-market strategy of supply chain and advanced analytics products, helping clients with complex business problems to achieve complete visibility into their supply chain operations.