Sales and operations planning (S&OP) is now considered to be one of the important processes within successful supply chain management.
It is essential to ensure the smooth running of a business both in the short and long-term and helps companies balance:
- supply and demand
- customer service
A good S&OP process will undergo many years of regular improvement with adjustments to maximise sales and productivity within different areas of the organisation.
Whether you are just starting out with your planning or looking to improve these are three major mistakes to avoid in S&OP.
1. Not getting the balance right
This is one of the most important things to get right in S&OP, yet so many businesses get it very wrong.
Finding the right balance of supply and demand is crucial to your success. Produce too little and both the sales team and the consumer is left feeling let down, but produce too much and you are left with goods that cost you warehouse space and may need heavy discounting to shift.
Equal importance should be placed on both the sales and operations areas of your business if you want to achieve a harmonious supply chain.
2. Planning for just one outcome
Never plan for only one outcome.
It has been an S&OP rule for many years to work towards the ‘one goal’ – a business’s ultimate ideal ending. Unfortunately, this just simply isn’t viable and not only does it diminish the importance of your executives it can leave you in hot water if things go wrong.
It’s an S&OP executive’s job to mitigate risk and plan for alternate outcomes, just in case the supply and demand does not follow the path it is supposed to.
Don’t make the mistake of planning for something that can often be inconsistent, always plan for both positive and negative alternate results.
3. A lack of engagement across the board
Another one of the biggest mistakes businesses should avoid in S&OP is the inability to engage with all areas of the business.
The entire reason good S&OP is crucial to an organisations success is because if done correctly, it enables the entire business to move in the same direction. Despite this fact, many companies still fail to understand the importance of communication.
Whilst operations would want to see results in units, finance is more likely to need information in the form of net margins.
Being able to communicate plans in a way that sales, operations and finance can understand will ensure that they are more involved in the S&OP process and can help to create a smoother supply chain.
These are three obvious but common mistakes that businesses fall down on when it comes to S&OP. However, alongside correcting these mistakes, it’s important to always regularly check your S&OP process on a weekly to monthly basis to ensure that calculations and forecasts are heading in the right direction.
Fluidity is vital in business, so you need to be doing everything you can to improve the flexibility of your supply chain today.
Getting expert and independent help with your S&OP can not only make sure you avoid common mistakes, but also ensure you have workable plans both from today and into the future. Visit Total Logistics to find out more.