Process innovation and change are intricate always due tothe complexity involved in altering the decisions, tasks, and skill sets of thepeople involved in the course of action. Sales and Operations Planning (S&OP)is an integrated business process which enables the organization to formalizeand integrate the planning process, achieve focus, and co-ordination among allmanagerial functions. Updated sales plan, production plan, inventory plan,backlog, financial plan, and new product development plan are a part ofS&OP. It helps the management to understand the current position of thecompany, anticipate the future consequences, and plan necessary actionsaccordingly.
This is a core business practice which is applied toconserve a margin and simultaneously satisfy the market demand. In anybusiness, a well established S&OP process is the mark of excellence. Asales and operations plan is generally prepared on the basis on the AnnualOperations Plan (AOP) which is based on sales and supply. Accordingly, an S&OPplan is solely to accomplish the AOP targets of the business. Each and everycompany does some form of S&OP already.
S&OP to enhance Supply Chain Management:
Supply chain in an organization is under tremendous pressuredue to its increasing complexity, and supply chain volatility which makes it toface challenges that exceed those of the past. These mounting pressures makethe business face difficulties in achieving the desired outcomes. Therefore,increasing number of organizations today, are opting for S&OP to aligntheir demand plans, and achieve desired performance results.
There are many organizations that do not directly produceproducts. Instead they procure products from various sources and offer them ata higher price, short lead time, and higher delivery fidelity comparativelyover other sources. Risk of obsolescence and overstock of inventory are avoidedfor these companies. They are better beneficiaries of a robust S&OPprocess. Through this process, the company is able to minimize or avoidinventory and cost risks.
Benefits of the Process:
- Improved customer service
- Lower inventory
- Shorter lead time for delivery
- Minimized obsolescence
- Stability in production rates resulting in higher productivity
- Minimized premium freight costs
S&OP for Textile and Apparel Industries:
Textile and apparel industries deal with many variables suchas seasonal demand, multi channel demand, and drastic changes in fashion,styles, and colors. Apart from this the economic complexities also influencethe buying power of the consumers ultimately affecting the apparel industriesand their profit margins. So, good statistical tools are needed to review thepast performance of the industry, and forecast for the future possibilities.
This helps the apparel industry to perform sales,operational, financial, and supply chain analytics, making it easy to identify toidentify potential dilemma spots, foresee approaching trends, and improveresults. A recent research report reveals that with appropriate S&OP,revenue can increase from 2% to 5%, and reduces inventories from 7% to 15%lesser. The profitability of a new product launch can be up to 20%.
S&OP prospers on the collaboration and honestcommunication among organizational players. Implementing the process enhancesteamwork both at the executive level and operations management.
References:
- Larry Lapide, Sales and Operations Planning Part III A Diagnostic Model, The Journal of Business Forecasting, Spring 2005, &sec=article&uinfo=<%=server.URLEncode(2094)%>"target="_blank">http://ctl.mit.edu
- Donald H. Sheldon, World class Sales and Operations Planning,
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