| Sales and Operations Planning (S&OP) is an | | | | and had no idea what they fully expected. The |
| integrated business management process through | | | | salesperson informed the supply chain group that the |
| which the executive/leadership team continually | | | | agreed upon lead time was five days. The internal |
| achieves focus, alignment and synchronization among | | | | supply chain team took that as once they received |
| all functions of the organization. The S&OP plan | | | | the order they would have five days to deliver the |
| includes an updated sales plan, production plan, | | | | product. The product was seasonal in nature. The |
| inventory plan, customer lead time (backlog) plan, | | | | customer's actual expectations were for delivery of |
| new product development plan, strategic initiative | | | | the product to be made within two days (order to |
| plan and resulting financial plan. Plan frequency and | | | | delivery) during the seasonal spike. You can imagine |
| planning horizon depend on the specifics of the | | | | the boisterous discussion that occurred in-season |
| industry. Short product life cycles and high demand | | | | when the company delivered the product on the |
| volatility require a tighter S&OP planning as | | | | stated fifth day and the customer called to complain |
| steadily consumed products. Done well, the | | | | about orders that were three days late! The loss of |
| S&OP process also enables effective supply | | | | face with the customer and hefty expedite charges |
| chain management. | | | | needlessly happened simply because of an upfront |
| A properly implemented S&OP process routinely | | | | communication error. The sales professional needs to |
| reviews customer demand and supply resources and | | | | define the stated lead time and confirm both sides |
| "re-plans" quantitatively across an agreed rolling | | | | agree upon the definition.o Service Levels. Defining |
| horizon. The re-planning process focuses on changes | | | | lead times is an excellent way to bring up different |
| from the previously agreed sales and operations plan. | | | | price points associated with different service levels. |
| While it helps the management team to understand | | | | Maintaining the example from above, the expectation |
| how the company achieved its current level of | | | | of going from a five day lead time to two day lead |
| performance, its primary focus is on future actions | | | | time during portions of the year is setting a different |
| and anticipated results. Companies that have an | | | | service level and should present the opportunity to |
| integrated business management process use the | | | | be priced differently. At the very least, the company |
| S&OP process to monitor the execution of the | | | | will know the total financial impact of agreed upon |
| company's strategies.[1]. | | | | pricing.o EDI. Make sure you understand how the |
| In more simplified terms Sales and Operations | | | | customer is going to place their purchase orders and |
| Planning can be described as - STATE WHAT YOU | | | | how that might impact the stated lead time especially |
| ARE GOING TO SELL AND MAKE WHAT YOU | | | | if they are submitting them via EDI (Electronic Data |
| STATE YOUR ARE GOING TO SELL. It really doesn't | | | | Interchange). Often times, as in the example above, |
| have to be more complicated than that. | | | | purchase orders go through an EDI clearing house, |
| A well run S&OP is the key to businesses being | | | | which can delay them by as much as one day. As an |
| able to quickly modify and change to current market | | | | aside, there really needs to be a governing body to |
| conditions - which is absolutely essential in today's | | | | incorporate a standard EDI protocol (similar to the |
| every growing world economy. So, why are some | | | | UPC and EAN barcode initiative undertaken by major |
| companies struggling to see the results? | | | | retailers) but that is a topic for another article.o |
| A solid to exceptional S&OP process begins and | | | | Deduction Avoidance. The sales professional also |
| ends with a close to right demand (sales forecast) | | | | needs to clarify seemingly simple expectations that |
| plan. No demand plan will ever be perfect. With the | | | | most often end up as deductions taken by the |
| proper statistical modeling like MAPE (Mean Absolute | | | | customer. |
| Percentage Error) and comprehend forecast Bias | | | | § The payment terms need to be agreed upon. |
| most organizations should be able to produce a high | | | | § The appropriate unit of measure for the |
| quality demand plan. However, there is one very | | | | purpose of ordering and invoicing. |
| important piece of the puzzle that is often missing | | | | § Understand the Bar Code requirements, if |
| that is almost as important to the profitability of the | | | | any, and insure your information technology and |
| organization as an accurate demand plan - defining | | | | manufacturing teams can process it accordingly. |
| customer expectations. Show me a highly functioning | | | | § Documentation. Does the customer require an |
| business, and I'll show you a company that is in | | | | ASN (Advanced Shipper Notice) or email shipment |
| complete concert with their customers' expectations. | | | | notification. Do they need a C of A (Certificate of |
| · Customer Expectations. Defining customer | | | | Analysis)? MSDS sheet (Material Safety Data Sheet)? |
| expectations is critical to the back of half of the | | | | All of the above or other important documentation?o |
| organization - better known as the supply chain by | | | | Final Mile. The sales professional needs to confirm |
| giving them the ability to design a cost effective and | | | | what and how the customer expects to receive the |
| efficient operational plan to meet and exceed those | | | | delivery of the product or service and any accessorial |
| expectations. It also gives the supply chain the | | | | charges associated with them. As with lead time, |
| opportunity to create a flexible and adaptable supply | | | | certain types of delivery expectations might fall |
| that can change with emerging market conditions. As | | | | under a different service level and should be priced |
| I have stated in a previous article, the sales | | | | accordingly. |
| professional should be not only selling products and | | | | Defining customer expectations is a key component |
| services but they should be selling their companies | | | | of establishing and maintaining a fully satisfied |
| supply chain as well. The professional salesperson | | | | customer. Without fully understanding what the |
| should work with his customer to define the following | | | | customer expects and knowing what your companies |
| vital expectations and understand if his companies | | | | supply chain can deliver, makes beginning and |
| supply chain can meet those expectations (Don't | | | | continuing a profitable relationship more difficult. |
| commit unless you know you can deliver!):o Lead | | | | Providing the business with a highly accurate demand |
| Time. Most sales professionals are familiar with the | | | | plan is vitally important function to insure a well run |
| concept of lead times. It is essential to define and | | | | S&OP - defining and comprehending the |
| clarify what it means to both the customer and your | | | | customers' expectations at the onset can't help but |
| companies supply chain though. Let me give you a | | | | foster positive relationships and build trust - which will |
| real life for instance, a sales department landed a | | | | yield a better demand plan/sales forecast. |
| prestigious big box retailer as a new account. They | | | | References |
| had never done business with this company before | | | | 1. ^ Palmatier,George E. |