3 ways to optimize supply chain planning with S&OP
Tap into the key metrics and external data you need to unlock your supply chain planning agility.
At a time of constantly fluctuating consumer demand, ongoing business disruptions, and increasingly volatile raw material prices, Connected Planning is rapidly becoming a must-have capability. Sales and operations planning (S&OP) enables more effective supply chain management and focuses the resources of an organization on delivering what your customers need (while staying profitable).
Here are three ways to improve supply chain planning to support the additional priorities — as well as meet the financial goals of your organization — while meeting consumer demand.
1. Optimize the S&OP process with advanced analytics
Planning activities have traditionally been a supply chain topic. However, digital and advanced analytics are now unlocking the ability to make complex trade-offs among functions such as sales, including promotions, production, and the supply chain.
As an integrated business management tool, S&OP empowers you to focus on key supply chain drivers, including sales, marketing, demand management, production, inventory management, and new product introductions or phase outs and supersessions.
By using planning tools, leaders across the business can identify trends and patterns in the data supporting greater collaboration and data-driven decision-making. But to be truly successful, leaders and decision-makers need to recognize and address the interdependencies between projects, promotions, product launches, and phase-outs.
This includes pulling together data from multiple sources and applying the expertise of knowledgeable teams (e.g., business intelligence) to plan the best outcomes across variable scenarios. Mature S&OP organizations are utilizing advanced analytics tools to calculate scenarios and their impact on the business in real time.
2. Embrace external data for improved demand forecasting
Without a clear understanding of demand, businesses will fall short of fulfilling orders and maintaining a steady supply. But accurate demand management is easier said than done. It often requires the analysis of enormous amounts of data to create accurate forecasts, based on historical sales, upcoming product launches, marketing promotions as well as any other sales data to anticipate future demand.
Using the previous year’s events as the sole basis to plan for what will happen in the current year can be a recipe for disaster as demand patterns can vary wildly from week to week and month to month, year over year.
To match the pace of change, planning and forecasting processes that used to be done annually or quarterly now must be conducted more frequently to stay competitive. Demand sensing, for instance, allows you to receive forecasts frequently (e.g., once a day). It enables retailers to improve accuracy and also identify short-term supply imbalances and react to dynamic changes more quickly.
A real-time, connected, and single view of demand allows you to respond nimbly to disruptions when they occur and accurately predict revenue. Leaders and decision-makers should incorporate external data sets such as point-of-sale data, weather projections, and even mobile phone location to predict true demand by customer and channel.
By using a combination of consumer insights, external data, and your own customer data, leaders can better predict and mobilize against changes to consumption, channel mix, or even product demand by post code for long term planning and S&OP.
This combination of advanced data analytics underpinned by machine learning and accelerated delivery mechanisms will enable you to anticipate and satisfy consumers’ desires before they are aware of them. By contrast, companies that lag are ignoring forecast accuracy metrics and missing insights generated from external data, which will be a missed opportunity to advance their future planning skills.
3. Underpin supply planning with key metrics
To say supply chain management is a fine balancing act is a massive understatement. It’s made all the more complex by the relationship across multiple business units as well as internal stakeholders and external vendors.
For many organizations, given the ongoing disruptions, supply planning has become the prime area of focus. Supply planners need to carefully interpret demand forecasts, and create a roadmap for meeting that demand, by collaborating with logistics, finance, operations, and manufacturing.
In some cases, companies manage supply constraints by accumulating excess inventory; however, it is a suboptimal strategy for driving increased profitability. By streamlining supply planning and better aligning with demand, companies can make the most of their working capital and execute inventory decisions that maximize value.
Ongoing supply challenges require you to holistically evaluate both risks and opportunities — including revenues, profit margins, service levels, performance penalties, and customer impacts — and have the capabilities to measure them.
KPIs allow you to identify and analyze strengths and inefficiencies to enable data-driven decision-making. Metrics such as order rates, warehousing costs, inventory-to-sales ratios, inventory velocity, and cycle time should be included. Supply chain leaders should establish specific parameters by which they can quantify performance.
True customer focus places emphasis on customer satisfaction and retention figures. This requires specific attention focused on tracking the perfect order rate (i.e., those orders that arrived on time with the correct items) as it as the biggest impact on the bottom line.
But ultimately, you should be interrogating data at all levels — everything from top-level, rough-cut capacity planning to individual production and logistics schedules at the micro level.
This content originally appeared on bedfordconsulting.com.