Tuesday, March 10, 2009

The Focus of the S&OP in These Troubled Times

While the basic format of the S&OP process—that of running periodic, multi-functional planning meetings—should not change, the areas of discussion and focus should, in order to consider increased supply-demand uncertainties. In this regard, in this regard wthere are five pieces of advice to help forecast and plan with these increased risks:

Since new products and promotions are instituted to gain market share, there is a need for better forecast and planning the supply needed to make them successful. Planners need to communicate more effectively with Sales and Marketing. These promotions and new product launches must be closely monitored to ensure adequate supply.

One must be quick to detect changes in consumption. A change in consumption might come and go before it is detected if one is looking at shipment data alone. We need to better understand the impact of economic volatility on demand. Planners then need to stay abreast of what is going on in the economy to project future impacts.

Minimizing demand uncertainties by focusing on the customer, channel, and product segments that most contribute to revenues and profitability. Leverage formal risk management techniques as supply-demand risks increase. Wemust move away from the use of point forecasting to range forecasting and scenario planning to better recognize demand uncertainties.

Supply planners will need this level of recognition to mitigate risks via the implementation of hedging, buffering, and multi-sourcing strategies aimed at ensuring reliable supply.

The process of S&OP meetings should remain the same, planners can gain from following the above advice during these turbulent times. Companies that focus their S&OP in this way stand a good chance of making it over that last big wave on the way to calmer economic waters—meanwhile, their competitors that don't, might not.