Advice and Assistance for Manufacturers
November 2010
A recent AMR/Gartner email newsletter referenced a field study that revealed this interesting tidbit: “51% of companies said the only technology they use for S&OP is Microsoft Office plus Access databases”. That’s not necessarily a bad thing.
Sales and Operations Planning (S&OP) is the process where company management develops a plan for balancing supply, demand and production. It starts with a forecast and proceeds to the development of a game plan for how to meet that demand and effectively use all available resources to produce a profit. Everything is on the table including a conscious decision to not meet some demand – use scarce resources to satisfy ‘important’ demand (most profitable) and let less important demand go to a competitor. This is not an easy process as it involves tough decisions and it may rely on questionable assumptions (forecast accuracy, commodity pricing, equipment reliability, worker efficiency, etc.)
Nevertheless, it is a vitally important process that should be repeated monthly to validate and possibly revise the plan based on most recent information. Are Access and Excel appropriate tools for S&OP? Why not? While there are sophisticated planning and optimization tools available from a number of software developers, many small and medium sized companies don’t have the resources to buy and use such sophisticated tools. Most management teams in these companies can handle the forecasts, production plans and procurement data adequately with spreadsheets and get the job done just fine.
I’m not trying to un-sell anyone on sophisticated S&OP tools. If you have the resources to put them to good use, they certainly deliver value. But if you can’t afford them (either the price or the time and effort required to really use them), then don’t let that stop you from putting a solid S&OP process into place. Especially in times like these, with rapidly changing demand, material availability, freight rates, etc. S&OP is critical to the effective and efficient operation of the enterprise.
If you don’t have a documented and functional S&OP process in effect in your company, you should take the coming New Year as an opportunity to formalize the planning cycle. Work with the best forecast you can develop and build a production and procurement plan around what you have. Then pay careful attention to the monthly updates to both refine the plan itself and hone your processes to make them more effective.
