The sales market is a dynamic one, which has seen a boom, especially in the last few decades. Be it e-commerce, or the traditional one, the sales market has seen record-breaking growth. According to a 2023 Forbes report, sales in e-commerce can extend by 10.4% in 2023.
Such extensive growth requires proper planning, and this is where S&OP comes in. It is an element that is often forgotten by the firm owners. However, without a robust S&OP framework, most businesses can run into expensive roadblocks. This framework guarantees the effortless functioning of an organisation wherein it can respond to risks and blockades easily.
Looking forward to a career in supply chain management? Here is a guide on the S&OP framework, which will talk you through its fundamentals, benefits and much more.
S&OP: What is it?
S&OP is a fundamental element in supply chain management. It is a framework of proper planning, which aligns with sales coordination, management and operation. It thus ensures that a company's master planning process is aligned with its demand, supply, sales, management etc. In simple terms, this framework ensures that the executive and leadership teams of a business are balanced and work collaboratively.
What is the Purpose of S&OP?
Proper planning is the first step to success. Businesses need to understand their market status better so that they can reach success, which can be ensured by proper S&OP planning. Such planning can serve purposes like:
- Fine-tunes processes
- Improves customer service experience
- Balances demand with supply
- Improves budget forecasts
- Enhances sales
- Increases cross-department collaboration, communication and transparency
- Ensures easy maintenance of inventory stock
- Helps in product portfolio mapping
- Helps businesses to respond following market shifts
Fundamental Pillars of S&OP
To pursue a logistics management course, you need the knowledge of S&OP basics. There are four fundamental pillars of sales and operation planning, which are demand, supply, volume and mix.
Demand is a fundamental pillar of S&OP. It regulates the resource capacity, stock and inventory levels, required to suffice customer needs. Demand helps understand your customer better, their preferences, choices, and requirements, which are variable over time. You need to understand demand metrics by analysing seasonal trends, effects of price variation, changes in fashion or taste, customer confidence in the products, product usability etc.
The second fundamental pillar of S&OP is supply. Supply planning is important as it gives a picture of the total material required to meet customer demands, the total requirement of labour, the total cost that would be incurred in the process and so on. You can understand supply metrics better by analysing the price effect on goods and services, the price of its substitute commodities, input costs, future price expectations, government policies and programmes and so on.
Volume metric is the third important pillar, the proper analysis of which is important if a business has to balance demand with supply. As a logistics manager, your role would be to keep track of total production, stock of products for transportation, inventory stock etc. Thus, volume analysis helps a company to recognise potential problems in the supply chain followed by production adjustment and stocking the inventories.
In the supply chain, product mix covers individual commodities, while volume refers to product lines and families. Volume-related issues and queries precede the mix-related ones, and thus proper planning helps in deciding the goods to be produced. To ensure supply is attuned to demand, the firms need to chalk out what products and product families they need to produce.
What are the Benefits of S&OP?
S&OP improves cross-department communication and collaboration substantially. It ensures there's transparency between the teams and keeps everyone on the same page. Here are its other benefits:
- It helps to accumulate accurate data faster.
- It enables smoother adjustments to the supply chain and helps to fix problems easily.
- It ensures optimum resource utilisation
- It reduces all forms of wastes
- It accelerates productivity by scrutinising defects
- It increases overall efficiency by eliminating departmental miscommunications.
Best Practices of S&OP: Tips and Tricks
Marketing products can be hard, but S&OP doesn't need to be. Here are some tips and tricks you can use for your career in supply chain management.
Use latest data
To understand market trends better, it is ideal to use the latest data. Furthermore, it helps to validate customer demands, smoothen supply chains and ensure timely deliverables. Such data sets ascertain swift responses to changes, taking on opportunities early, and risk minimisation. You’d need a strong management procedure paired with the latest analytics tools to ensure the latest data usage.
Define relevant metrics
Setting up realistic metrics will help in S&OP guidance and following up on its performance. Over time optimization of the process also becomes simpler. You can consider the following benchmarks to set relevant metrics:
- Accuracy of demand forecast or sales prediction
- Ensuring inventory efficiency
- Setting realistic delivery deadlines
- Monitor on-time deliveries
Run through potential mishap scenarios
Simulate through multiple threat scenarios so that you can prepare beforehand. Develop strategies to manage any supply chain disruptions or demand fluctuation. Disruptions can be caused by issues in raw material accumulation, supplier constraints, inventory shortages etc. Environmental disruptions like shortage of raw material supply due to natural calamities, transportation issues etc. should also be taken into consideration.
Sales and operation planning or S&OP is a vital process that helps a firm to balance customer demand with supply. It further helps to maximise revenue by optimising resource use. This process demands extensive planning paired with sufficient accurate data and forecasting.
To kickstart your career in supply chain management you can enrol in a logistics management course, like the one offered by Imarticus. Enrol yourself in Digital Supply Chain Management In Association With E&ICT Academy, IIT Guwahati from Imarticus, where you get to accelerate your supply chain management career. It is a program curated keeping in mind the contemporary industrial demands and helps the learners adapt essential management skills. Furthermore, this industry-oriented program offers network enhancement opportunities and thus helps to broaden your communication and collaborative skills.
Visit Imarticus to learn more about this program!