Most companies have implemented some form of sales and operations planning for quite some time, but few are satisfied with the current process. As a result, they are encountering more and more problems, particularly as their supply chains become more complex " and can suffer from the "four stages of planning grief" In stage one the status quo seems fine, but symptoms of future problems begin to show up " such as mounting back orders. In stage two, the symptoms intensify as the company institutes planned price increases while introducing new products, effectively cannibalizing its own market. In stage three, demand increases, but manufacturing capacity can't keep up " and competitors begin to capture the unmet market demand and increase their market share. Finally, in stage four, the competitive trickle becomes a flood of competing products, ultimately depleting working capital and affecting financial performance.
In addition, many S&OP processes are incapable of reconciling the perspectives of sales, marketing, manufacturing, and logistics or extending the supply-chain decision process to include customers and suppliers. When each part of a company is operating separately and lacking effective communications that share updated data, stakeholders make decisions independently without recognizing the broader impact. Instead, stakeholders need aggregated data presented according to different dimensions that are meaningful to them: time, organization, product, geography, unit of measure, and so forth, Thus, the company's S&OP process can link decisions at the strategic level, align tactics with strategy and goals, and allow decision makers to adapt to changing circumstances as they develop.
Inadequate Technology Spells Doom
Some companies approach the S&OP process using spreadsheets and simple tools for rudimentary collaboration. The spreadsheet technique, while a low-cost option in the short term, presents several challenges, including different versions of the same data and an inability to integrate and reconcile S&OP with underlying business processes. Data becomes outdated very quickly, hampering collaboration, while team members get frustrated trying to piece together the picture of the company from faxed or e-mailed spreadsheets.
The consequences of this approach can be costly and far-reaching, for some of the following reasons.
* Product supply and the market are not reconciled. Repeated stock-outs cause distributors to switch to other manufacturers for the same product. Distributors show little mercy in making up for any slowdown in getting stock through their pipeline.
* Excess inventory dilutes prices. Excess inventory is the mirror image of the stock-out. For example, when an electronics manufacturer bet on the wrong style of MP3 player, production capacity and demand were out of sync for more than six months. The company wound up with excess capacity that it had to dump on an unsuspecting market, taking a big financial loss.
* New product introductions fall flat. The successful commercialization of new products mandates close coordination between research and development, marketing, sales, production, supply, and logistics. An information or communications failure between any of these links can result in lost market share because of a tardy or ineffective commercial launch of a new product.
* Supply mix does not meet market demand. Many large companies must support a complex supply web and balance their multifaceted supply mix with the requirements of diverse customers, channels, and regions. Without sufficient information, these same companies may have difficulty adapting their supply chains to meet the constantly shifting demands of their best customers, opening more productive channels, or negotiating for access into new geographic regions.
In addition, many S&OP processes are incapable of reconciling the perspectives of sales, marketing, manufacturing, and logistics or extending the supply-chain decision process to include customers and suppliers. When each part of a company is operating separately and lacking effective communications that share updated data, stakeholders make decisions independently without recognizing the broader impact. Instead, stakeholders need aggregated data presented according to different dimensions that are meaningful to them: time, organization, product, geography, unit of measure, and so forth, Thus, the company's S&OP process can link decisions at the strategic level, align tactics with strategy and goals, and allow decision makers to adapt to changing circumstances as they develop.
Inadequate Technology Spells Doom
Some companies approach the S&OP process using spreadsheets and simple tools for rudimentary collaboration. The spreadsheet technique, while a low-cost option in the short term, presents several challenges, including different versions of the same data and an inability to integrate and reconcile S&OP with underlying business processes. Data becomes outdated very quickly, hampering collaboration, while team members get frustrated trying to piece together the picture of the company from faxed or e-mailed spreadsheets.
The consequences of this approach can be costly and far-reaching, for some of the following reasons.
* Product supply and the market are not reconciled. Repeated stock-outs cause distributors to switch to other manufacturers for the same product. Distributors show little mercy in making up for any slowdown in getting stock through their pipeline.
* Excess inventory dilutes prices. Excess inventory is the mirror image of the stock-out. For example, when an electronics manufacturer bet on the wrong style of MP3 player, production capacity and demand were out of sync for more than six months. The company wound up with excess capacity that it had to dump on an unsuspecting market, taking a big financial loss.
* New product introductions fall flat. The successful commercialization of new products mandates close coordination between research and development, marketing, sales, production, supply, and logistics. An information or communications failure between any of these links can result in lost market share because of a tardy or ineffective commercial launch of a new product.
* Supply mix does not meet market demand. Many large companies must support a complex supply web and balance their multifaceted supply mix with the requirements of diverse customers, channels, and regions. Without sufficient information, these same companies may have difficulty adapting their supply chains to meet the constantly shifting demands of their best customers, opening more productive channels, or negotiating for access into new geographic regions.
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