Earlier this year, Aberdeen surveyed almost 200 companies to document their processes and capabilities related to Sales and Operations Planning (S&OP). According to the report, 59% of respondents said that improving top line revenue in 2010 (versus 45% of respondents in the July 2009 Sales and Operations Planning report) was the top pressure they felt in terms of driving attention and resources toward S&OP initiatives.
That 15% year-over-year increase signifies a shift in priorities for supply chain management professionals, a shift my supply chain management team knows and understands well.
The official report “Sales and Operations Planning: Strategies for Managing Complexity within Global Supply Chains” calls out other key pressures including the need to reduce supply chain operating costs (53%) and the management of increasing demand volatility (49%). From my perspective, the fluctuating economy has driven home the importance of S&OP.
In 2009 with sales dropping, the only way to maintain margin was to drive costs out of the business – one major way being reduction of inventory levels. This must be managed properly to ensure service levels remain unchanged and companies can still fulfill the few customer orders coming in.
As demand slowly returned in 2010, and with costs already at a minimum, driving top line revenue was the only other lever to increase margins and recapture market share. However with cash at a premium, how does one ensure sales campaigns will lead to profitable demand that can be quickly supplied to drive short cash to cash cycles?
Only by adding the finance teams to existing demand and supply meetings can revenue and margins be projected at a holistic level. It’s at this point where the best possible decisions are made that drive at business goals. That’s the Holy Grail – That’s Integrated Business Planning.
According to Nari Viswanathan, director of the Supply Chain Practice at Aberdeen Group, “S&OP is the key integrated process that the supply chain organization, and specifically the Chief Supply Chain Officer, can use to achieve visibility and transformation across the entire organization and throughout the supply chain.” As we continue through 2010, only time and experience will show if S&OP remains top of mind or if other pressures take its place. I suspect it will.