Improving your Competitiveness and Profitability with Sales & Operations Planning!
Creating a collaborative environment of success
The primary goal of any successful manufacturing company is to attain a well-balanced and synchronized harmony between sales and operations. This enables manufacturing companies to establish strategic buffers and optimize inventory levels across the supply chain consistent with the expected demands. Delivery lead times are then reduced and avoiding materials shortages will eliminate inconsistent loads on manufacturing capacity, unnecessary overtime and improve both supplier and customer on-time delivery. This will allow manufacturing companies to minimize operation cost which will improve their competitiveness and profitability.
Sounds logical and pretty simple!
Unfortunately, it is not as simple as it sounds. First, it requires companies to have a truly collaborative sales and operations program in place – something that is present in less than 45% of manufacturing companies today. Without a strong sales and operations program in place, the balance of demand and supply can quickly fall apart. As a result, a large number of small to mid-size manufacturers are constantly facing the risk of selling products without inventory to support deliveries or overloading their inventory with unsold products in hopes the orders come in.
Hope is not a good business strategy!
To establish and sustain a well-balanced and synchronized harmony between sales and operations a team approach is required. At its inception this team should include a knowledgeable facilitator and a real commitment from senior management that the company will dedicate the time and resources needed to overcome the following challenges.
- Challenge #1 – Strategic Thinking:
To optimize an S&OP program, companies first need to establish a long-term (3-5 years) vision and a shorter-term (1-2 years) business strategy. This strategic plan is then used to drive the sales and operations plan which is designed and aligned to carry out the long-term strategic business plan while remaining focused on the short-term business strategy.
- Challenge #2 – Teamwork & Alignment:
This closed-loop S&OP process brings together two distinctly different teams (Sales & Operations) that frequently have different department objectives and goals. Often these objectives and goals are found to be conflicting. To achieve the desired results, this team of managers must work strategically and take a high-level perspective on where the business is heading over the next one to two years. Then they will be in a position to develop objectives and expected results that avoid conflict and are closely align with the Company’s business strategy.
- Challenge #3 – Delegation and Tactical Execution:
With clear objectives in place, the planning is then handed off to the respective teams. These teams leverage the power of Kaizen and focus on improving short-term issues such as supplier performance, supplier qualification, materials shortages, capacity issues, staff overtime, and the associated financial impact. In identifying and addressing these issues, these Kaizen teams rely on the aligned objectives outlined so that there is no distortion between the long-term strategic plan and the short-term tactical planning. Ultimately the goal is to ensure the company has the right amount of material at the right place, at the right time.During this period the team will likely encounter issues related to supplier qualification, defect detection efficiency, replenishment and Kanban policies and of course some level of change management as they challenge the status quo.
- Challenge #4 – Integrated Technology:
Concurrently, the conversation and efforts must also focus on higher efficiency and productivity and metrics that support the analysis. Accurate data to make good data driven decisions will be a critical to success element. Business systems (CAD, CRM, ERP, QMS, etc.) will need to be optimized, they cannot be a future consideration, but rather a major focus during the transition period.Beyond the typical business systems attention must also be given to Smart Manufacturing such as Machine Learning, Supplier Collaboration and various forms of Artificial Intelligence. These products can help automate manually intensive tasks leaving key employees with more time to focus on more important tasks and higher levels of creativity.
Manufacturing executives, manager and employees often know or have an idea of what needs to be done to improve the current condition. The problem seen today is that everyone is usually deeply engaged in dealing with the day to day issues. An effective sales and operation plan requires time and effort to develop and sustain, but the advantages far outweigh the disadvantages of hoping or guessing if you will have the right material, in the right place, at the right time. And although it may not be simple to establish an effective sales and operations plan, it is necessary!
Contact us to learn how Synergy can help improve your competitiveness and profitability with Sales & Operations Planning.
About the Author:
Michael Canty, EVP VISUAL Business Unit & Strategic Business Services
For over 30 years, Michael has been recognized for his accomplishments in successfully implementing programs that transform and improve all phases of the business enterprises he works with. He most recently led, influenced, and executed a lean enterprise strategy across the North American operations of a multi-billion, multi-national, multi-facility manufacturing organization.
A committed lifelong learner with a passion for sharing knowledge with others, Michael strategically applies various strategies, technologies, and methodologies to help Synergy’s clients develop and implement effective business strategies. The result has been improved operational performance.