The global economy is improving and as a result, organisations are adjusting their operations to address this positive shift in demand. Adjusting sales and operations quickly and accurately, while providing a profitable return, often poses a significant challenge for most organisations.
In addressing these challenges, Neil Cormack, Supply Chain Director at Softworx, says organisations need to implement an integrated business management strategy that incorporates a sales and operations planning process. According to Cormack this will provide the organisation with high-level capabilities for creating, managing and synchronising their sales plan, production plan, inventory plan, customer lead time (backlog) plan, new product development plan, strategic initiative plan and resulting financial plan.
“When deciding on a solution companies should ensure that it addresses every major stage in the sales and operations planning process, which is why a strategy is essential”.
Cormack says companies are constantly re-examining how they source, store and deliver their products due to cost-cutting pressures and an increasing desire for bigger profits.
“To enable companies to do this they need to apply a solution that integrates extensive “what if” scenario building tools directly into decision-making processes. Companies need to be able to model potential changes based on up-to-date demand data, choose the action that results in the highest potential increase in revenue or margin and then finalise and populate the changes automatically across the global supply chain.”
A sales and operation planning solution provides organisations with benefits in three key areas:
– More accurate alignment of supply with demand – Analysis of sales history provides clear visibility into current demand trends, historical demand levels and key indicators of potential near-term demand shifts. This information enables companies to collectively make proactive decisions that better align production and distribution with the biggest opportunities for revenue and promptly adjust operations based on insight into demand variability.
– Increased opportunity for topline revenue and higher margins – if the solution integrates financial data and impact modelling directly into the planning process, users can see the potential cost, margin and profit impact of decisions instantly, before the changes are implemented. This enables the company to make the most profitable choice.
– More value from capital assets and the company’s workforce – through a more informed decision that is based on accurate and up-to-date demand data and supply-side constraints (material, labour, machine, equipment, transport and storage), companies are able to more closely align the use of production, fulfillment and other key supply chain assets with the most profitable market opportunities. The result is a significant contribution to gross margin levels by maximising revenue for specific product lines, while simultaneously reducing costs through more intelligent asset utilisation.
The sales and operations planning process in the manufacturing industry is enabled by integrating demand and supply chain planning.
“By not making provision for projected changes in demand e.g. seasonality, a company exposes itself to operational inefficiencies and is in danger of over or under investing in inventory with a knock-on-effect on profitability,” says Cormack.
As part of the sales and operations planning process, demand planning is a cost-effective solution to forecasting, inventory target level setting and distribution replenishment planning. An integration of supply planning into the sales and operations planning process enables this sophisticated but flexible tool to streamline supply chain planning, keep shortages and surpluses to a minimum, and optimise revenues while minimising supply chain costs.
“A sales and operation planning solution is integral as it helps companies to profit through periods of intense demand variability. A solution that aligns sales, finance, manufacturing, procurement and logistics around the most profitable and achievable build plan is a real solution,” concludes Cormack.
Neil Cormack, Softworx Supply Chain Director