S&OP Maturity Series, part 2 of 5
In my last post, I discussed a scenario in which the S&OP solution was the difference between having to decide if it was better to lose potential profits, or risk upsetting existing, loyal customers – and meeting everyone’s needs.
Having a solid S&OP process will become more important as your company grows from one stage of maturity to the next. With this growth, all processes in the supply chain need to come together and work cohesively for the smooth running of your business.
To illustrate this process, let’s revisit Andrew, the production floor manager at Q Co., an OEM (original equipment manufacturer).
The challenges never stop coming
Based on their excellent handling of that big last-minute order, Q Co. has been rewarded with the ASDF account. While extremely profitable, it nevertheless comes with a significant risk: Revenue for Q Co. could see a jump as high as 35%, but the trade-off is their resources will be placed under a potentially severe strain. To prevent bottlenecks in production, an extra shift is needed to prepare the entire order – as opposed to merely being prepared to handle the first few weeks. The plant manager, Jerome, raises this as a red flag issue.
A delicate balancing act
It’s easy to just focus on the prize and plough ahead, but to be truly sure of your standing, there has to be a focus placed on proper, accurate and responsible forecasting. Using the new S&OP solution, Andrew and Angela work together with other stakeholders to decide on the best way to strengthen and optimize their supply chain. Different scenarios and their impact on business KPIs are reviewed to ensure that Q Co. will be able to handle forecasted demand. The findings are presented to Jerome for a final consensus on the best course of action.
Of course, simply having chosen an optimal plan is no reason to rest on their laurels. Once the direction for Q Co. has been laid out, Andrew has a bigger responsibility in keeping the company moving forward.
He has done what is expected – ensure there is enough capacity to meet demand, clear bottlenecks and keep the customers happy. The question now is what can Andrew do to take charge and identify opportunities for profit? It’s time for him to move from Mr. Fix-it to Mr. Foresight. Stay tuned for the next post on Andrew’s initiatives to reduce inventory and wastage.
It’s a simple equation: Better forecasting means better business. Find out how you can use attribute-based forecasting to make the best plans possible.
Demand forecasting can be used in a wide range of fields and industries, including both logistics and manufacturing. Learn all about it here.