Many manufacturing firms leave money on the table due their approach to sales and operations planning (S&OP). Thomas Kwasniok, a partner in Bain's Performance Improvement practice, outlines four steps to create a high-performance S&OP that will be the central nervous system of your operations.
Read the transcript below.
THOMAS KWASNIOK: Many manufacturing firms leave money on the table due to their approach to Sales and Operations Planning, or S&OP, as we call it. That can be lack of coordination between departments or adhering to rule of thumb rather than rigorous mathematics. Results can be stockouts, can be surging inventories, can be variability in what the factories have to produce.
Getting this right takes four things. Firstly, link your operational plan to your supply chain strategy. Companies doing that right have a 6 to 12 months' lookout on considering assumptions, demands, priorities and trade-offs. And then convert this into an operational plan that is put forward monthly to a forum called the S&OP meeting, which includes all relevant functions, like sales, manufacturing, logistics, procurement.
Number two, it would take the discipline to make rapid in-cycle changes—covering, for example, for a production line that comes down. But that cannot result in endless debate about the plan. Number three, a belief in data. No planning should happen according to tribal knowledge. And finally, use feedback loops to get the variability out of the supply chain, which is homegrown, and rather cope with the variability that comes from the market.
This kind of S&OP can be a kind of central nervous system of a company's operations. No significant change should happen in one corner of a company without the other corner knowing about it. This can create a huge advantage in a dynamic, changing market environment.
Read the Bain Brief: Good Sales and Operations Planning Is No Longer Good Enough