How Two Disparate Mechanisms Of S&OP Are Melded Together?

How Two Disparate Mechanisms Of S&OP Are Melded Together?

AUTHOR

Vivek Sood

TIME TO READ

minutes 

UPDATED ON

May 11, 2021

S&OP brings together two disparate but essential mechanisms to look at an even bigger picture.

On One Hand, Demand Management Is The Art Of Maximising Revenue Achieved Out Of A Pool Of Customers And Products In A Given Period. 

The key questions asked are which customers to serve; where; with which products; at what price, and in what way are they to be charged? 

All these questions are extremely important, and are generally thought to lie in the exclusive domain of sales departments. 

Some industries such as the telecommunications and airlines are renowned for being extremely good at what is euphemistically called ‘yield management’ but is essentially a revenue maximisation exercise.

On The Other Hand, Supply Management Is The Art Of Minimising The Total Cost Of Fulfillment While Meeting All The Demands Placed On The Supply Systems.

The key questions are where to buy, produce and store; for how long; when and how to move, and where to move in order to keep customers happy. 

These questions are thought to lie in the exclusive domain of production and logistics departments. Cost minimisation has been the most popular end goal of traditional supply chain management systems.

This Ability - To Simultaneously Focus On Maximising End Results For The Customers While Minimising Costs - Is The Foundation Of The Emerging Supply Eco-Systems.

Starting with the clear purpose of maximising profitability for the company as a whole, it is much easier to create a collaborative process for sales and operations planning. 

Technically, every supply chain professional knows that the objective function of profit maximisation embodies inventory minimisation, cost minimisation, revenue maximisation and stock-out minimisation at the same time.

The technical problem is relatively easy enough to define using the operations theory. However, in reality, it is much harder to create and infuse a collaborative process that achieves that purpose into an organisation’s DNA.

That is the aim of i-SOP. Intelligent sales and operations planning  relies just enough on tools, formulae and check lists to make it a success. 

The Key To Its Success Is, However, The Collaborative Approach Built Into The Process From The Beginning. 

The leadership and participants are selected and trained for their positive, results-oriented attitude to joint problem-solving using lateral thinking.

Open and honest communication is guided by the instruments and tools created especially for this purpose. Finally, a single measure of success is used for all participants in the process.


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Notes:

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Vivek Sood

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