Supply chain planning, demand planning, and S&OP

1. SUPPLY CHAIN PLANNING, DEMAND PLANNING, AND S&OP One of the most common problems facing manufacturer across all the industry is the difficulty of actually balancing demand and supply. Supply chain planning begins with acquiring the goods or material needed to satisfy the end product. It is also the procurement of materials or services required to create the final product and continue until the finished goods are in the hand of consumers. This process typically involves a range of decision and transactions between several distinct entities. Manufacturers are continually faced with the challenge of determining what to make, how much to make it, and when to make it. When companies fail to meet these challenges effectively, they suffer a multitude of consequences. Failure to balance the supply chain will not only affect the entire manufacturing organization but the complete business trading network. However, many companies haven’t been able to maximize supply chain performance because of the disconnected planning, poor supply chain visibility, and misaligned functions. Lack of coordination hurts supply chain profit when supply and demand management are made independently. Therefore, supply chain partners must work together across the enterprise to coordinate the decision and maximize profitability. This obstacle has led to further business challenges, such as poor delivery performance, and loss of orders and revenue.

2. To maximize revenue and ensure availability of product demand planning must be effective. We all know how important demand planning functions in ensuring that operation is timely, cost effective and efficient. To understand the demand for a product, these go beyond the basic of what type of demand are we seeing. For any given product, there may be dependent demand, independent demand, service parts demand and inter/intra plant demand. All types of demand have to be planned for in the supply chain planning to ensure availability when needed. Estimating future demand is one the most valuables activities in any organization. The demand plans impact is felt throughout the business, from sale and marketing to manufacturing and distribution. The right plan can balance inventory planning with costs and lead to higher customer service levels and positive cash flows. The use of demand planning enables the supply chain to increase its profitability because supply and demand are matched in a parallel fashion. Excessive and costly inventory may be stocked for discontinued or slow moving items; on the other hand, inventory shortage for new and promoted products may inhibit promotional programs. Stock-outs may occur because companies failed to have the right products in the right place at the right time. And if this is frequent it can lead to increased costs due to expedited orders or even worse, permanent loss of customers.

3. Supply and demand management through sales and operations planning (S&OP) can significantlyimprove management performance of an organization when applied to predictably variable products. Sale and operations planning is a business process that helps companies better manage demand against supply. Keeping demand and supply in balance is a constant struggle. The consequence of poor customer services, high inventories, cash flow difficulties, and failure to meet planned business goalleads companies in search of a process to better manage the delicate balance of supply and demand. S&OP enables the management to establish the desired levels of customer services, production plan, and inventory sale. More importantly, it guides the organization toward managing their business proactivelytowards optimal performance. The S&OP business goal is to reach consensus on the current status and future plans for each product family, both for demand and supply. Leading companies often adopt S&OP(Sales & Operation Planning), a solution and process that ensure business units make plans and decisions in the context of overall business objectives.