S&OP
Strategy
Vendors Factories Distribution Centers Customers Modals Components Finished products Machines Planning Periods
Sales
Logistics
Items Availability Batch Size Initial Inventory Safety Stock Maximum Stock Final Stock Transport capacity in modals Inbound DC Capacity Outbound DC Capacity
Production
Bill of Materials Resource Assignment Number of Resources Hours Available in the Period Preventive Maintenance Resource Consumption Resource Efficiency Production Yield Extra Capacity
Finance
Product Prices Tax rates on products Procurement Costs Resources Fixed Costs Extra Capacity Cost Product Variable Costs Inventory Costs Transportation costs
Result
Integrated Plan Financial Report Social Responsability Environmental Responsibility Supply Procurement Plan Production Components Consumption Plan Production Plan Inventory Plan Production Plan by Resource Resource Usage Plan Extra Capacity Usage Plan Logistics DCs Input Plan DCs Output Plan Inventories on DCs Plan Component Transport Plan Product Transport Plan Modal Usage Plan Sales Delivery Plan Non-Delivery Plan
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Logistics for S&OP

Operations complexity has challenged the planning capacity of many organizations. In competitive environments, organizations with tight money can not deliver superior services, value, and competitive prices with merely internal business improvement. It is dependent on the optimization of the entire supply chain. Often people refer suppliers to first-tier suppliers but forget to think end-to-end, missing a real opportunity for progress. Logistics of supply and production broadened its scope, including internal and external sourcing. Optimization helps organizations on selecting the best source strategy for each situation. Supply chain optimization calls the ability to test different scenarios to recommend the right choices of volume and value.

The full benefit of improved operations occurs when companies account for all-important supply chain nodes on both supply and customer sides. The vast scope of demand and supply on complex businesses challenges integrated approaches. Without an integrated S&OP process, organizations become more complex, less proactive, and more functional. The planning horizon should be a 12-18 months interactive process with monthly runs to enable a review and communicate to the organization the changes in months two and beyond.

The early engagement of finance and salespeople to logistics and production people is vital from the beginning to ensure success. The implementation of S&OP is full of paradoxical choices. The reconciliation of these paradoxes is a requirement to unlock the potential of decision-making.

In many companies, the operations department initiates the S&O process as a response to the pain caused by changing forecasts and the apparent disregard from the demand side of the business. They desire stability, efficiency, and reduced complexity. However, on conducting the S&OP agenda, the operations leadership and perspective need to be balanced with the remaining functional areas of sales, marketing, and finance to realize the total business benefits.

The planning horizon also presents a constant tension. Some errors occur when organizations define S&OP with a 3-18 months horizon to focus management on a medium-long term. Unfortunately, it leads to a disconnected process. The principal leader must set an appropriate balance between the people's reaction to "the bureaucracy" and the "prescribed way" of doing things. The advantage of S&OP is that decisions in the medium-long period will decrease the number of surprises in the short term. A proper S&OP depicts 0-18 months at an aggregate level, detailing the short period 0-2 months.


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