Sales & Operations Planning (S&OP) is an established industry process that aims at finding a balance between demand and supply and streamlining cross-functional collaboration. Procurement People should learn the Sales & Operations Planning (S&OP) Process.
Procurement professionals can contribute significantly to the S&OP process by providing valuable insights into supply chain dynamics, identifying potential risks, and optimizing sourcing strategies. By understanding the S&OP process, procurement teams can make more informed decisions, improve supplier relationships, and support overall business growth.
For example, below are 5 reasons why procurement folks should attend S&OP Reviews.
Influence Sourcing Decisions
- Informed Supplier Selection: S&OP provides procurement teams with a comprehensive view of future demand, enabling them to select suppliers with the capacity and capabilities to meet anticipated requirements.
- Strategic Supplier Relationships: By understanding the company’s long-term plans, procurement can build strategic relationships with suppliers who can support growth and innovation.
- Risk Mitigation: S&OP helps identify potential supply chain risks, such as supplier disruptions or material shortages, allowing procurement to diversify sourcing and mitigate risks.
Alignment of NPI Launch
- Synchronized Launch: S&OP ensures that procurement activities are aligned with new product introduction (NPI) timelines, preventing delays or disruptions to product launches. They can get involved in the Demand Review of S&OP and see the NPI pipeline and also any changes in product design changes and communicate with suppliers proactively.
- Resource Allocation: By understanding the resource requirements for NPI, procurement can secure necessary materials and capacity from suppliers promptly.
- Quality Assurance: S&OP can help ensure that suppliers meet the quality standards required for new products, preventing costly recalls or product failures. Moreover, S&OP fosters a sense of shared responsibility for quality across the organization and its suppliers. This collaborative approach leads to a more proactive and preventative approach to quality management.
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Review Supplier Performance
- Performance Measurement: S&OP provides a framework for tracking supplier performance against agreed-upon metrics, such as delivery time, quality, and cost.
- Continuous Improvement: By identifying areas for improvement, procurement can work with suppliers to enhance their performance and drive cost savings.
- Supplier Relationship Management: Regular performance reviews help build trust and strengthen relationships with suppliers.
Help Make Better Planning
- Demand Forecasting: S&OP provides a more accurate forecast of future demand, enabling procurement to optimize inventory levels and avoid stockouts or excess inventory.
- Capacity Planning: By understanding demand patterns, procurement can work with suppliers to ensure they can meet future needs.
- Supply Chain Optimization: S&OP helps identify opportunities to improve supply chain efficiency, reduce costs, and enhance customer satisfaction.
Help Forecast Upstream Supply Constraints
- Early Warning Signs: S&OP can identify potential demand increases. In turn, it can help identify supply chain constraints, such as material shortages or supplier disruptions in the supply review, which can be escalated to the procurement organization to act on proactively. This allows procurement to take proactive measures to mitigate their impact.
- Risk Management: By understanding potential risks, procurement can develop contingency plans to ensure a continuous supply of materials.
- Supplier Diversification: S&OP may indicate the need for supplier diversification to reduce reliance on a single source and mitigate risks.
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Conclusion:
Procurement Professional inputs can be vital during the S&OP review. Discuss bottlenecks in the supply of raw materials or alternate sources to procure balance and level production plans. Furthermore, they need to be 6+ months ahead of anything else in the company.
The power of S&OP is based on transforming a forecast into a plan where each department has a role and a responsibility. Moreover, the feedback and input of each department to the plan will make it more robust. That is the key to success: a collaborative plan. Time and time again I have seen its power and results. This is why every individual including procurement professionals should learn about S&OP.
As I have said at the start procurement professional should learn S&OP in detail, we recommend starting with the SCMDOJO flagship course, S&OP Course- Why S&OP, 5 Step Process, Benefits & Barriers with a 50% discount.
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Bonus Video Content to Learn More about S&OP
7 Practical Challenges in S&OP Deployment You Should Avoid
Why Sales & Operations Planning? | Barriers to Deploying S&OP
S&OP vs. IBP – What Are The Top 5 Differences?
About the Author – Dr. Muddassir Ahmed
Dr. Muddassir Ahmed is the Founder & CEO of SCMDOJO. He is a global speaker, vlogger, and supply chain industry expert with 19 years of experience in the Manufacturing Industry in the UK, Europe, the Middle East, and South East Asia in various Supply Chain leadership roles. Dr. Muddassir has received a PhD in Management Science from Lancaster University Management School. Moreover, Muddassir is a Six Sigma black belt. He has founded the leading supply chain platform SCMDOJO. It enables supply chain professionals and supply chain teams to thrive by providing best-in-class knowledge content, tools, and access to experts.
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