The current crisis has forced us all to regroup and reassess the near-term future. But operations teams can be left scrambling as they wait for fast-changing forecasts and plans to filter down from the revenue side of the business. And while every aspect of your operation, from incoming supply to customer demand, has been disrupted, it’s the demand side that drives everything for operations. Now, more than ever, sales and operations must be tightly coordinated to ensure supplies, production schedules, and inventory levels are in line with revised demand expectations.
As the country slowly reopens, your sales teams will be contacting customers, gathering information on their outlook, and assessing how your company will be able to support their changing needs. Of course, sales wants to deliver an emphatic “Yes!” to every customer request, especially now. Your executive team might even be encouraging sales to over-promise as a way to make up for customers who need to cut back on orders. It’s a natural reaction, and also probably a prudent decision under these circumstances.
But for operations to meet the needs of each and every customer, there must be more collaboration, coordination, and visibility across what sales is hearing and promising and what production is, well, producing. This coordination is generally referred to as sales and operations planning, or simply S&OP, and it’s more important than ever.
S&OP Delivers Real Benefits
In a recent report from IDC, “The Benefits of a Collaborative S&OP Process”, the research firm found that manufacturing companies with “successful S&OP processes” were reducing inventories by up to 20%, reducing lead times by up to 25%, and improving customer service by up to 5%. The performance increases combined with tighter sales-operations collaboration also drove revenue increases of up to 5%. That’s real money, and especially crucial now as customers pull back, delay, or outright cancel orders. Every little bit helps, and a revenue increase of a few percentage points can have a significant impact on your company’s near-term future.
The IDC report was published just weeks before the current crisis caused widespread shutdowns and shelter-in-place restrictions. But the findings are arguably even more relevant now, and the current crisis opens a door for process changes that may have faced resistance just a few months ago. Who can argue with the potential for double-digit inventory and lead time reductions, along with a bit more revenue?
Facilitating successful S&OP requires a technological foundation, and if you don’t already have one in place, you’re at a competitive disadvantage: IDC also found that nearly one-third of companies have already invested in upgrading their IT infrastructure and 23% have upgraded their enterprise applications to support this extended planning. Now is a good time to tap IT to ensure the foundation is in place to enable successful S&OP.
Manufacturing’s Digital Transformation
Without a solid digital foundation, S&OP can’t be successful, and trying to run it on spreadsheets just means more errors and less speed. Sales needs real-time insight to inventories, sales orders, and more so they can confidently promise customers. Operations needs to instantly see those promises and manage them along with changing production, inventories, and labor, as well as changes from engineering, bottlenecks or issues with quality control, and compliance concerns. You can’t juggle all of these variables without an intelligent software solution.
Since sales is already running on Salesforce, that’s your best place to start. You don’t need yet another system that’s too complex and requires too much work to integrate and maintain. Plus, putting S&OP on Salesforce with Rootstock’s planning engine makes it easier on sales, since they can continue working as usual, but will have access to so much more data. Salesforce can still integrate with your back-end Oracle or SAP or other systems, but sales users are not forced to learn or switch between yet another application.
Putting S&OP on the Salesforce platform using Salesforce’s Manufacturing Cloud and Rootstock’s planning engine eliminates the gap and delay between Sales and Operations. In today’s climate, when every order is precarious and customers are facing as much uncertainty as you are, sales is the proverbial canary in the coal mine. Getting their changing pipeline forecasts in the hands of operations faster and with more granularity ensures operations can make better decisions and react faster to changing market trends. That means less unsold inventory, less raw materials orders, and less wasted production.
We recently partnered with IndustryWeek and Salesforce to help explain how this end-to-end engagement, from the customer back through the entire manufacturing chain, makes sure the reality of customer needs is what drives operations. The webinar, “Keeping Supply and Demand in Perfect Harmony!”, is available to view on-demand.
Give Your S&OP Every Advantage
Sales has a window into customers, markets, and competitors that no one else in your company has. They’re talking with customers every day, getting real intelligence on not just their orders but also their thinking, which helps inform sales forecasts. Getting that information back to operations means better planning across your entire company.
In the other direction, getting inventory, available to promise, and scheduling information to sales means they can pass more accurate information on to your customers. That not only reduces frustration due to delayed orders, it puts you in a better position to cement your customer relationships.
Both of these resources – IDC’s report and our webinar with IndustryWeek and Salesforce – are available to you right now. S&OP shouldn’t be a hard sell within any company at this time. Better collaboration, better planning, and a better customer experience is crucial to getting through the current crisis. And it sets you up for even more success as we all return to some semblance of normal.
We’re here to help, too. If you have any questions at all, please don’t hesitate to reach out to one of our manufacturing and operations experts.