How The S&OP Process Creates Value In The Supply Chain

HOW THE S&OP PROCESS CREATES VALUE IN THE SUPPLY CHAIN By Patrick Bower In today’s competitive environment, it is easier and much less expensive to keep a customer with awesome service than to acquire a new customer … S&OP reduces inventory levels by improving forecast accuracy … both Sales Planners and Supply Planners have a tendency to hedge up the forecast. The supporters of S&OP implementation projects often face a tough question from senior management: How will the implementation of an S&OP process benefit the organization? This is not an unusual question, as most business process redesign efforts face similar justification issues. This article describes five typical value creation opportunities enabled by S&OP and is based on our experiences with a diverse cross industry mix of clients. Before we start, it is important to define the word “value.” In this article, value is defined as an improvement in revenue, profit, efficiency, reduction of waste, obsolescence, or working capital. Organizational value can be measured with any number of return-onassets calculations — we employ a simple return on shareholder value approach. With the recent increase ...