Dive Brief:
- Without a thriving sales and operations planning (S&OP) system, it's impossible to create excellence in delivery standards, IndustryWeek reported Tuesday.
- While looking to improve delivery performance, supply chain managers should focus on aligning output to current needs, while accounting for the shop floor's production capacity compared with performance to schedule.
- In other words, S&OP plans must be realistic and include details about the plant's product return record and the business cost of reduced pricing due to poor on-time delivery performance or product rejection.
Dive Insight:
S&OP is one of the most important processes in the supply chain, but knowing what needs to get done is not the same as doing it well. Unpredictable fluctuations in demand are common within every production-based industry, but how a company adapts is what determines its health and standing.
If forecasts, for example, indicate an inexplicable annual 8% surge in demand mid-April, one solution would be to ask the shop floor to scale production up 8% and order 8% more parts. Such an approach would increase costs temporarily to meet the surge in demand.
The supply chain manager, in this sense, is the demand-setter within a manufacturing plant's internal supply chain. But if the company's production capacity is at its limit, increased demands will not yield better margins. In these instances, supply chain managers should always target an increase in agility rather than capacity.
