University of Medical Sciences &

Technology Faculty of Business

Administration

Operation management

The Current issues of

operation management
And
Operation and sales

Duaa Aidaross Ahmed

OU-BU-2020-192

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 The Current issues of operation management

Introduction:
Organizational issues can be a challenge for some companies to overcome
as they try to improve and manage their daily operations. The first step to
resolving organizational issues is to acknowledge that there is a problem and
identify the source. It takes time to determine where issues are coming from
and create the appropriate solutions for each problem, but this is a necessary
step for any organization that wants to grow and thrive in a healthy manner.

Why is it important to resolve organizational issues?

Identifying and resolving organizational issues is highly beneficial to both the
organization and its employees. The quicker you can resolve organizational
issues, the sooner you can create a healthier workspace and focus your
energy and resources on other business matters. Having good organizational
practices promotes a sense of accomplishment and achievement within the
company. Organizational improvements can also serve as motivation for an
organization to keep pushing for new solutions or make proactive changes to
avoid the same issues in the future.

1- Role specification:
Role specification means hiring the most qualified person for a job and
assigning work to the most appropriate employee. A lack of quality role
specification can disrupt workflows, reduce efficiency and decrease
communication between team members. Role specification issues can occur
because:
● Managers may show biased behavior towards or against particular
individuals.
● A hiring manager doesn't take the time to interview a candidate
thoroughly.
● Leadership may not understand their team's capabilities and particular
strengths.

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 ● Nepotism can sometimes lead to an unqualified new hire.
To overcome this organizational challenge, it's important that managers learn
about the skills and interests of their team members so they can assign work
to the most qualified member or train members on how to succeed. It's also
essential that managers conduct a thorough hiring process for new
candidates to hire people that suit company openings. They may enlist the
help of recruiters who are more adept at finding qualified candidates for
specific roles.

2- Customer satisfaction and relationships:

One of the most important aspects of a successful organization is its
relationship with its customers. Satisfied customers contribute to increased
revenue and consistent purchases as a source of income. Customers may
become unsatisfied with an organization due to poor customer service or
poor quality of a company or service.A solution to customer satisfaction as
an organizational issue could be to retrain employees on how to provide the
best customer service and engage with consumers through surveys, social
media and market studies.

3- Innovation:
Innovation is how companies develop new ideas and expand their products
and services. An organization that is innovative opens itself up to new
opportunities, integrates updated technology tools and becomes an industry
leader. Organizations experience low innovation and grow stagnant because:
● They have a company culture that stifles employee creativity.
● The company uses outdated business practices that don't facilitate
innovation.
You can encourage innovation in your organization organizations by listening
to the ideas of your team members and creating a culture where they feel
comfortable being able to openly and freely express their ideas. It's also
helpful to thoroughly analyze current business practices and make necessary
changes so new ideas and innovations can easily integrate into the
company's processes.

4-Not Using Data in Decision-Making:

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The best decisions are based on the data. Period. Operations managers can
always learn from data: the campaigns they run…the channels they use in
their marketing… their sales strategy. Data is not just raw numbers; it’s about
telling a compelling story. It’sa good idea to use a digital workplace that
allows you to build dashboards with the data you have. These dashboards
often help turn a table of numbers into insight – highlighting the things that
matter most like customer satisfaction, engagement, and retention.

5- New Technology Integration:

Integration of new and needed technology doesn’t need to be a tiresome and
frustrating process for operations managers. Ensuring your team has all the
features and functionality they needs provides your business with a
competitive advantage, cost savings, and faster streamlining of processes.
So, look for a way to bring all your processes into a tool that embraces and
integrates all technology you need to run your business – cloud providers,
data sources, chat and discussion options, task tracking, and project
management options.

6- Safety:
You cannot run an unsafe business. Unfortunately, there are more fatal
injuries in the warehousing industry than in others. Many companies fail to
consider the ethical considerations of hazardous risks in operation, even when
they know they can potentially cause injury to workers.

Many warehouses also fail the OSHA legal compliance requirements of risk
and hazards. Through OSHA, the government prescribes business
responsibilities, including the following warehouse safety rules:

● Making their place of business free from any known or reasonably

foreseeable hazards.
● Protect workers from hazardous warehouse working conditions,
including the use of proper PPE.

Lack of compliance can lead to fines, closure, or public shame resulting from
the OSHA inspection report. That’s a black eye on your business. You also

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risk having employees with lost morale because nobody wants to work at a
risky place.

7- Absence of clear direction:

Lack of direction is one of the most common problems in an organization and
it stems from two root causes:
» The leader or leaders rarely discuss or chart a deliberate direction or
strategy for the future, or they fail to communicate a coherent message about
the strategy to all members of the organization.
» There are many activities to execute and the organization lacks the
alignment needed to gain the traction necessary to help the organization
transform, adapt, and shape the future-activities that would ensure the
organization's long-term, sustained growth. In short, too many functions and
individuals lack an understanding of how they fit or why they matter. As a
result, people become complacent, content to just show up, take care of
today's business, and hope that someone is in the wheelhouse steering the
ship.

8- Difficulty blending multiple personalities into a cohesive

and unified team:
This can be an enormous challenge, regardless of whether the team is part of
the executive suite, a special project team in an R&D lab, or an operating
team in a production facility. People's personalities vary widely, and the
diversity of backgrounds, opinions, views, and experiences can cause
challenges for teams. This creates a unique set of potential issues and
opportunities.
If you can get people to come into alignment and support common
objectives, a diverse team of leaders can produce amazing results, take on
the demands of customers, and meet the threat of competitors. However, if
leaders stay in their silos, protect their own "turf," fail to share information,
refuse to collaborate on shared problems, or lack the ability to think with an

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entrepreneurial mindset, the organization will under-produce. You have to
have a team that is both in the business and on the business. Failure to
develop key competencies and behaviors.
In our work with organizations, we commonly encounter a lot of hardworking
people who have good intentions. However, despite their experience in the
industry, their technical talent, and the subject-matter expertise that many
leaders bring to the table, creating a high-performance organization is often
still out of reach.
Nearly everyone we meet, including senior leaders, has at least one (and in
some cases, multiple leadership weaknesses. Sometimes leaders are aware
of their behavioral shortcomings; in other cases, they are blind to their
leadership deficits. People inside the organization are often afraid to candidly
say what they think, and helping enormously successful leaders with their
Achilles heels can be tricky.

Poor communication and feedback.

I have worked with countless leadership teams in which the number-one
problem was a lack of honest, constructive, and open dialogue about the
team members' practices, styles, skills, or behaviors. Without a culture of
openness, feedback, and coaching, organizations will struggle to grow.
In fact, next to pitfall #1 (absence of clear direction), this is the most frequent
lament we encounter. In fact, this issue is so predictable, common, and
destructive that we prepare material on this topic prior to any work we do
with individual leaders or leadership teams.
Many teams try to muddle through this somehow, enduring the bully or trying
to guess what others want and need from them.
People often tell us that they fear reprisal or retaliation if they open up-but the
reality is that leaders can't execute on their strategies, lower costs, or
effectively launch new processes or services when people fail to
communicate with constructive candor, so this is an issue that must be
overcome.

9- Lack of awareness:
Building a solid organization takes hard work and a keen awareness of the
culture and environment that exists in a business. Most executives are very
busy people; a lot of things vie for their attention. Market conditions can
change fast in a VUCA (velocity, uncertainty, complexity, and ambiguity)

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world and demand huge portions of a leader's time. We affectionately call this
the "task magnet."
Unfortunately, while they're busy focusing on their many necessary
operational distractions, many managers take their eye off the teamwork ball.
This means that communication suffers and leaders get preoccupied and fail
to recognize people, celebrate progress, build the talent pipeline, or invest
time reviewing processes, practices, and better ways of working across
functions. People then become disengaged, feel marginalized, and lose focus
and commitment.

Solving Operations Management Challenges with

Slingshot:
Slingshot empowers more effective operations management by bringing all
your processes and team collaboration into one place. Slingshot streamlines
your work and creates the perfect environment for executing the perfect
strategy.
Slingshot is the only digital workplace that brings together data analytics,
project management, file organization, and team chat. Having everyone
all-in-one place ensures an uninterrupted workflow for everyone in your
organization. You can organize your teams, projects, and even departments
into transparent and highly visible workspaces. Each workspace includes
quick access to all related discussions, pinned files, data analytics, tasks, and
information management. All of this, without needing to switch apps … ever
again.
The biggest bonus? You can make better use of your data to drive better
decisions. The data-driven features of Slingshot allow you to pull data
reports from multiple sources and create beautiful dashboards that tell the full
story of any campaign or project. Your team can easily track KPIs and go
from insight to action in seconds, with dashboards that are created with a few
clicks and shared with your team in seconds – or added to a data catalog,
where all your organizational data is easily found, always.

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 Operation and sales

INTRODUCTION:
In many businesses like retail, packaged goods, pharmaceutical, industrial
sectors etc, we have dissatisfied customers, high inventories, cash flow
problems, missed annual business targets, imbalances in demand and supply
and other issues which keep cropping up at regular intervals putting lot of
stress on the organizational system due to VUCA markets.
It is a known fact that when demand surpasses supply, manufacturing may
fail to provide the required volume and consequently, customer service may
be affected. Alternatively, when supply exceeds demand, inventories could
increase resulting in cut in production, plant shut downs and lay-offs reducing
the competitiveness of the organizations.
The above two scenarios could be avoided if a proper balance between
demand and supply is planned and an advance warning system is put in
place to avoid the imbalance (Vollmann et al, 2005).
As organizations have to match supply with sales orders, the term S&OP has
come into use to refer to that process that helps organizations to keep
demand and supply in balance. The premise of S&OP is that customer
service and inventory are 'resultants' and to effectively manage them the
drivers- demand and supply, have to be managed to have competitive
advantage.

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EVOLUTION OF S&OP:
A typical manufacturing cycle is initiated by production planning activity with
master production scheduling (MPS) providing a plan for manufacturing of
components and sub-assemblies that go into a final product. MPS, in turn, is
based on both forecasts as well as actual orders received from customers.
With increase in variety and volumes, information technology was used to
capture the required input parts that form the finished product. This
information system was called as material resources planning (MRP). Il was
an effective method for arriving at dependency demand with major advantage
seen in terms of reducing inventories and thus saving invisible costs which
ultimately impacted the product cost (Buffa & Sarin, 1990) As production
volumes, mix and complexities increased to match customer demands, MRP
evolved into manufacturing resource planning (MRPII), a system that tied the
basic MRP system to the firm's financial system and also to other core
supporting processes (Krajewiski et al, 2008). However, it failed to achieve
performance improvements in demand management due to more emphasis
on supply side of business and less integration of sales, marketing,
manufacturing and management functions (Ling and Palmatier, 1987). It is
also believed that conceptually, S&OP evolved from aggregate production
planning (APP) in the early 1950s to MRP II in the mid - 1980's (Thome et al,
2011).
It is reported that S&OP was created in the late 1980's by Dick Ling when
MRP II was in vogue and was seen as a driver whose principal focus was to
make MRPII to work. At that time S&0P was a breakthrough concept, as it
forced sales, marketing and manufacturing to agree once a month to 'one set
of numbers' for sales, production and inventory (Ling and Coldrick, 2009).
Further, Calderon (2006) observed that supply plans without reasonably good
demand plan was futile and that S&OP viewed both these aspects of
business in a seamless way.
The principal focus of S&OP during the 1980's and 1990's was how to get a
good operational foundation in place to evaluate demand and to ensure that
sufficient resources are in place across the business to meet the same
Wallace and Stahl (2008) clarified further that the coordination between the
sales planning and production planning has morphed into S&OP with both
working together to achieve required output and opined that it is a lubricant

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between different partners in supply chain that makes it to function
harmoniously with minimum supply chain disruption.

3. FUNDAMENTALS AND THE ROLE OF SSOP:

Association of Operations Management(APICS)defines S&OP as a, "process
that provides management the ability to strategically direct the businesses to
competitive advantage on a continual basis by integrating customer focused
marketing plans for new and existing products with the management of
supply chain"
S&OP is considered as a set of processes that enable a company to respond
effectively to demand variability and take timely decisions which could have
direct impact on profitability and customer satisfaction (majumdar &
Fontanella, 2006). Further, it is essentially seen as a value chain and an
enterprise-wide risk management process (APICS and Protiviti, 2008)
Moreover, Thome et al (2011) opined that S&OP is a tool that unites different
business plans into one integrated set of plans. Its main purpose being
twofold:
(1) To balance supply and demand
(2) To build bridges between the business or strategic plan and the
operational plans of the firm.
The latter point is also emphasized by considering S&OP as a facilitator and
integrator of strategic and tactical planning components of an organization
(Wallace& Stahl, 2008). Lapide (2004), who popularized S&OP in early 2000's,
observed that companies that fully embrace S&OP process gain competitive
advantage by meeting customer demands at the highest levels by
maintaining reduced inventories and mini mised supply chain operating costs.
As per Ferreira (2006), S&OP is positioned at the centre of the supply chain
that extends backward to suppliers and to customers in the forward direction
with the support of technology enablers like enterprise resource
planning(ERP), data warehousing, supply chain etc and the organizational
enablers like structure, skills & capabilities, training, metrics, incentives etc
An approach of integration of functions with S&OP is provided by Krajewiski
et al (2008) in the figure: 1, which shows the relationship between annual
business plan (ABP), S&OP, operations strategy, forecasting, constraint
management, resource planning and scheduling.

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The bi-directional arrows signify the iteration process indicating that, if S&OP
cannot be developed to satisfy the objectives of the ABP, the same (ABP)
needs to be adjusted accordingly. Similarly, if a viable MPS cannot be
developed, S&OP would need suitable adjustment.
Milliken (2007) and Lapide (2004) identify S&OP as a cross functional process
for collaborative decision making.
It has a 'Planning Horizon' of 15 to 18 months with the longer period being
considered for implementation of capacity expansions, if need arises (Wallace
and Stahl, 2008 and Thome et al, 2012).
As regards company-wide planning, it is done on highly aggregated basis and
at S&OP levels, it is planned at family, sub-family and model level. Finally, at
the level of manufacturing and execution, it is done meticulously at SKU level.
It is to be noted that, the four fundamentals of S&OP are demand, supply,
volume and mix. Volume is concerned with how much to make of the product
families, whereas, mix determines which individual products to make for
which customer.

PROCESS OF SCOP:
S&OP is considered as a set of management practices or as a bundle of
interrelated management practices within the firm and supply chain.
Justifiably, it is a complex construct which can be measured as a
management and planning process covering frequency of meetings, trust and
confidence of designated participants, agenda, etc (Thomé et al 2012).
S&OP comprises series of steps with monthly meetings involving designated
and empowered participants from functional departments. Regular
monitoring and evaluation of results is done with the help of information
technology (Lapide 2004, Grimson and Pyke 2007).

S&OP Process Challenges

As with any multi-department process, there will be challenges that a
company must overcome. An October 2009 AMR Research report identified
these key S&OP challenges:
1. Data timeliness and quality
2. Using plan in daily operations
3. Connecting strategy to S&OP
4. Moving from demand/supply focus to

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profitability
5. Getting plan agreement
As S&OP became more global and companies settled in to the process of
bringing teams together, according to the AMR Research report, the big
challenge changed from coordination of global teams in 2007 to the need for
data quality and timeliness. Data was pulled from disparate systems at
different times and often delivered differing results from an overload of
Microsoft Excel spreadsheets. Instead of one version of the truth,
organizations have been faced with conflicting opinions of fact.

The right tools in place help ensure data quality and drive towards
determining a feasible plan where consensus can be reached by all attending
departments. There are many tools available today to gather and prepare the
information and model the multiple scenarios that are needed for an effective
and efficient S&OP process. The more thorough the preparation, the more
efficient and effective the meeting will be and the better the resulting plan.
The second most identified challenge was using the plan in daily operations.
The natural tendency is to attend to the "squeaky wheel." The change in
thought process has to be towards the activity that provides the greatest
impact towards reaching corporate goals. S&OP helps develop a plan and set
priorities to maintain this focus.
Another challenge that has appeared in many research studies is the
integration with finance and understanding the role of finance in S&OP.
In an increasingly cost conscious environment, integrating finance into the
equation is gaining importance. While a shift, it also follows with recent data
from AMR Research? that shows more than 60 percent of supply chain
executives now report directly to a member of the C-suite. Excluding finance
in the process can cause S&OP to lack support of the executive team and
whither on the vine.
Another key reason to have finance involved is the concept of shared metrics.
Without visibility of the financial impact of decisions made during S&OP, it is
difficult to fully understand the impact of sourcing, inventory, postponement,
and other pivotal business strategies. (The concept and impact of metrics on
the S&OP process will be discussed in more detail later in this paper.)
S&OP is a process that by nature unites all key constituents to a single goal.
Senior level executives responsible for sales, marketing,
materials/procurement, manufacturing, transportation, and finance meet to

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consider the needs and constraints of each of their respective areas in light of
overall company objectives, and agree on an operating plan for the next
month, quarter and year. This process is repeated each month as the plan is
updated and extended.
The key word here is agree. The S&OP process is one of compromise. The
best performance in inventory control, that is, the lowest inventory level, will
not yield the highest customer service. High customer service is expensive.
The most efficient production will likely increase inventory and may not
coordinate with sales shipment objectives.
Dealing with these trade-offs is at the heart of the
S&OP process
in order to balance sound business decisions to construct the best overall
plan, the S&OP team must have accurate, reliable information - the current
status, future conditions, constraints, and concerns about demand,
production, inventory, procurement, and finance. They must also know how
changes and decisions in one area impact performance in others. And, they
need the flexibility to evaluate multiple business scenarios - optimistic,
pessimistic and realistic. Without this information, executives must rely on
experience, intuition and risk assessment.
These challenges are not insurmountable; in fact, the following five steps can
make your planning process impactful and effective.

The steps:

Step 1 - Innovation and Strategy Review:

An important consideration for any company is managing product lifecycles.
• What products should we introduce to the market place?
• When should we introduce them?
• What products should we sunset or discontinue?
These are all critical questions to answer and the impact on sales,
production, inventory, and finance must be understood.
Introducing new products is a key aspect of the innovation and strategy
review. NPIs can significantly impact the well being of a company including
inventory and lost sales. The ability to predict sales on NPIs, where there is
no sales history to model, can be difficult. Traditional time-series forecasting

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tools that utilize history will not work effectively for NPIs. To overcome these
challenges, more advanced techniques must be employed.
Companies that have been successful in managing NPIs utilize advanced
techniques such as attribute-based forecasting which generates demand
profiles for new products based on existing product demand tied to
identifiable attributes such as style, color, season, material type, etc. A
well-designed attribute-based forecasting system will continually monitor
demand signals, quickly recognize any deviation from the forecast, and adjust
the assumptions and forecast to match the actual demand signals.
In addition, attribute-based forecasting techniques can be used for product
retirements. When retiring a product, the history for that product is no longer
a reasonable indicator to predict a retirement demand profile. Attribute-based
forecasting is a preferred method to predict how fast or slow the product will
sell during the retirement phase by looking at how products with similar
attributes have been previously retired.
Having solid forecasts for NPIs and retirements is an essential first step in
preparing for the S&OP meeting.

Step 2 - Demand Review:

A primary output of the S&OP process is a decision on the level of customer
service the company will strive to achieve through the effective use of all of
its resources. To plan to meet demand, you must know what current demand
is and how it can change over time, the art and science of the forecast.
Proven forecasting techniques rely on rigorous statistical analysis of past
demand including orders, shipments and point-of-sale (POS) patterns
overlaid with demographics, product lifecycle projections, seasonality factors,
and management judgment. These techniques abound for mature products
with a sales history though each still requires consistent and accurate
information.
To this end, collaboration is critical and must be sought whenever possible
while developing, refining and creating consensus forecasts.
Customers, distributors, sales reps, and marketing all have information and
insight that can augment and improve on the statistical forecast to boost
accuracy.

Demand Sensing:

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A forecast is never 100 percent accurate.
Realizing this, management will formulate plans that recognize expected
forecast error and compensate accordingly. Nevertheless, it is important to
monitor forecast accuracy on a continuous basis. As real demand occurs, it
can be captured and compared to the forecast. Early detection of differences
and trends will help avoid shortages / over-production and can be used to
adjust the forecast to bring it closer to actual demand. This should be
completed on a regular basis, even in between scheduled updates.
Multiple demand signals can assist in sensing changes in demand patterns.
For example, orders, shipments and POS can be used in combination to
show if changes occur. The most detailed and up-to-date demand signal is
POS since it provides true consumer purchasing activity. Anything further
upstream does not indicate how much of the product actually sold; it simply
provides details on what is still in the customer supply chain.
For purchase parts and raw materials, many companies have established
close collaborative relationships with their suppliers to pass actual usage
data upstream for POS-like timeliness.
Recent analyst firm surveys have shown manufacturing executives cite a
strong need for improved forecasts and more timely demand sensing to
provide more visibility to supply chain and manufacturing teams into real
demand to provide field sales people or brokers with a better ability to resolve
out-of-stocks and capitalize on selling opportunities as well as improve stock
positions, especially on promotions. Demand sensing also enhances the
ability to differentiate the demand for individual products within product lines
or groupings. Not all products sell at the same rate; inventory position and
policy must recognize these differences to be able to provide optimum
availability and avoid stock-outs and/or oversupply.

Demand Shaping:
Often, company management and the S80P team take the approach that
demand variability is a given; and the challenge is to understand it and act in
the most effective way possible. That is true to a certain extent, but demand
can be influenced and driven to meet the company's objectives.
Through proactive measures, you can shape demand to meet company
goals.
Many companies are engaged in demand shaping; however, most do so
disconnected from the overall operational plan. It is crucial for a company's

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on-going profitability and growth to make demand shaping an integral part of
the S&OP process.
For example, if one plant has available capacity, it might be prudent to
develop a promotion plan to drive demand to fill up that plant's capacity.
Promotional activities in support of a new product launch are frequent
demand shaping techniques.
Advertising, pricing actions, coupons, and incentives to salespeople, dealers
or retailers are all examples of demand shaping activities.
Any demand shaping plan must be developed in conjunction with the
forecast. As demand is changed the forecast must be adjusted accordingly or
you will create a major ripple throughout your supply chain. There's an
iterative loop implied here:
• Initial forecasts and plans reveal an opportunity where increased demand
would improve results
Demand shaping activities and expected results are proposed
• Forecast changes reflect the expected changes in demand
• The full planning process reveals the resulting changes in sales, inventory,
production, logistics, customer service, and profit
Inherent in the demand review is balancing the demand plan against the
company's overall financial objectives. It is critical the demand plan and the
alternatives presented at the executive S&OP meeting are created to meet
service level, inventory, production, and profitability objectives.

Step 3 - Supply Review:

Once the demand plan is finalized, the supply team needs to determine how
they can meet the demand plan. Two elements are key in determining how to
profitably satisfy the demand plan.
They are:
1. Inventory Optimization - How much inventory is currently available and
where is it in the supply chain?
2. Production and/or Procurement Optimization -
Do we have the production or purchasing capability to meet the demand
plan?

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Inventory Optimization:
Inventory is one of the largest investments that a company will make and is
the primary determinant of customer service. It is therefore appropriate that
inventory policy and specific inventory positioning decisions be key
outcomes of the S&OP process.
Where to keep product across the supply chain including raw material,
work-in-progress (WIP) and finished goods helps optimize the financial
investment in inventory.
The primary purpose of finished goods inventory is to meet expected
short-term demand while components and raw materials provide for the
needs of manufacturing to meet future demand.
The right amount of the right inventory in the right place at the right time
helps prevent lost sales though this must be balanced with the cost and risk
of holding too much inventory as that will place a strain on cash flow. To
balance this, many companies optimize for each location, product, and
channel within overall company objectives such as total inventory investment
and customer service requirements.
The best way to set inventory plans and policies is to thoroughly analyze and
understand the relationships between various stocking decisions, service
levels, and inventory investments for each category of goods, channel, and
customer or customer group. This is where the most difficult decisions are
evaluated. The sales team wants the ability to ship any product every day
which requires a higher inventory level to improve fill rates and avoid
stock-outs. Procurement and finance, on the other hand, want less inventory
to reduce costs and improve cash flow. Production wants more components
and raw materials to reduce the risk of manufacturing disruptions due to
shortages and wants to match production schedules with efficiency,
regardless of demand. The heart of the S&OP process focuses on balancing
these trade-offs to develop the plan that best satisfies the needs of the
company as an entire organization, not just a silo within the company.
To optimize inventory, supply chain leaders run simulations that explore the
dynamics of the demand/inventory to availability/service level relationship.
They also review and identify the ideal stage, raw, WIP and finished, for each
product in inventory, and the proper placement of inventory in the distribution
network. Simulation allows a choice of methods including minimize inventory,
service objectives, minimize short shipments, and various order quantity

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options including economic order quantity (EOQ), inventory turns, 'x' days of
supplv. capacity-limited EOQ, etc. Additionally, these leaders consider the
redeployment of inventory, moving of excess inventory from one warehouse
or distribution center (DC) to another
DC instead of making more product.
To take this a step further, you can include planned events such as pricing
actions, sales incentives, advertising changes, and competitive actions when
running the simulations. Simulations and proper planning through
collaboration can help make sure there is sufficient inventory and logistics
capability to cover any changes in demand driven by these events.

Operations Planning:
The bottom line is about shipping product - when, where and how much. The
challenge is to develop a supply plan that profitably meets company
objectives. When developing a supply plan, manufacturing must take into
account multiple considerations including:
Do not exceed a pre-set level of production on certain products during a
specific period, or overall production during a given time, whether expressed
in units, pounds, hours, or some other indirect measurement
• Do not exceed the availability of certain components
• Do not exceed production capabilities; no overtime
• Minimize inventory build-up to accommodate high-demand periods (this
often conflicts with the previous point)
• Do not exceed a certain level of inventory at one, several, or all distribution
centers) or do not exceed a certain inventory value or volume at a location, a
group of locations or overall
• Maintain 99% service for certain customers and 95% for the rest, or
different service levels for various products, product lines, channels, or
regions
• Minimize less-than-truckload (LTL) shipments;
minimize overall transportation costs;
eliminate premium freight; or only use owned or contracted transportation
resources
The only way to intelligently make this kind of complex decision is to have the
information available along with the ability to explore the impact of various
factors through simulation.

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The ability to see the interaction among the various factors is the key to
ensuring the supply team is effectively utilizing available resources.
The supply team will analyze the findings of the various scenarios, and
perhaps suggest alternative strategies that can be modeled to test their
effectiveness.
Collaboration is essential at this stage. It is important to discuss alternative
scenarios with the affected partners and ensure that critical parts and
resources can be made available in sufficient supply to support any plan that
the company might want to enact. It is also appropriate to discuss any
significant changes in demand or distribution expectations with the affected
sales people to get their concurrence that the expectations are realistic and
uncover any possible snags in the plan they might be able to identify based
on their knowledge of the customers and the markets.

Step 4 - Financial Integration:

This is the most critical of all the pre-S&OP processes. While the demand and
supply teams have kept the company's overall objectives in mind, in many
businesses some bias creeps into the process. The financial review step
removes that bias. It is at this time that all constituents agree on the final
demand and supply plan and what alternative plans will be presented during
the executive S80P review.
It is crucial during the financial integration step that key metrics are balanced
against company financial objectives. A key technique in boosting S&OP
effectiveness is leveraging shared metrics.
This combats the issues when objectives are looked at from a silo
perspective. For example, the VP of manufacturing may be measured on how
efficiently operations utilize available resources (total uptime). When viewed
from a silo, running at 98 percent efficiency looks fantastic; however, when
viewed from a shared metric perspective, 98 percent efficiency may drive
excess inventory in products where there is little or no demand. That is why it
is imperative to adopt a shared metric view for S&OP.
Step 5 - Executive Business Review:
The ultimate objective of the S&OP process is to leave the meeting with an
operational plan that best achieves the company's objectives within known
constraints. The deliverable from the executive business review is a list of
actions that implement the decisions and plans agreed upon.

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Besides reviewing best case and alternative demand and supply scenarios, it
is imperative that executives assess risks to their supply chain.
Risks include:
• Quality issues
• Supplier failure
• Demand spikes
• Demand disruptions
• Obsolescence
• Strikes - internal and with external suppliers
Understanding the impact from these and other risks and having contingency
plans in place is paramount for any company. Having the supporting
information from the demand, supply and financial teams makes this an
informed decision as opposed to a 'shooting from the hip' decision.
Between meetings, department heads and managers carry out instructions,
and keep a close eve on current activities and events in order to detect any
deviation from what was outlined in the plan and bring that information to the
attention of the appropriate individuals as quickly as possible.
Corrective actions can bring the situation back in line or, if that isn't possible,
the plan may have to be revised with the new constraints in force.
Simulation becomes a key tool once again in responding to deviations from
the plan; alternative responses can be tested for the S&OP team to consider
in revising the plan.
A Plan Goes into Action
Sales, inventory and operations planning come together in the form of a
monthly meeting between the executives responsible for sales, marketing
inventory, procurement, production, and finance.
At the executive S&OP meeting, the challenging decisions are made as to
how the company's resources will be applied to meet company objectives,
including customer service and profitability, within the constraints and
capabilities available. Typically, a one-year plan is advanced, with
successively more detailed quarterly and monthly plans. Once the plan is set
at the monthly meeting, the group does not need to meet again until the next
month unless there is a significant deviation from the plan that must be
addressed immediately.
Because the primary business of the executive
S&OP meeting is to compare and balance trade-offs between the various
competing objectives this information must be made available to the team

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before and during the meeting. Proper preparation can make the S&OP
meeting efficient and effective. This planning involves the need to model
several scenarios and understand the impact each has to the company. It is
easy and more comfortable to provide the model that everyone wants to see;
however, understanding how deviations in supply or demand can lead to
more reliable roadmaps and growth, and improved bottom line results.

BENEFITS OF S&OP:
a) Increased forecast accuracy.
b) Increased sales revenue.
c)Increased on time delivery.
d) Inventory reduction.
e) Safety stock reduction.
f)Increased productivity.

CONCLUSION:
The disciplined stage-wise approach is the backbone of S&OP. The
consensus decision by various functional heads coupled with longer horizon
plan of 15 to18 months along with management involvement makes S&OP
framework a very successful tool to balance supply with demand, thus,
providing competitive advantage to the organization in terms of increased
revenue and productivity, reduced inventory, improvement in on-time delivery
leading to enhanced customer service and sustained growth of the
organization.

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