Towards a more agile S&OP when everything goes wrong

Sales are swinging wildly, suppliers cannot keep up, inventories are too high and OTIF is at rock bottom… How can you stay calm in the middle of the storm?

Here are a few ideas for making S&OP more agile through more granular analysis loops.

Demand management

• Use the ABC XYZ matrix to identify stable demand segments
• For unstable segments:
  • Change the planning granularity, for example from monthly to weekly or from product family to SKU
  • Introduce risk analysis instead of statistical forecasting
  • Consider shifting from MTS to MTO, in line with the customer promise

Capacity review

• Reassess supplier risks
• Seriously explore new sourcing options
  • Regional supply chains: bring suppliers closer to plants or distribution platforms to better control risks instead of relying on distant, highly consolidated flows
  • Strengthen alternatives: avoid putting all your eggs in one basket and eliminate single sourcing or excessively risky supply arrangements
  • Promote direct or shorter flows: these require close collaboration but reduce intermediaries and duplicated inventory
• Rebalance workloads as much as possible
• Consider new transport options
  • Plan several transport solutions for the same flow to mitigate cost volatility and disruption risks

S&OP meeting

• Work with decision-making scenarios
  • Build margin and cash scenarios: translate sales, production and purchasing volumes into financial projections, incorporating exchange-rate movements and fluctuations in raw material and transport prices
  • Frequently analyse variances against budget
• Manage P&L by product family:
  • Use fully loaded costs and compare in-house plants with subcontracting: consolidate costs across the entire value chain and allocate financial amounts appropriately
• Prioritise demand by margin