Many of us think of S&OP and think of days in meetings and unending discussions between the functional groups in the business. Many will agree it is a powerful tool. Many will also contend the benefits might not justify the tremendous cost of the exercise. Others might also look at expensive software for sale at high prices that could simplify the process but still would not yield the necessary benefit.
The full-blown S&OP process will yield a comprehensive balance of demand and supply. If we look at Theory of Constraints, we learn that only the constraint needs to be balanced. If the constraint is a machine of other production resource we can consider off-loading some of the demand to other resources or better managing the supply to that resource to ensure it is fully utilized. Our ERP will help identify the supply and demand factors affecting that resource.
We could also find the constraint is a policy such as never rescheduling past due orders. We might look into that policy and realize that it causes imbalances in supply and demand that can be resolved by relaxing the policy while maintaining some other way to keep those past due orders in mind.
From another perspective, we can look at the seven wastes of lean. Inventory is one of those wastes and is also a supply factor that might be out of balance. S&OP wants to bring supply into balance with demand and Lean wants to eliminate the waste of excess inventory.
Keep things simple. Build a dashboard from your ERP that shows demand and supply on a few key resources. Watch this dashboard daily – you will not have the comprehensive view S&OP brings but you will have a view every day and not just after the monthly meeting.
Use the features that are built in to your ERP.
Before every sales order verify the available to promise date. Spend time balancing other supplies and demands to see if the ATP date can be improved. Pay attention to the suggested changes in purchase orders and production orders or jobs. Many of these suggested changes reflect an imbalance in supply and demand that can easily be adjusted with no loss in performance.
Study sales orders that are delivered late and understand why. There probably were signals early on that should have alerted you to the late delivery and you might have been able to rectify a problem. You certainly should be able to learn from a mistake and not make it again.
Pay attention to the surplus inventory reports. Do something to sell it or use it while it still has some value. What can you do differently next time to prevent accumulating surplus?
If you haven’t implemented S&OP yet because you weren’t certain it had enough value, don’t worry. Just continue using the tools you have on smaller scales. Keep your business balanced and your customers will be happy.
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