5th Step: How S&OP process is the key to optimize production & distribution capacity
26-05-2020
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How S&OP process is the key to optimize production & distribution capacity  

The fifth article of our series to be prepared for the Supply Chain's restart around six priority actions. After qualifying customer demand, it's time to set up a common, demand and supply, process to optimize the capacities used in the complete supply chain. 

(NB. S&OP: Sales and Operation Planning)

 

In this period of health and economic crisis, optimizing production involves guaranteeing the safety of employees and all stakeholders. The social distancing measures for health reasons in force must decrease operations' capacity. It is even more essential than usual to understand and measure current and future industrial and logistical capabilities and to prioritize them according to demand and sensitivity to the time of product delivery.

Therefore, even if companies are looking to increase their production rates and catch up the time lost (if they can), they must reserve logistics capacities in advance or secure supplies to minimize exposure to possible increased costs. Collaborating with partners could be an effective strategy for getting priorities and increasing capacity with favorable conditions.

To improve the scheduling activity in a stressful period, real-time visibility will depend not only on tracking the punctuality of freight in transit but also on more general changes, such as airport congestion, border closures, or supply disruptions. It will be imperative to maintain a flexible approach to supply chain management to adapt to any change quickly depending on the situation or environment. One more time, the digitalization of the supply chain will be vital for our supply chain managers.

With an estimated demand in our hand (as reliable as possible), the S&OP process takes its full meaning, especially in this particularly volatile period. The process should allow you the production and distribution capacity optimization regarding the demand. It is important to analyze different scenarios (pessimistic & optimistic) to identify the next decisions to take and understand their financial and operational involvement.

By optimizing the use of the available capacity, the S&OP process allows you to determine which product families offer the most significant strategic value in the medium and long term. This process is supported by a multi-functional team with the marketing and sales department, operations, supply chain, and finance. It is also necessary to include all people who can adapt to and understand the updated macroeconomic forecasts and measure the expected impacts on the company performance. If it's possible, it's preferable to use a digital platform to make the planning of the complete chain (from the beginning to the end). Using a dynamic scripting approach will allow the S&OP process to be a solution to better match production and supply chain planning to the demand expected in different circumstances and propose multiple scenarios.

In a period where the uncertainty of demand is omnipresent, let's try to keep a cool head and anticipate as much as possible with adaptative scenarios.

If you still had any doubts about starting an S&OP project in your company, do not hesitate!

S&OP will help you navigate rough water and thick fog!

 

Philippe Bornert, AGILEA CEO

 

 

To find the previous articles : 

1ST STEP: TRANSPARENCY & VISIBILITY DURING THE RESTART PHASE

2ND STEP: THE STATUS OF THE WEALTH

3RD STEP: ASSESS THE MATERIAL RESOURCES IN YOUR SUPPLY CHAIN 

4TH STEP: QUALIFY THE CUSTOMER DEMAND