Sales & Operations Planning with Suppliers
Many companies have been active practitioners of S&OP for years with great success. While there have been many refinements to the process, I was intrigued by a conversation that I participated in last week. Tim Wilson, who is currently the District Manager for APICS’ Great Lakes District started an informal monthly breakfast discussion group seven years ago. The conversations have covered many different supply chain issues over the years and this is certainly not the first time S&OP was discussed.
Several participants mentioned that their companies have begun to include suppliers in their S&OP process because suppliers are a key factor in achieving some objectives related to cost and customer service.
Don Jensen, a former S&OP consultant, who now works for Freudenberg Corp recently attended a Wal Mart conference for its suppliers. While the conference focused on Replenishment activities, Don mentioned Wal Mart has recommended suppliers compare plans with Wal Mart to ensure alignment between expected sales volumes and supplier deliveries. Coming out of the recession, keeping stores stocked is increasing in importance for retailers. If stores are out of product, sales and profits suffer.
Outsourced activities can also be a critical part of your S&OP process. Providing suppliers with more than purchase orders can help align supplier plans with your requirements. Information on future needs and potential changes will help your supplier anticipate supply needs. When suppliers have to rely only on purchase order history and future PO’s, they may not be able to provide the responsiveness that is needed when demand increases.
A related idea that we discussed was the possibility of extending the flow of requirements information back up your supply chain to your suppliers’ suppliers. Many large global companies have taken this approach with great success.