Sales and operations planning refers to the management of sales, inventory and operations. That helps the management get a better understanding of the current financial results. Sales and operation is a business aspect that most individuals do not understand. It creates a link that the business owner can use in managing various activities in the business.
Ensure your SOP horizon is aligned with your business. Most of the SOP processes focus on aligning supply and demand. There is a chance that errors happen because the management did not look far into the future. The time frame for measuring accuracy should be aligned with your business priorities. For instance, your company may be dealing with significant demand swings. It may take you six months to employ and train individuals. You must plan for that long in advance.
Take the time to have a better understanding of the forecast accuracy. The demand management part of the SOP is something that people always complain about. However, you cannot attain perfect accuracy. That does not mean that you cannot improve at it. What determines the accuracy forecast is the level in product hierarchy you consider. You should analyse the accuracy of estimates over an extended timeframe.
The tertiary influence on demand and supply is something you should consider. Make sure you understand the external factors that affect demand and supply. You can then use the information to calculate the potential impact. For example, the history of a business can be used to find out the demand impact for the customers.
Show the value of customer and supplier collaboration. There are benefits associated with a deeper partnership between the suppliers and customers. For you to achieve that in real life, you should show the value of them working together. They will not make the extra effort when you do not show them value.
Take the time to model the changes in demand and supply. When doing that, ensure you include the financial impact. Most firms do not do any type of modelling when planning their SOP process. A wide variety of variables need to be factored in such modelling. It should include how much the suppliers can be flexible with demand changes. Also, it needs to have the time they take to increase their production.
The SOP needs to be the central point of how the business is operated. If the SOP is effective, it impacts the financial statements and performance metrics. That is why it should be a vital aspect of how the business is managed. However, the functional leaders should know the benefits of them attending the meeting.
The SOP is a critical aspect to ensure your business is successful. The management team will get a balance between the customer service, working capital, and the total costs with an effective SOP. Your company will enjoy numerous benefits when you incorporate effective SOP. Thus, you should make it part of your business. If you are unsure of where to start, get the experts to help you.