Manufacturers needing to make decisions about what to build before there's clarity on what will be sold should constantly be evaluating their Sales & Operations Planning (S&OP) process. This means actively balancing supply and demand by managing tradeoffs between inventories, margins, competitiveness, and customer satisfaction. This also means working with lots of data. Effectively working with and understanding S&OP data is critically important today. With constantly changing SKUs, stronger competition in a global market, and more frequent product promotions driving customer purchasing decisions, S&OP data is the lifeblood of any company.

What should you do to capture, manage and share this ever important S&OP data? What are the key areas and measures you should focus on when deciding how to manage and take advantage of all this data? The following recommendations are not exhaustive-each manufacturer is different and should carefully evaluate the "pain" areas of their business and make sure their S&OP process is generating the necessary data needed to better manage the overall process. In general, however, most manufacturers will share these commonalities.

Minimize Surprises

Let's face it, as a manufacturer you hate surprises. If you're a public company, a surprise that's not effectively managed and communicated means a drop in valuation for the company. An effective S&OP process that focuses on collecting and understanding demand data from internal stakeholders and trade partners is essential if you want to minimize surprises. It's not uncommon today to see even very large companies, including ones over $30B in revenue, doing weekly bottom up forecasts. Yes, weekly! This means lots of data, but it does not mean it needs to be painful. In fact, if you make it easy to participate in the S&OP process -- and make it relevant by providing the information your stakeholders want- - then you can get the data you need. This means reaching all stakeholders as often and as close as possible to the point where you need to make a decision on what to build. Providing easy to use systems that allow you and your trade partners to share forecast and other information is the key element in capturing a timely consensus demand signal, which will allow you to minimize surprises. That's good for your margins and your business.

Optimally Manage Inventories

Your S&OP process must be laser-focused on managing inventories. As a manufacturer, the benefits of optimally managing your inventories are felt in many areas but can be summed up with having the right amount of product, at the right time, in the right place (yes, price should be here, too, but more on that in a minute). Your S&OP data is the key to making this happen, and your ability to actively manage this data must be flexible and collaborative. For example, S&OP data such as weeks-on-hand calculations (which should be tailored to specific products and channels) will help you lower inventory buffers at all points in the supply chain, as well as the associated carrying costs. Newer inventory management processes such as VMI are becoming more widely utilized in industries beyond consumer goods, so you need to get better at managing your inventory data throughout the extended supply chain. Doing so will enable you to drive optimal inventory decisions, which leads to increased margins, increased cash to order cycles, and an improvement in customer satisfaction.

Improve Margins

Using S&OP data, especially across functional areas within the company, will lead to improved margins-if not, something is very wrong with your S&OP process. Improving margins is often an area that's under-emphasized in an S&OP process, and yet is ultimately the most important factor in the health of a company. An improved S&OP process can lead to margin improvements in many areas. However, the entire S&OP process needs to be collaborative and needs to include all functional areas of the business, not just the supply chain organization. We often see revenue and costs overlooked in S&OP processes, and this is worrisome. Making sure the relevant S&OP data, such as average product unit cost, inventory levels, logistics costs, anticipated margins, customer satisfaction rates, etc. is shared across marketing, finance, supply chain and the executive suite is critical to adequately measure total costs against total revenues. Having input and shared data amongst all functional groups is what drives margin improvements, which benefits everyone.

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