Page 360 - Orlicky's Material Requirements Planning

CHAPTER 20 Sales and Operations Planning 339

is to ensure that the volume and financial forecast are reconciled and aligned. The
demand plan is at an aggregate level, and the aggregate families are chosen, understood,
and used by all functions. Simulations at the aggregate level are more helpful than trying
to do “what ifs” at the stock keeping unit (SKU). Choose a software solution that facili-
tates this capability.
Traditional S&OP tended to use manufacturing families. In demand-driven envi-
ronments and product differentiation businesses today, we see the aggregate product
family being brand or brand/technology. Why would one choose an aggregate group
with little relevance to marketing and sales?

Managing Supply

Supply management also has broadened in its scope. Traditionally, it applied to just man-
ufacturing, but now it is extended from manufacturing to a wider view of sourcing that
includes other resources, including external ones. In multinational organizations, it has
been extended to supply-chain optimization, making the best sourcing decisions from
scenario planning. This has challenged the planning capability of many organizations in
that traditionally many planners have been used to management and execution in detail
at single supply points; supply-chain optimization is a wider role calling for the ability to
test different scenarios and recommend and make the right choices.

Monthly Timing and Integration

The widening scope of new activities, demand, and supply has put even greater pressure
on a more joined-up approach. As businesses have become bigger and more complex,
S&OP has become a bigger challenge. We have noticed that without an integrated
process, organizations attempt to solve complexity by being more functional.
Highlighting the importance of new activities and their impact on demand and sup-
ply, and forcing volume and financial integration through the integrated reconciliation
process, we facilitate a business management understanding based on a robust opera-
tional view (volume and value) across the organization. This integration, combined with
the increased future horizon, emphasizes the connection between the steps as the most
important element in success. It also stresses the need for this to be seen as an iterative
process, normally run on a monthly cycle, so that decisions taken during the process and
confirmed in the senior management review in the month are fully communicated into
the organization and executed through the process in month 2 and beyond (Figure 20-6).
The arrows from the senior business management review into the next cycle show
the importance of making, committing to, and communicating decisions and taking
action. These changes to the process had a major impact on the leadership of the imple-
mentation and its use in the organization.
Traditional S&OP normally was led from the supply side of the organization. The
importance of new activity integration and early volume/financial reconciliation will not