LEAN OR SALES AND OPERATIONS PLANNING?

By Ray Padilla, Director of Client Services

When companies are resource-constrained, this question is often asked by executives attempting to prioritize improvement initiatives. The answer, of course, is that all companies – manufacturing and service – need both. S&OP and Lean are complementary. A goal of lean manufacturing is to create a process that will allow material to flow - from raw material to finished product to the customer. Thus eliminating waste and wasteful practices, reducing costs and cutting lead times - while synchronizing production and purchasing activities. S&OP, integrated with detailed planning will help balance future demand and supply, to predict capacity and material problems with enough time to do something about them, and to understand the financial consequences of production and purchasing decisions.

S&OP is the process that brings together all the plans for the business (customers, sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans. The objective of Sales & Operations Planning is to arrive at a business “Game Plan” to help make decisions, manage and allocate critical resources to meet the business goals. The senior management team should be meeting once per month to review demand (firm and forecasted) for each product or service and then discuss the availability of critical supply resources (people, machines, raw materials) to satisfy the demand at a cost that will yield a financial benefit to the company. Companies just getting started with S&OP will review demand, supply, and financial impact for the immediate 2-3 months. As the process matures, an 18-24 month view is recommended.

A robust S&OP process, when implemented and used effectively, will yield:

• Increased customer service
• Reduced inventories
• Lower manufacturing, distribution, and service costs
• Better control of the overall business financial performance
• Increased teamwork within and across all business functions

Implementing Sales and Operations Planning along with Lean will produce extraordinary results. Companies committed to Operational Excellence have successfully implemented both simultaneously. It’s not a choice of one or the other. Do both – your company’s future depends on it!