Monday, May 09, 2005

Sales & Operations Management - Next Frontier in SCM

Supply chain management efforts till date have focused on cost reduction, asset reduction and planning cycle time reduction, helping in increasing the flexibility of the supply chains. The future focus of supply chain management efforts will be on revenue growth. Forecast gaming and channel inventory are important areas of improvement to achieve revenue growth. Organizational and metrics misalignment, forecast being treated as given instead of being treated as a starting point to shape demand and supply to meet a plan and unidirectional process flow causing slow reaction are all challenges with the as-is process. The forecast gaming and channel inventory can be reduced by using the right metrics, by having tight organizational alignment and by having real time monitoring and adjustment of the sales & supply plan. This can be achieved with Sales & Operations Management solutions that have the following key capabilities. (1) Synchronized sales & operations planning (S&OP) cycles designed to achieve reliable execution of corporate plan. (2) Institutionalized process play books for each SCM function to enable rapid response. (3) Intelligent decision support tools with root cause analysis and what-if simulation. (4) Demand & supply shaping embedded into the process play books of each SCM function. (5) Tools & process to support continuous improvement with frequent validation of model assumptions like new product ramp up curve & price elasticity.

Results from leading companies are very promising; some of them report increased revenue and margin with bottom line impact of 2–3%.

What do you think?

Karthik Mani

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