By: Donald Clark CFPIM, CSCP
Balancing demand with supply is the basic objective of every single enterprise. This is easy to state but as it turns out, not so simple in practice. Some organizations meet this balance well, while others survive through crisis management.
Those that do not bring supply and demand into balance suffer the consequences. Excess inventory, disrupted production schedules, missed deliveries, etc., become the norm. All of these conditions create a huge amount of waste and then the finger pointing begins, pitting departments against each other. Ultimately, it is our customers who suffer and sure enough, they will begin to go away.
On the other hand, a thorough understanding of demand, along with developing a comprehensive supply strategy to meet that demand, will allow organizations to effectively produce and deliver product, with greatly reduced waste. A vital tool to achieve this goal is the sales and operations planning process.
Sales and operations planning (S&OP) brings together all of the functions of an organization to create a companywide game plan. The output of this plan forms the basis for all of our short-term decisions and activities. Beyond the immediate result of creating this agreed upon plan, sales and operations planning helps in breaking down the barriers that exist between our departments and helps the company to move forward as a cohesive team.
Once a month, at least, the top people from each department work together to review actual performance since the last meeting, identify areas of improvement, determine the next period’s projected demand and then make sure the resources exist to meet that demand.
Dynamics AX 2009 provides users with the tools they need to perform the S&OP processes. It has item forecast capability, resource profiles to see how much work can be done and load profiles to see the effect of operations plans on existing capacity.
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