In our last post, we began exploring some of the quantifiable benefits of achieving S&OP excellence. Just to recap, consulting firm Oliver Wight ran a survey to measure the ROI of 40 of its clients who had achieved Class A (outstanding) performance in their sales and operations planning (S&OP) processes. You can see those results — and other good information — for yourself in an Oliver Wight white paper.
Our previous post shared the first three results. Let’s take a look at the next three.
Reduced inventory by 18-46%
According to a commonly cited industry rule of thumb, carrying excess inventory will cost you about 25% of the value of that inventory per year. So, if you’re carrying $200,000 in inventory, you’re letting $50,000 fly out the window annually. If we take the middle road here and assume you could trim 30% off your inventory by achieving S&OP excellence, then you would be saving $15,000 per year in this category alone. And that’s not even taking into account the fact that when you hold less inventory overall, there’s often less need to sell off aging inventory at a loss.
Reduced safety stock by 11-45%
Not surprisingly, companies that excelled at S&OP achieved similar improvements in the categories of inventory reduction and safety stock reduction. After all, inventory is inventory. But when you’re holding safety stock, there’s a greater perception of wasting your money. Making improvements in this area, then, can help you free up wasted resources to devote to more important business priorities.
Increased productivity by 30-45%
When you can’t find a way to negotiate better pricing from your suppliers, a good way to improve your bottom line is to boost the productivity of your people and operations. There isn’t an executive alive who doesn’t want to squeeze better results out of the investments s/he has already made. This is the area in which Class A S&OP practitioners have achieved the most impressive results.
Don’t Settle for Soft Benefits. Save Hard Dollars.
As you can see from the survey results, companies that are implementing S&OP solutions don’t have to settle for the promise of soft-dollar benefits such as greater collaboration, increased morale, and enhanced public image. There’s reason to believe you can also make better forecasts, boost your sales, make more on-time deliveries, reduce your inventory, and boost your productivity.
So, before you even consider implementing a new S&OP solution, hold your software provider’s feet to the fire. Ask about the quantifiable benefits their clients have achieved. Find out how soon you can expect to see improvements. Look beyond the glossy brochures and get the real story.
Demand Solutions is ready, willing, and able to provide you the full story about how to achieve true S&OP excellence. To find out how you can elevate your operations to new heights, call us at 800-886-3737 today. Also, you should download our latest free white paper: “Achieving Supply Chain Excellence.”
Jeff Bower is the Northwest Principal for Demand Management, Inc. Within this role, he ranges from Northern California to Alaska. He has nearly 22 years’ experience with Demand Solutions supply chain management software.