Supply and demand balance gives a business the optimum mix of customer satisfaction, lean operations, and profitability. With shorter product life cycles and faster lead times, businesses often struggle to bridge the gap between customer needs and business capacity.
The solution comes down to integrated S&OP. Thanks to machine learning, artificial intelligence, and big data, S&OP software has developed substantially, opening up a world of opportunity.
The Cost of Failure in Supply-Demand Balancing
Businesses with a rudimentary supply-demand balancing model have loopholes in their processes. They lack the key integrated components that produce real value. Not only will their revenue goals be unmet, but they are likely to suffer losses.
Failure to balance demand and supply can cause stockouts or excessive inventory. The former will lead to higher costs in expedited deliveries while the latter could lead to high markdowns.
The lack of integration can also result in higher production costs upstream of the supply chain and poor performance and service delivery downstream. Frequent stockouts or poor service delivery ultimately lead to permanent customer loss.
What are some of the process gaps that can cause customer and revenue loss?
● Partial scope (e.g focus only on supply)
● Unclear objectives
● Undocumented processes
● Decentralized or fragmented leadership
● Inadequate KPIs
● Inconsistent follow-up
● Limited accountability
● Siloed performance views
S&Op for Supply and Demand Balance
Sales and operations planning S&OP is a management process that coordinates the various functions of a business synchronizing them to achieve profitability and performance goals.
● Data, analytics, and tools. Robust data on customers, markets, operations, and financials must be gathered. Supply and demand software is used to analyze this data and produce different models such as demand forecasts and inventory management.
● Processes that have clear objectives, sequences, frequent checks, and documentation. The monthly S&OP meeting falls here. Its purpose is to review actual versus plan and make decisions on the way forward. The effectiveness of the processes relies on accurate data reports being shared prior.
● People to make clear decisions based on solid inputs. Executive teams and top management need to be involved in S&OP to give the plan a company-wide scope, to review decisions, settle conflicts, and make policy decisions.
S&OP Software is a key component of making the planning process effective. There are various tools that feed into it. Supply optimization improves the efficiency of the supply network and performance. Demand optimization uses sophisticated algorithms for the automatic generation of forecasts. Intuitive demand solutions enable demand planners to have full control of the forecast process without getting stuck in complex algorithms.
It’s clear that balancing demand and supply requires integrated S& OP with robust tools and solutions to deliver the right data analyses.