BUSINESS

For Manufacturing, A Blueprint for Better Sales & Operations Planning

August 30, 2006

A dynamic marketplace presents manufacturers with a business problem: how to match product demand with production and supply chain capabilities? Unfortunately, many companies fall short of the mark. They're constrained by an ineffective planning process, using disconnected, departmental spreadsheets that rarely reflect overall organizational strategies.

The result? Manufacturers experience unpredictable or sub-optimal performance. They may fail to meet customer needs at a critical time, or face higher costs because of unanticipated demand or excess products in inventory. They may miss opportunities because resources are focused in the wrong place. Or they spend too much time and effort manually reconciling sales demand with operations supply capability.

A better way to manage supply and demand

Colin Snow, vice-president and research director of operational and supply chain performance management at Ventana Research, says these are precisely the reasons why a more dynamic, coordinated approach is called for.

"As new opportunities arise, manufacturers need to plan quickly and in detail. Success is contingent on a number of ingredients - enterprise-wide integration of systems, ubiquitous information visibility across the supply chain, a strong 'what-if' capability, and deep analytics for comparing outcomes, so management can anticipate the impact of potential actions across business functions."¹

A recent Accenture survey of supply chain executives makes similar conclusions. Companies are rushing to capitalize on opportunities in emerging markets such as China and India, and 93 percent of respondents see global operations as a central part of their strategy to do so. Nearly all (97 percent) are attempting to upgrade their operations, yet implementing an effective sales and operations planning process ranked as their biggest challenge.²

Enter the IBM Cognos Sales and Operations Planning (S&OP) Performance Blueprint – an integrated performance management framework that helps manufacturers align sales and operations to drive better-informed, more effective planning. "The Cognos Sales and Operations Planning Blueprint empowers organizations to react quickly to ad-hoc exceptions - like changes in demand, supply, capacity and product – plan effectively and measure the progress of responses against key performance objectives," says Snow.³

A blueprint for better sales and operations

The S&OP Blueprint integrates planning activities across finance, operations, production, purchasing, sales, and marketing. Using a common platform and workflow, departments coordinate their sales and production plans. Sales and marketing forecast product demand and revenue, and plan campaigns.

At the same time, schedulers carry out capacity, cost, and throughput modeling of products and plants to determine the right combinations. While production operations identifies capacity, labor, materials, and machinery financial constraints to meeting demand. And the supply organization evaluates supplier capabilities in-line with the materials and build plans.

Once they're rolled up, management and finance teams review, analyze, and align plans with corporate goals and objectives. Using this coordinated process, it's much easier to reconcile sales and demand forecasts with supply plans and financial goals. There's also more time for analysis and rolling forecasts. Since the business can quickly adjust plans and targets as needed, it stays on top of market changes or new opportunities and issues such as supply chain disruptions.

A first for manufacturing

Built using IBM Cognos 8 Planning and IBM Cognos 8 Business Intelligence, the S&OP blueprint is the first in a series of manufacturing blueprints planned by Cognos. Developed by the Cognos Innovation Center for Performance Management™, the blueprints provide targeted, pre-built data, process, and policy models based on proven best-practices in manufacturing planning, budgeting, and forecasting.

"IBM Cognos Performance Blueprints provide executives and managers with the information and sophisticated insights required to effectively assess the trade-offs that are vital to ensuring the right mix of production, outsourced resources, and trade promotions to maximize sales effectiveness and meet demand," says Paul Hoy, director of manufacturing solutions at Cognos, an IBM company.

Summary

Departmental, spreadsheet-based planning will fall short in helping manufacturers effectively manage supply and demand. Instead, companies need enterprise-wide forecasting and planning capability, to effectively coordinate both market needs and the capabilities of the business. IBM Cognos Performance Blueprints provide an ideal way to jump-start that process.