S&OP is a powerful tool. As noted in the Advantages of S&OP article, the key capabilities of S&OP provide numerous capabilities. And those capabilities reach far and wide within an organization. Here are the 4 key capabilities of S&OP:
1. Executive Decision Support
Firstly, an S&OP plan promotes organizational transparency across the entire supply chain. Executive Management can easily assess both “the forest” and “the trees” of the supply chain. The clear insights provided by the S&OP plan regarding the strategic direction and the tactical execution of the operational plan promotes confidence within the Executive Management ranks. Also, with the S&OP plan, the Operational Team provides transparency to Executive Management by providing a plan that includes the aggregate business environment, customer needs, and how to maximize the productivity and profitability of their organization.
2. Cross-Functional Collaboration and Alignment
Secondly, the Executive Team formulates and communicates a company-wide vision to be shared with all business holders. The S&OP plan facilitates cross-functional communication among each business unit that needs to work together to support the plan.
3. Scenario Management
An S&OP plan clearly delineates performance parameters and production goals. Because these plans proactively incorporate both capacity limits and demand requirements, the production cycle becomes a planned event. Indeed, these predictable production cycles are filled with structured events that occur in a particular sequence, time after time and cycle after cycle. Then, this predictability makes sure that tasks are repeatable and auditable within each S&OP planning cycle.
4. Risk Management
Finally, risk management may be the most critical of the key capabilities of S&OP, as most managers, if objectively profiled, lean more towards the risk averse than towards the opportunistic. First, dentification of risks, then assessing the severity of each risk, determining the likelihood of every risk, deciding how to minimize the impact of the risk and, finally, developing contingency plans to work around the risk are all important components of risk management.
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