As noted in our 5 Key Benefits of S&OP for your Supply Chain article, improved business alignment is an important benefit of a corporate wide S&OP effort. Improved business alignment strengthens a corporation’s competitive position, eliminates functional silos, and enables optimized decision-making among all team members.
Corporate Strategy from the Top Down
Executive management needs to establish corporate priorities in terms of market expansion, new customer acquisition, penetrating new industries, and resource allocation. Communicating these corporate priorities to all team members will, ideally, have each team member make decisions that support corporate goals.
Although corporate goals provide clarity regarding a company’s direction, a practical, easy to use framework and set of tools needs to be readily available to each team member for executing daily planning and decision making.
Supply Chain Management Is A Boundary Spanning Process
Supply chain management encapsulates the entire production planning process. On the sales end, customer demand is captured to create an accurate need forecast. Aggregate market conditions are factored in to incorporate demand changes for seasonality (like an increase in swimsuit orders during warmer months) and other predictable factors (like a decreased demand for toys after the annual December holidays).
This accurate forecast generates needs for raw material acquisition, production planning, and distribution. Financial resources are required to support each step of the production process.
Aligned Performance Metrics Provide Optimized Business Outcomes
Individuals working in supply chain management may be evaluated based on service metrics, safety stock levels, and a smooth manufacturing production cycle that runs as planned, without unscheduled interruptions for either unplanned maintenance or raw material supply issues. In this situation, safety stock could be viewed as a “cushion” that helps the organization be prepared for any unforeseen circumstances.
Team members working in finance may be evaluated based on cash cycle times and maintaining minimal levels of safety stock.
Devising a model that allows each functional area, in this case the supply chain management and finance teams, to perform well relative to their performance criteria, is critically important for improved business alignment.
Cloud Based Software Improves Organizational Transparency
Providing team members with a unified set of information, as is available via cloud based software, enables each team member to see the impact of their decisions on all functional areas impacted by their decisions.
With clear direction from Executive Management regarding overall corporate goals, both the supply chain and finance team members can perform “what if scenarios” when making critical business decisions. This modeling flexibility can improve overall business alignment.
