Warehouse Tetris: Sales and Operations Planning

Heard of the game tetris? Sales and Operations Planning (S&OP) is just that- playing Tetris with your warehouse inventory. 

Picture this: imagine each product as a Tetris block. Good S&OP planning strategically arrange these “blocks” not just for a snug fit but to anticipate future moves in the market. 

The goal? To maximize efficiency and minimize gaps.

Similar to tetris, Sales and Operation Planning is about finding balance. Professionals juggle inventory levels, production capacities, and market demands, resulting in a well-orchestrated and efficient whole. 

Let’s dive deeper into the theories of S&OP below!

What is Sales & Operations Planning?

Sales and Operation Planning is a management process to drive a unified, consensus-based operating plan that enables organizations to meet business plans. 

In other words, it controls inventory costs while fulfilling customers’ requirements on time in full (OTIF). 

S&OP requires cross-functional coordination and cooperation among different departments: sales, marketing, planning, purchasing, operations, warehousing, shipping, finance and product development. 

Having the right MRP module in support of the S&OP management process improves all-round efficiency and meets business objectives more effectively.

To recap, S&OP is crucial for business as it seeks to:

• Deliver Right material the first time

• Deliver at the right time, to the right place, at the right amount 

• Optimize inventory, reduce obsolescence while delivering all the rights

Some Challenges Businesses face with strategic S&OP

Now that we’ve covered the definition and role of Sales and Operation Planning, let’s look at a couple of challenges that businesses may encounter in achieving seamless alignment. 

1. Sales objectives and operational objectives tend to run counter to each other when separated or when each is run as a silo function. 

2. Sales vs Operations

• In their counter strategies, sales, as a profit center, seeks diverse options for maximizing sales with the shortest possible delivery times.

• In contrast, operations, as a cost center, aims for cost-effective production with minimal waste, underscoring the importance of accurate forecasting.

To align them and make them work together as a team, this is where S&OP comes in. 

To ensure success in the S&OP management process, every team member must grasp the company’s overarching business objectives. 

This may require functional teams to go above and beyond, adjusting their individual objectives to align seamlessly with the broader goals of the company.

S&OP empowers participants from key functional teams, fostering a collective understanding of the business’s big picture. 

The management process includes a regular formal meeting run by a leader that covers a planning horizon adequate to plan for materials and resources effectively to meet the operating plan. 

Ideally, proper S&OP will allow even seemingly conflicting functional objectives to synergize in maximizing overall business objectives.

Sales and Operation Planning Unveiled: Warehouse Optimization & Customer Satisfaction Insights

To beef up our article on S&OP, we sat down and chatted to our operational expert in Aristou, Director KL Ang, as he shared how the role of S&OP not only optimizes warehouse inventory, but also improves customer satisfaction. 

“Let’s discuss inventory first. As much as sales like to have more inventory to sell and deliver with the shortest time, as all customers want short delivery times, they have to understand they have to forecast accurately. If the actual sales fall short of the forecast after production is done, they have the obligation to find other creative marketing ways to sell what was forecasted but did not sell. If there is slow-moving inventory, sales have to step up and find ways to sell the inventory as part of overall company objectives to prevent obsolescence.”

Addressing inventory considerations is crucial for sales to balance the desire for more inventory with the necessity of accurate forecasting. 

Responsibility for sales to employ creative marketing strategies to align with overall company objectives and mitigating the risk of obsolescence is imperative.

“On improving customer satisfaction, a crucial aspect of company objectives, if a significant customer issues an urgent delivery request, production must be willing to make changes while still addressing other priorities, taking the initiative with purchasing to expedite materials.”

Our expert highlights the important correlation of production and customer service working hand in hand to provide the ultimate customer satisfaction.

“Regarding enhancing overall business performance, every function must contribute to cost reduction without negatively impacting the company’s revenue. Meanwhile, sales, recognizing the challenge, must provide accurate sales forecasts so that supporting functions can produce the right product in time. To strike a balance between the various functions’ activities, ensuring they don’t cannibalize but synergize, there must be a forum for discussion and action planning, a role fulfilled by S&OP.”

Just as the human body is made up of many parts, so is the entire business function joining hands in working together to resolve any limitations to enhance overall business performance and can be achieved through the role of S&OP. 

In this segment, we discuss the core elements of an effective S&OP process. Specifically: demand planning, supply planning, collaborative decision-making, and continuous monitoring.

“Core elements in the S&OP process include the forecast, sales orders, an MRP tool to identify exceptions in the purchase plan, a production plan based on a single set of data for analysis, metrics to provide feedback on team results, driving optimal inventory, reducing obsolescence, and training people to work together for common objectives. S&OP is primarily about teamwork in identifying and resolving key issues, decision-making, determining actions, assigning responsibilities, and setting deadlines.”

Mr Ang emphasizes the importance of collaboration and effective coordination among team members in addressing critical issues and achieving common objectives.

“I’d recommend a designated team should address the issues and report the solution or decision during the next S&OP meeting. Meetings should be concise, avoiding unnecessary extensions to solve problems that cannot be resolved within the meeting’s time frame. Each functional team is entrusted to execute their work using their specialized knowledge and converge as part of the S&OP process. In urgent situations, functions can proactively resolve issues outside of S&OP meetings and report back on the outcomes. These practices collectively contribute to effective S&OP management.”

The recommended approach involves designating a team to address and report solutions or decisions in the subsequent S&OP meeting. These practices collectively contribute to effective S&OP management through efficient problem-solving and collaboration.

“In companies with numerous SKUs or product varieties, necessitating the purchase of numerous raw materials, a robust MRP tool is essential. With the help of a BOM, this tool ties all material requirements and operational plans together to meet demand forecasts and sales orders promptly. The right MRP tool offers high efficiency, minimizes errors, and adapts continuously to independent demand and production changes, providing substantial return on investment and becoming one of the company’s best investments.”

The right MRP tool is characterized by high efficiency, error minimization, and adaptability to independent demand and production changes. 

Its significant ROI positions it as one of the company’s most valuable investments, contributing to operational excellence.

Sales & Operations Planning (S&OP) stands at the intersection of strategic sales and efficient operations, playing a pivotal role in achieving organizational harmony. 

Businesses often encounter challenges in aligning sales strategies with operational capabilities, emphasizing the need for a well-defined and agile S&OP process. 

Now, armed with an understanding of the core elements, we are ready to shift our focus from theory to practice and delve into real-world transformations in Part 2 of this series. 

Join us as we spotlight how one of our clients has embraced and evolved through S&OP.

We’ll also share advice and actionable tips for businesses eager to strengthen and optimize their own S&OP processes. 

For more information on a free demo and consultation with our experts, contact us here now!