{"id":3379,"date":"2020-08-18T07:05:46","date_gmt":"2020-08-18T07:05:46","guid":{"rendered":"http:\/\/www.rtgsolutionsgroup.com\/?p=3379"},"modified":"2020-08-18T11:52:16","modified_gmt":"2020-08-18T11:52:16","slug":"why-is-it-so-hard-for-businesses-to-get-sales-and-operations-planning-right","status":"publish","type":"post","link":"https:\/\/www.rtgsolutionsgroup.com\/why-is-it-so-hard-for-businesses-to-get-sales-and-operations-planning-right\/","title":{"rendered":"Why is it so hard for businesses to get S&#038;OP right?"},"content":{"rendered":"<section class=\"wpb-content-wrapper\">[vc_row][vc_column width=&#8221;3\/4&#8243;][vc_single_image image=&#8221;3383&#8243; img_size=&#8221;1110&#215;500&#8243;][vc_column_text]<span style=\"font-weight: 400;\">We\u2019ve all heard of supply and demand. Demand is what consumers want, and supply is what companies have. But do you know how your business can bring supply and demand together to maximize profits and cut costs?<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The secret is sales and operations planning, or S&amp;OP. Sales &amp; Operations Planning involves predicting future customer behavior and making decisions about inventory, sales, and other business operations based on those predictions.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">At RTG Solutions Group, we believe that proven methodology, a commitment to people, and effective communication drive success. We love S&amp;OP because it encompasses all of those things! It\u2019s a tested-and-true strategy, encourages teamwork across departments, and requires consistent communication.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Today, we answer all of the big questions so that you can <\/span><a href=\"https:\/\/www.demandcaster.com\/implementing-sales-and-operations-planning-sop\/\"><span style=\"font-weight: 400;\">implement S&amp;OP<\/span><\/a><span style=\"font-weight: 400;\"> into your own organization and see the ROI. In this article, we cover the following questions:<\/span><\/p>\n<ul>\n<li><strong><span style=\"font-size: 14pt;\">What is S&amp;OP?<\/span><\/strong><\/li>\n<li><strong><span style=\"font-size: 14pt;\">Why is S&amp;OP important?<\/span><\/strong><\/li>\n<li><strong><span style=\"font-size: 14pt;\">How does S&amp;OP affect the supply chain and inventory management?<\/span><\/strong><\/li>\n<li><strong><span style=\"font-size: 14pt;\">Why do companies struggle with S&amp;OP?<\/span><\/strong><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Let\u2019s jump right in! <\/span>[\/vc_column_text][vc_custom_heading text=&#8221;WHAT IS S&amp;OP?&#8221; font_container=&#8221;tag:h3|text_align:left&#8221; use_theme_fonts=&#8221;yes&#8221;][vc_single_image image=&#8221;3382&#8243; img_size=&#8221;1110&#215;500&#8243;][vc_column_text]<span style=\"font-weight: 400;\">Sales and operations planning, or S&amp;OP, is a multimodal business process. The goal it is essentially to balance supply and demand. Sounds easy enough, right? As it turns out, aligning your company\u2019s supply to your customers\u2019 demand requires extensive planning. And this is where S&amp;OP comes in.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The starting point is a thorough analysis of consumer buying patterns. These patterns are then modeled to predict future customer demands. You then work backwards to align all business operations\u2013inventory management, logistics, purchasing, manufacturing\u2013to the customer behavior forecasts.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Because sales and operations planning touches so many different areas of the business\u2013from marketing to manufacturing\u2013it requires seamless cross-departmental collaboration. This collaboration often poses a challenge to companies whose departments typically work in silos.<\/span>[\/vc_column_text][vc_custom_heading text=&#8221;WHY IS S&amp;OP IMPORTANT?&#8221; font_container=&#8221;tag:h3|text_align:left&#8221; use_theme_fonts=&#8221;yes&#8221;][vc_column_text]<span style=\"font-weight: 400;\">Balancing supply and demand through S&amp;OP may be tricky, but it is well worth it. Its primary benefit is profit maximization.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">On one hand, it reduces inventory costs by eliminating waste. Excess and idle inventory eats up profits, and it\u2019s a bigger problem than you might think. In fact, US retailers hold onto $1.36 of inventory for every $1 in sales! (<\/span><a href=\"https:\/\/www.conveyco.com\/inventory-statistics\/#:~:text=As%20of%20June%202019%2C%20U.S.,for%20every%20%241%20in%20sales.&amp;text=There%20is%20also%20an%20increased,and%20managing%20the%20added%20inventory.\"><span style=\"font-weight: 400;\">Source<\/span><\/a><span style=\"font-weight: 400;\">)\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But with strong S&amp;OP, you can avoid over-stocks. This is because the inventory you have on hand is supposed to match the inventory that customers buy. The result is less waste and lower inventory costs!<\/span><\/p>\n<p><span style=\"font-weight: 400;\">On the other hand, sound practices through sales and operations planning can maximize your sales and improve the customer experience. Again, if your supply chain plan allows you to have the right inventory at the right time, then you\u2019ll be able to fulfill every order you receive. Plus, consumers expect shorter and shorter delivery times, so the time savings from S&amp;OP will enhance your customer service performance.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In other words, S&amp;OP can be used to eliminate stock-outs and over-stocks, which means all the collaborative efforts can save you money. <\/span><a href=\"https:\/\/www.conveyco.com\/inventory-statistics\/#:~:text=As%20of%20June%202019%2C%20U.S.,for%20every%20%241%20in%20sales.&amp;text=There%20is%20also%20an%20increased,and%20managing%20the%20added%20inventory.\"><span style=\"font-weight: 400;\">One market analysis<\/span><\/a><span style=\"font-weight: 400;\"> found that overall inventory costs can be cut by 10% just by reducing stock-outs and over-stocks.\u00a0<\/span>[\/vc_column_text][vc_custom_heading text=&#8221;How does S&amp;OP affect the supply chain and inventory management?&#8221; font_container=&#8221;tag:h3|text_align:left&#8221; use_theme_fonts=&#8221;yes&#8221;][vc_single_image image=&#8221;3381&#8243; img_size=&#8221;1110&#215;500&#8243;][vc_column_text]<span style=\"font-weight: 400;\">A successful S&amp;OP plan should heavily influence inventory management and supply chain strategies. As we mentioned earlier, S&amp;OP starts with forecasted demand and then works its way backwards through the organization.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Once you develop your consumer demand predictions, you work backwards to ensure all operations are in line to meet those demands. This means supply chain operations and inventory management need to be strategic, efficient, and carefully planned.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For one, you will need dependable supply chain partners who can adjust to your forecasts as they fluctuate. For even smarter planning, set up alternate sources for all supplies. This way, you will have back-up sources in case of <\/span><a href=\"http:\/\/www.rtgsolutionsgroup.com\/reeling-from-supply-chain-disruption-heres-a-3-step-approach\/\"><span style=\"font-weight: 400;\">supply chain disruptions<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In addition, your inventory should be informed by your demand forecasts. And because the goal of S&amp;OP is to balance out supply and demand, you need strong inventory management policies that keep the \u201csupply\u201d side up to par.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In particular, inventory management policies should encourage accurate inventory data, which is essential to effective supply chain operations. Inaccurate inventory data is actually quite a widespread problem in the business world. <\/span><a href=\"https:\/\/www.conveyco.com\/inventory-statistics\/#:~:text=As%20of%20June%202019%2C%20U.S.,for%20every%20%241%20in%20sales.&amp;text=There%20is%20also%20an%20increased,and%20managing%20the%20added%20inventory.\"><span style=\"font-weight: 400;\">One report <\/span><\/a><span style=\"font-weight: 400;\">found that the average U.S. retailer only has an inventory accuracy of about 63%!\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Finally, automating inventory processes through Enterprise Resource Planning (ERP) systems will make your S&amp;OP process more effective. ERPs were first designed to centralize and improve inventory management. However, today, they support a wide range of business processes.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">ERPs are therefore invaluable tools in S&amp;OP. This is true for a couple of reasons. First, they allow for centralized information-sharing across departments. Second, they encourage accurate inventory data, which is essential for successful S&amp;OP but difficult to achieve.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">These are just some examples of the many ways S&amp;OP impacts the supply chain and inventory management.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Interested in more information about inventory management? Check out our article on <\/span><a href=\"http:\/\/www.rtgsolutionsgroup.com\/how-better-inventory-management-leads-to-increase-in-profitability\/\"><span style=\"font-weight: 400;\">How Better Inventory Management Leads to Increase in Profits<\/span><\/a><span style=\"font-weight: 400;\">!<\/span>[\/vc_column_text][vc_custom_heading text=&#8221;Why do companies struggle with S&amp;OP?&#8221; font_container=&#8221;tag:h3|text_align:left&#8221; use_theme_fonts=&#8221;yes&#8221;][vc_column_text]<span style=\"font-weight: 400;\">Many companies struggle to nail S&amp;OP because it relies on a skill that organizations find difficult: cross-department collaboration.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The process of balancing supply and demand inevitably requires several departments to work together. So, business leaders must be able to break down walls between departments and open up lines of communication.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Just how many departments need to be involved in the fine orchestration? Well, that varies from company to company according to size, product type, and other factors.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Here are some departments that might be included in an S&amp;OP process and the role they\u2019d play:\u00a0<\/span><\/p>\n<ul>\n<li><span style=\"font-weight: 400; font-size: 14pt;\"><strong>Senior Management<\/strong>: Facilitates conversation, accountability, and collaboration across departments.<\/span><\/li>\n<li><span style=\"font-weight: 400; font-size: 14pt;\"><strong>Marketing<\/strong>: Collects consumer data and models future customer demand predictions.\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400; font-size: 14pt;\"><strong>Sales<\/strong>: Achieves sales according to inventory availability and S&amp;OP targets. Also provides real-time updates on consumer behavior.<\/span><\/li>\n<li><span style=\"font-weight: 400; font-size: 14pt;\"><strong>Purchasing<\/strong>: Procures materials according to S&amp;OP targets.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\"><span style=\"font-weight: 400;\"><strong>Supply Chain\/Logistics<\/strong>: Coordinates appropriate <\/span><a href=\"http:\/\/www.rtgsolutionsgroup.com\/supply-chain-consulting\/\"><span style=\"font-weight: 400;\">supply chain<\/span><\/a><span style=\"font-weight: 400;\"> arrangements to ensure production can meet demand.<\/span><\/span><\/li>\n<li><span style=\"font-weight: 400; font-size: 14pt;\"><strong>Warehouse<\/strong>: Collects and reports accurate inventory data.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">This list is by no means exhaustive. Sales &amp; operations planning can \u2013 and should \u2013 be a universal roadmap that guides all areas of operations, and it requires expertise across various disciplines.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Therefore, every department has a role to play in the creation, achievement, and re-adjustment of strategies and goals. And, importantly, departments cannot work in silos. They should have access to all the same information and consistently work together to achieve common goals. Teamwork will always win the day!<\/span>[\/vc_column_text][vc_custom_heading text=&#8221;CONCLUSION&#8221; font_container=&#8221;tag:h3|text_align:left&#8221; use_theme_fonts=&#8221;yes&#8221;][vc_column_text]<span style=\"font-weight: 400;\">S&amp;OP is the key to balance what your consumers want with what your organization can provide. The greatest advantages are its ability to maximize profits, cut waste, and improve customer service.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, many organizations struggle with the implementation of S&amp;OP because it requires consistent teamwork across departments. Organizations should actively foster cross-departmental communication and collaboration to execute the sales and operations planning strategy.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Do you think your business could benefit from S&amp;OP, but you\u2019re not quite sure where to start? <\/span><a href=\"http:\/\/www.rtgsolutionsgroup.com\/contact-us\/\"><span style=\"font-weight: 400;\">Contact us<\/span><\/a><span style=\"font-weight: 400;\"> today to speak with our supply chain experts!\u00a0<\/span>[\/vc_column_text][vc_empty_space][\/vc_column][vc_column width=&#8221;1\/4&#8243;][stm_sidebar sidebar=&#8221;311&#8243;][\/vc_column][\/vc_row][vc_row full_width=&#8221;stretch_row&#8221; el_class=&#8221;third_bg_color&#8221; css=&#8221;.vc_custom_1566094721980{margin-bottom: -60px !important;background-color: #308c36 !important;}&#8221;][vc_column][vc_cta h2=&#8221;Experiencing disruption in your supply chain? We can help.&#8221; h2_font_container=&#8221;font_size:20px|color:%23ffffff|line_height:24px&#8221; h2_use_theme_fonts=&#8221;yes&#8221; shape=&#8221;square&#8221; style=&#8221;custom&#8221; add_button=&#8221;right&#8221; btn_title=&#8221;Call Us Today!&#8221; btn_style=&#8221;outline&#8221; btn_color=&#8221;white&#8221; btn_align=&#8221;right&#8221; btn_i_align=&#8221;right&#8221; btn_i_icon_fontawesome=&#8221;stm-phone6&#8243; use_custom_fonts_h2=&#8221;true&#8221; btn_button_block=&#8221;true&#8221; btn_add_icon=&#8221;true&#8221; el_class=&#8221;third_bg_color&#8221; css=&#8221;.vc_custom_1597168468548{margin-bottom: 0px !important;}&#8221; custom_background=&#8221;#308c36&#8243; custom_text=&#8221;#ffffff&#8221; btn_link=&#8221;url:https%3A%2F%2Fwww.rtgsolutionsgroup.com%2Fcontact-us%2F|title:Contact%20Us|target:%20_blank|&#8221;][\/vc_cta][\/vc_column][\/vc_row]\n<\/section>","protected":false},"excerpt":{"rendered":"<p>[vc_row][vc_column width=&#8221;3\/4&#8243;][vc_single_image image=&#8221;3383&#8243; img_size=&#8221;1110&#215;500&#8243;][vc_column_text]We\u2019ve all heard of supply and demand. Demand is what consumers want, and supply is what companies have. But do you know how your business can bring supply and demand together to maximize profits and cut costs? The secret is sales and operations planning, or S&amp;OP. Sales &amp; Operations Planning involves predicting<\/p>\n","protected":false},"author":1,"featured_media":3383,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[106],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Why is it so hard for businesses to get S&amp;OP right?<\/title>\n<meta name=\"description\" content=\"S&amp;OP touches many areas of the business, requiring seamless cross-departmental collaboration. 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