Our operating-oriented PE clients are always looking for value levers: areas where focused improvements can create large performance gains.
Some firms focus mainly on researching best practices. We’re practitioners. We take proven ideas and implement them. In the course of our recent work, we’ve identified six areas where we have recently been finding untapped opportunities to help well-run companies reach new performance levels.
The focus here is on Sales & Operations Planning, or S&OP.
S&OP is a structured process that integrates business planning, financial planning, sales forecasting, new product introductions, capacity planning, manufacturing operations, and supply chain planning.
S&OP works best with companies that have strong management and fundamentals in place. Most companies engage in some form of S&OP, yet few do it well. We work with a set of proven methods and tools that routinely deliver major improvements in profitability, working capital, and customer service levels.
There are some symptoms that tend to indicate whether a company has the potential to benefit significantly from an S&OP initiative. One or more of the following indicate possible opportunity:
- Excess inventory, as compared to peer companies or practical achievable levels.
- Customer service problems, typically measured by order fill rates, on time deliveries, or customer attrition.
- Difficult capacity decisions (e.g., capex or outsourcing) due to factors such as rapid growth or forecasting challenges.
- Missteps with new product introductions-lost sales due to shortages, excess inventory, or unplanned costs to meet unexpected demand patterns.
- Manufacturing and supply chain management unprepared for surpriseevents related to demand (changing product mix, new product launches, customer specific issues, etc.).
- Lack of accountability for forecasting, service levels, or inventory performance.
- An inability to sustain any inventory reductions. Ineffective process for prioritizing customers and making decisions when it is not physically possible to satisfy all customer demand. Barriers to collaboration between functional heads (VPs of product development, sales, marketing, supply chain, and/or manufacturing).
Many middle market companies lack the tools, systems, or processes to manage S&OP effectively. We have a 50-point assessment tool that we use to analyze a company’s S&OP status and opportunities. This includes reviewing:
- New product planning
- Demand planning and forecasting
- Supply planning
- Financial planning
- Integrated reconciliation
- Senior management review procedures
In the assessment, we identify key areas of opportunity, quantify the potential impact, and develop specific action plans.
Following the assessment, we work with management to implement an S&OP system. We introduce a structured process and specific tools to manage this mission-critical area.
The most important element in driving results from an S&OP program is executive leadership. The active commitment and collaboration of the senior management team is what separates mediocre results from great results. Our approach develops the management collaboration necessary to unlock the full financial benefits.
We also have experience with leading decision support software tools as well as ERP capabilities. We help companies get the highest utility from their existing ERP systems, and make the best use of specialized S&OP related tools.
This approach consistently yields specific improvements in customer service levels, inventory turnover, asset utilization, manufacturing productivity, and supply chain efficiency.