JDA Software Provides Insight For Companies To Effectively Bridge The Planning-Execution Gap Of S&OP

While globalization has resulted in many bottom-line benefits, it has simultaneously increased the level of complexity and uncertainty by which companies operate, making the sales and operations planning (S&OP) process critical to a company's success. Companies face a plethora of business challenges – such as increased service level demand from retailers, shorter product lifecycles and global competition – and their market position is being defined by how quickly they can react to these challenges.

"With this new level of variability, companies must have the capability to synchronize their demand and supply plans to that of their largest customer, especially now that critical-mass retailers have more influence over the manufacturing supply chain planning process," said Kelly Thomas, senior vice president, manufacturing, JDA Software. "This complex process, which involves sensing demand signals further down the supply chain, requires an S&OP process that synchronizes the executive planning and execution sides of S&OP."

Added Fred Baumann, vice president, industry strategies at JDA Software, "Companies that embrace this integrated S&OP framework will benefit from improved company-wide visibility, strategic alignment and financial accountability. By achieving this level of supply chain planning excellence, businesses will be able to implement strategies that increase revenue, lower costs and improve cash flow across the entire supply chain network."

Below, JDA Software provides valuable insight for companies to close the planning-execution gap and create an integrated S&OP process that satisfies corporate objectives, improves profitability and increases market share.

The Power of Synchronization
A synchronized S&OP process transforms the traditional supply and demand balancing exercise into an integrated business planning process that aligns operational plans with long-term strategies and financial objectives. To achieve this level of coordination, companies must establish an integrated planning framework that links S&OP with Collaborative Planning, Forecasting and Replenishment (CPFR) initiatives. By working with customers and suppliers, companies will build joint value by collaborating on forecasts, new product and replenishment plans. These external insights can improve the collaborative demand planning processes that are internally executed across functions within a company. After creating a consensus demand plan that incorporates insights from customer and supplier relationships, it becomes a key input into the long-range integrated business planning process to synchronize demand, supply, new product and financial plans over a time horizon that links to corporate strategy.

Significant transformations have occurred in the marketplace recently that make the connection of S&OP and CPFR more attainable and valuable, including the deployment of time-phased order planning capabilities by many critical-mass retailers. With this new capability, retailers can now provide a view of what they plan to order beyond a single lead time in addition to providing critical-mass demand data from the retailer's shelf or Web portal. This results in further improving a company's planning process.

Additionally, businesses need the capability to create and evaluate scenarios for demand spikes, supply shortages and other strategic, operational and tactical events. This enables companies to examine how different scenarios will affect the its financials and determine the best course of action. Yet, in order to achieve perfect-order fill rates and customer service targets, the sales and operations plan creation must be tied to plan achievement.

To accomplish this, companies need the capability to track their daily progress against the sales and operations plan and take corrective actions to resolve performance gaps as they occur. As companies sense gaps in performance – such as demand or mix deviations, supply constraints or unexpected competitive actions – they must have access to "process playbooks" that provide the most profitable solution to a particular deviation. By employing this type of continuous improvement process, companies can ensure that they're operating in accordance to plan.

Achieving the Planning-Execution Connection
Yet, despite these benefits, many companies find it challenging to connect the executive planning and execution sides of S&OP. According to a recent AMR Research study1 "few companies claim to successfully link S&OP output to operational or execution processes. The study tells us 30 percent find driving the use of the plan in daily operations is a top challenge."

Companies interested in achieving an integrated planning framework that connects execution, operational, tactical and strategic processes will benefit from a solution that features:

• A robust data management system. Given the breadth and depth of today's global supply chains, companies have exponentially more data to manage and consolidate into one cohesive plan. Solutions need a meta-data management layer that features mappings and common data definitions for business unit, product, geography, etc., to help facilitate this process.
• A consolidated business view for all stakeholders. An effective S&OP process involves input from stakeholders such as finance, product development, procurement, manufacturing, demand and supply planning, and sales and marketing. Yet, each stakeholder needs the ability to view the time-phased plan in the language and hierarchy level respective to that individual's role in the organization.
• Visibility into all supply chain functions. Businesses need insight into company-wide supply chain planning activities, as well as the plans of their supply chain partners. This level of visibility is critical for companies initiating demand-shaping activities to ensure planned promotions won't strip away their capacity to make the product. This visibility will become even more critical as the economy recovers, enabling companies to divert sources of supply to higher-margin markets and boost overall margins.
• Automated workflow synchronization. Within the S&OP process, there's a cadence and order to the activities that must occur and a level coordination required between stakeholders. As companies deploy an integrated S&OP framework, the number of steps and coordination of activities across these functions and resources will increase. By using automated workflows and alert mechanisms, critical decisions can be elevated to the appropriate stakeholders, ensuring that goals and objectives are achieved according to plan.

A company's need for an S&OP process that closes the planning-execution gap will be determined by the industry in which it operates. Because consumer electronics companies are constrained by short product lifecycles, executing according to plan has become a condition for market survival – prompting the need for high levels of S&OP synchronization. In comparison, industrial manufacturers, business-to-business manufacturers and companies with slower-moving goods can achieve great gains through modest S&OP improvements such as enhanced process orchestration and synchronization with finance. Ultimately, the closer a company is to the end consumer, the more important it is to understand the demand stream and harness that knowledge to create an integrated S&OP process.

With this insight, business leaders can help their companies align goals and key resources to most effectively meet customer needs, as well as provide a clear visibility to identify and close gaps, leading to greater predictability.

JDA's industry-leading, supply chain planning and optimization solutions can help your company focus on key priorities to unite and execute corporate objectives, financial goals and operational plans. To learn more about JDA Software, please visit www.jda.com, e-mail info@jda.com or follow JDASoftware on Twitter.

1 AMR Research (recently acquired by Gartner, Inc.), "Conquering the Seven Deadly Challenges of Sales and Operations Planning," Jane Barrett, Steve Steutermann, January 2010

About JDA Software Group, Inc.
JDA® Software Group, Inc. (NASDAQ: JDAS), The Supply Chain Company, is a leading provider of innovative supply chain management, merchandising and pricing excellence solutions. JDA empowers more than 6,000 companies of all sizes to make optimal decisions that improve profitability and achieve real results in the discrete and process manufacturing, wholesale distribution, transportation, retail and services industries. With an integrated solutions offering that spans the entire supply chain from materials to the consumer, JDA leverages the powerful heritage and knowledge capital of acquired market leaders including i2 Technologies®, Manugistics®, E3®, Intactix® and Arthur®. JDA's multiple service options provide customers with flexible configurations, rapid time-to-value, lower total cost of ownership and 24/7 functional and technical support and expertise.

SOURCE: JDA Software Group, Inc.