Today, the global market’s ever-changing landscape poses several challenges. In fact, staying competitive is no longer simply a matter of efficiency and cost control in the organization. Successful companies are now driven towards the current and future needs of their customers. Businesses must ask themselves some key questions, among others:
- Which markets will be growing? How will their current customers’ need evolve? What business opportunities will arise? What are the chances of winning new contracts, or the risks of losing them?
- How is their production and supply capacity able to meet these future needs? Do they have the necessary flexibility for different scenarios likely to happen?
- Are our strategic and operational plans in line with the evolution of these markets and their organization?
Individually, each department works to achieve goals and develops plans to meet them, but companies rarely combine these efforts to ensure optimal cohesion and synergy.
Achieving a Balance Between the Three Key Components of the Business
Traditionally, companies have sought to achieve objectives that were financially and operationally justified. However, this has generated strategies that conflict with each other. Today, the preferred approach is to promote a global and integrated vision of the main functions of a company, such as finances, sales, operations, and supply.
An Integrated Approach to the Success of Your Business
Manufacturing companies’ activities are interrelated and interdependent more than ever. Thus, each service’s decision affects others. These do not only compromise functional objectives, but even business strategies. Here are some examples:
- Supply can help to reduce purchase costs against increasing inventory levels, which compromises cash flow while increasing storage costs and the risk of obsolescence.
- The operation department chooses to invest in more efficient equipment based on sales volumes that have increased significantly in recent years. Unfortunately, the engineers did not consider the forecast of future sales that announce a decline in the medium term, in favour of another range of products manufactured by different equipment.
- The sales department has just signed a contract with a new customer that will double the volume of sales of the leader product, manufactured on a single equipment already working full time. The contract will start in three months, but the purchase and installation of additional equipment requires a minimum of six months.
These situations occur daily in companies looking to increase sales, optimize operations, and reduce costs. Yet the goal of each service is to be successful and to increase shareholder value. Employees are also convinced to work towards this planned success ...
We see functional teams oriented towards extremely logical results which should nevertheless be profitable! However, we observe that the initiatives that they take can also generate obstacles limiting the achievement of business objectives which are crucial for companies!
Which element is missing?
An approach that incorporates all the business’s key functions emerged a few years ago. This consists of integrating strategic planning throughout the company. It is built around a rigorous monthly cycle that relies on clear business processes as well as specific deliverables governed by a multi-disciplinary team focused on achieving consensual financial and operational targets.
The Sales and Operations Planning Process (S&OP)
A monthly cycle that integrates each component and ensures consistency of action across all business functions is essential.
The latter relies on a collaborative decision-making process with a company reaching a balance between the objectives of the sales and marketing plan, finances, and internal capabilities. Its ultimate goal is the development of a consensual plan that allows the allocation of critical resources towards the achievement of business objectives.
This cycle contains a wide range of objectives, including:
- A structure that promotes teamwork and communication between departments (sales, marketing, operations and finances);
- Alignment of priorities towards the achievement of business objectives;
- Proactively identifying issues and implementing mitigation measures to drive service level and productivity improvements.
In conclusion, business success no longer relies on independent initiatives, established by separate departments with their own goals. The success of a modern company wishing to compete with the leaders in the marketplace now requires the collaboration of all departments to achieve its overall objectives, reflecting the needs of a changing market.
