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Enabling Sales and Operations Planning with RapidResponse

How RapidResponse Enables Sales and Operations Planning

In their article "The Secrets to S&OP Success," Mazumda and Fontanella (Aberdeen) state that "S&OP is no longer just about balancing supply and demand. It is about searching for and executing the most profitable strategy out of many possible scenarios."

They go on to say that "You cannot improve what you cannot measure… The emerging best metrics, such as gross margin, encompass the two-way impact of demand and supply decisions, rather than having separate and unrelated metrics for each."

In a webinar titled Top Ten Success Factors for Sales & Operations Planning, Crum (Oliver Wight) says that "Sales and operations planning is used by the leadership team to close gaps… You want to know if you have a gap as soon as possible. And by knowing it sooner, you have more time to respond and react than if you just find it out at month end or quarter end, for instance."

She also points out that "Managing by exception is what enables companies to implement sales and operations planning and not take days in operating each step of the process." These researchers identify several key capabilities required to power a world-class S&OP process, which the Kinaxis RapidResponse on-demand service is extremely well suited to provide: scenario management, expressing the results of scenarios as financial measures, early alerting to consequences of decisions made elsewhere in the supply chain, and focusing users on the exceptions that require their attention.

Scenario Management

RapidResponse makes it easy for users to create, evaluate, and compare multiple scenarios. In addition, the tool automatically identifies essential participants and invites their input by asking them to either collaborate on the creation of the scenario or agree to the consequences of the proposed action. For example, a supplier may agree to ramp up production of a component for a new product early because the sales numbers are trending above plan, and the inventory manager may need to agree to holding increased inventory of the component even though it increases risk.

Financial Measures

The operational objectives set by executive management are almost always expressed in financial measures such as gross margin, cash-to-cash cycle, economic value-add, or similar categories. RapidResponse can readily convert the unit-based view of the users into financial measures that are relevant to executive management. If standardized measures do not suffice, the tool can provide workbook capabilities that allow users to develop additional measures specific to their organizational needs. In addition, RapidResponse offers scorecarding features that enable users to rank financial measures and compare them across various scenarios. This provides an objective way of determining the best set of scenarios to include in the executive review during the S&OP process.

Alerting

As Crum points out, the ability to track key performance indicators (KPIs) within the S&OP cycle is critical to effective S&OP adoption. RapidResponse provides early warning that certain KPIs are projected to exceed tolerance levels, allowing the organization to take corrective action before problems arise.

In addition, while a supply order may arrive only one day late (which may be within tolerance from a supplier management perspective), the consequence could be that a major new order will be delivered late or, even worse, lost. This in turn might mean a downward trend for gross margin. With RapidResponse, such an occurrence would cause an alert to be sent to a senior manager, allowing him or her to take appropriate action.

More importantly, there could be several small changes at the operational level, each of which is within tolerance and therefore does not generate alerts. However, the cumulative effect of these changes could be, say, a 5 percent drop in revenue for the quarter—large enough to warrant executive attention. RapidResponse alerts can help companies better track and effectively respond to such situations by eliciting attention before a crisis occurs.

Management by Exception

Closely related to alerting is the RapidResponse capability to drill down to the exceptions that cumulatively cause a particular KPI to trend out of tolerance. In the example above, the executive could identify all sales regions in which the projected sales revenue is below target. These could easily be ranked in order, allowing the executive to identify rapidly the regions on which to focus. When contrasted to the common approach adopted by many companies in similar situations—i.e, ad hoc analysis and data extracts using spreadsheets—the increased productivity and effectiveness afforded by RapidResponse are readily apparent.

Summary

The diverse capabilities provided by Kinaxis RapidResponse provides an ideal mechanism to enable far more effective sales and operations planning for virtually any organization.

ABOUT KINAXIS

Kinaxis™ RapidResponse is a single on-demand service that empowers multi-enterprise manufacturers with integrated demand-supply planning, monitoring, and collaborative response capabilities. RapidResponse embraces human judgment to enable planners and front-line responders to handle unpredictable changes. Global leaders such as Casio, Honeywell, Jabil, Qualcomm, and Raytheon use RapidResponse to achieve breakthroughs in sales and operations planning (S&OP), demand management, supply management, and supply chain risk management. The results are superior customer service, improved operations performance, and a competitive market advantage. For more information, visit the Kinaxis web site at www.kinaxis.com or the company's blog at blog.kinaxis.com.

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