Sales and operations planning, or S&OP, is a process companies can use to coordinate planning across every area of their business. For manufacturers in particular, S&OP helps keep everyone from operations to production on the same page, with the goal of meeting customer demand and maximizing profitability.
S&OP is made up of two key steps: supply planning and demand planning. During the process of demand planning, companies are trying to determine how much product their customers realistically want and need so they can adjust production accordingly to avoid over- or under-manufacturing. To do that, they need to find ways to forecast upcoming changes in the market.
Ultimately, the goal of demand planning is to align planned inventory with the projected demand for each product produced. This process is incredibly important for successful businesses today, because as we’ve seen, market circumstances can change in an instant. In order to survive, manufacturers need to be as prepared as possible – which means taking several different approaches to demand planning.
Analysis of Sales Data
One of the most useful resources to consult when trying to gauge customer demand is your own company’s sales data. According to IBM, past history is typically the best predictor of future performance. There are several ways you can analyze sales information to better understand what the upcoming period will bring. Looking into trends from the previous quarter and fiscal year as a whole can help you see how sales have performed most recently, giving you a close estimate of what to expect at the current baseline conditions. Alternatively, comparing sales from the same week year over year can help account and prepare for traditionally slow or busy periods. Looking at the data through these different viewpoints will help paint the full picture of what to expect in both the short- and long-term.
Customer Information
In addition to sales history, other data can provide more detailed information about your customer’s needs in the coming weeks and months. Research tools like surveys, focus groups and interviews with members of your target audience can produce valuable insights into their priorities, opinions and unique circumstances. Though you may feel like you already have a good handle on your audience’s past behavior, the world is always changing, and if you don’t have the most current information, you’ll start to fall behind. Even if you don’t have the time or resources to complete these studies yourself, independent research groups often publish their findings for general use. A quick Google search for recent studies from reputable sources, such as Pew Research Center, Gartner, or Statista, can quickly grant you access to the data you need.
Market Forecasting
Beyond your own business history and target audience data, it’s important to understand what is happening in your industry and the economy as a whole. Although your company may have recorded steadily increasing sales the past few years, looming economic problems could instantly change demand, regardless of your past success or recent customer trends. Having experts you can trust to rely on for accurate market forecasting can add the last piece to the puzzle in understanding the projected demand for your company’s products. Keep in mind that outside factors, such as major weather events or disease outbreaks, can also quickly influence demand, meaning that you’ll want to keep a pulse on those conditions as well.
Now that you’ve compiled all this information, you may decide in any given time period that it’s best for your business to scale production up or down to match demand. Without a planning and scheduling tool like VirtECS, effectively implementing these changes can be difficult and time-consuming. VirtECS allows you to instantly update plans for your manufacturing plant and create resulting production schedules that are both feasible and cost-effective.
To find out more about how VirtECS can aid demand planning at your plant, download our guide. Be sure to check back to read our next article coming soon, where we will dive into supply planning, the other key step in the S&OP process, and how to address the capacity planning challenges that many manufacturers face.
