Use World-Class SOP Strategies to Balance Future Supply and Demand

  • by Wolfgang Eddigehausen
  • March 1, 2006
Having difficulty balancing supply and demand? Doing OK but want to do better? Learn the key strategies to put Sales and Operations Planning (SOP) to work for you.
Key Concept
One of the key activities in the area of supply chain planning is the periodic review of anticipated demand and available supply. This business process consists of steps performed within Advanced Planning and Optimization (APO), using primarily Demand Planning (DP) and Supply Network Planning (SNP). Sales and Operations Planning (SOP) is thus not a module of APO but rather a process supported by APO. Since the SOP process is a pure planning task, it does not interact with R/3 or SAP ERP Central Component (ECC), other than the use of master data created therein. Traditionally, the data required for the SOP process came from ERP systems, such as R/3, and was further processed, mainly in spreadsheets. Since the advent of supply chain planning systems such as APO, it is possible to carry out this process without data extracts and offline spreadsheets.
In a real-life environment, demand and supply do not often match and you must align them in a planning process. The Sales and Operations Planning (SOP) process consists of balancing what you could sell with what you can make available for delivery. At the end of the planning process, demand and supply planners agree on a feasible plan for the immediate future, referred to as the frozen period. During this frozen period, no one should make any demand forecast or supply plan changes.

The SOP process typically spans the next one to three months, depending on the type of industry and manufacturing processes. In a Consumer Packaged Goods (CPG) industry, the SOP starting point (after the frozen period) can be as short as one week, while in most other industries the starting point usually lasts about one month. Capital-intensive industries in which production changes are not easy to manage or are expensive also tend to have a longer frozen period.

While basically all companies have some type of SOP process, big differences arise in terms of clear process definition and system support. A well-performed and sustainable SOP process enables companies to detect supply problems early enough to avoid customer dissatisfaction. Its main idea is proactive planning rather than reactive firefighting.

Wolfgang Eddigehausen

Wolfgang Eddigehausen is a highly experienced expert in the areas of business process design, re-engineering, and user adaption, as well as process realization in complex SAP-centric environments. He has experience in solution and enterprise architecture and project management (PRINCE2 certified) domains defining enterprise capabilities with a focus on delivering effective and efficient solutions to organizations. Wolfgang's industry knowledge includes public sector, utilities, mining, distribution, general manufacturing, process and steel industries, and consumer goods.

In most roles his task is not only to architect a solution but also to evaluate and define strategic options with a focus on end-to-end solutions rather than systems. This also includes strong emphasis on the user acceptance through an innovative user experience and mobility enablement.

His career includes successful participation and management of projects in Australia, Europe, India, Japan, Singapore, South Africa, Taiwan, and the US. These projects required interaction with all levels of an organization, from the shop floor or office through to the CxO level. Throughout his career, Wolfgang has put emphasis on a holistic approach bringing together people, processes, information, and systems in project management, architecture, and implementation roles.

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