Small to mid-size pharmaceutical companies need optimal planning strategies and processes, which is why Sales and Operations Planning (S&OP) helps them function more efficiently. The three main areas where S&OP is used are forecasting, demand planning, and supply planning.
- Forecasting: As an innovative pharmaceutical manufacturer, it is important to accurately predict the product demand to effectively plan and source all the key APIs, drug products and package the finished products. Primarily, the Commercial team furnishes the market forecast by product family based on the patient population and treatment routine. The statistical forecast based on historical data may not be applicable for small to mid-size organizations.
- Demand Planning: Supply chain leaders need to better understand the internal and external factors that affect product demand. It provides users with actionable insights into what drives sales and make informed decisions about future demand planning.
- Supply Planning: When sales forecasts and demand plans are accurate, supply planners can better determine the production needs, capacity required for inventory, and timing of any capital investments.
Sales & Operations Planning (S&OP)
Sales and Operations Planning (S&OP) is a strategic process where key stakeholders can align to consensus-based demand plans and finalize the supply plan based on capacity constraints. The Executive Team reviews and approves the final S&OP plans that expedites the downstream operations.
S&OP stakeholders align their sales and revenue goals with the available production capacity, inventory levels, and demand plan to meet corporate business goals. Organizations that use a well-defined S&OP process will better plan for inventory levels and order fulfillment, anticipate market shifts, ensure customer satisfaction, mitigate stock-out and obsolescence risks, and optimize supply chain costs.
S&OP KPIs and Visibility
The first step in the monthly S&OP process is gathering and analyzing data related to past demand plans, actual sales and shipment, inventory on hand, forecast accuracy, capacity availability, and other related information. In the absence of any real-time data visibility, data gathering is a manual and painful process that leads to the risk of data errors or unreliability. Planners end up spending countless hours in preparation for the upcoming S&OP and planning deadlines.
In addition, supply chain performance visibility is a critical requirement to facilitate the pre-S&OP and Executive S&OP meetings effectively. Forecast Accuracy, Profitability, Actual Vs. Planned Sales, Obsolescence and Shortage, Inventory Months of Supply, Production Plan Overview are the critical KPIs for S&OP meetings. However, developing and presenting these KPIs manually is a challenging activity due to manual or Excel-based analysis.
Real-time data visibility and KPI access are necessary to manage the S&OP process and prepare reliable and high-quality deliverables to set the right path for supply chain operations and minimize supply risks.
KPIs are often used in sales and operations planning to measure the efficacy of certain processes. For example, sales targets are a common performance indicator, but many others can be considered. Other indicators can include forecasting accuracy, average inventory levels, stock-outs, the number of orders canceled per day due to lack of availability or lead time, and unit cost-to-sales ratio. Knowing how KPIs affect your business is the first step in evaluating whether S&OP is appropriate for your business.
Cross-functional collaboration and planning alignment across the company should be improved to help bring about organizational effectiveness. However, this can be a challenge due to the lack of a single source of truth, leading to differences in opinion and uncertainty over where the authority lies within each department. Friction between departments can happen when their goals are at odds, causing problems such as delayed response times and work overload.
S&OP Pre-requisites
It’s important to create a working environment that meets your employees’ needs and those of your customers. This could be done by ensuring you have the necessary processes in place and the right skills and talent to execute them.
You can also outsource or automate, as this will allow you to focus more on developing value-added activities such as new products or improved customer service. Automation is especially helpful for companies with a global workforce since it helps reduce time and cost barriers.
Another pre-requisite for a successful S&OP process is a system for managing all stages of the process – from planning to implementation. This includes opportunities for inputs from various stakeholders and requiring a cross-functional effort from each department involved. You also want to make sure that the system can generate accurate and timely information for analysis, so you can identify problems before they become too costly or detrimental to your business.
S&OP Benefits
- Sales & Operations Planning allows organizations to make better decisions regarding future goals of the business, leading to increased growth and market share.
- Implementing S&OP into your organization allows you to focus on the most important tasks that will result in future growth.
- Organizational alignment between sales & operations allows for better decision-making when determining future goals of the company.
- Collaboration occurs more often across the firm, which leads to higher morale and fewer mistakes being made, costing the company time and money.
- S&OP allows for better management of resources, which leads to a reduction in out-of-stocks/wastage.
- There is a focus on ensuring that all products are always available, which results in higher levels of customer satisfaction overall.
- Organizational alignment between Sales and Operations allows employees to be more productive and efficient in planning and forecasting, leading to increased customer satisfaction.
The SCmple Planning solution is built on Supply Chain Planning best practices for the pharmaceutical industry to eliminate painful manual tasks, daily firefighting, employee burn rate, and optimize your planning processes. As a result, you can gain real-time insight into your supply chain performance and make rapid but effective planning decisions. In addition, you can run various planning scenarios to optimize the decisions.