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S&OP – S&OE interface needs proper design for a smooth flow.
Supply Chain teams often encounter day-to-day friction between planning and execution. Why is it so prevalent? Let’s dive into it.
While conventional planning takes the demand outlook at an aggregate level, execution happens at the most granular level where actual demand is often substantially different. In some places, customers demand much more than what was planned, whereas at some other places, inventory gets stuck due to a slump in demand. Sounds familiar?
This issue is more widespread when the plans are kept relatively inflexible, say refreshed on a monthly or a weekly basis. We can correct it by improving the frequency of demand refresh to daily and implementing pull based replenishment in the entire value chain.
However, even pull based systems have issues if the inventory buffers are based on past demand patterns. Future demand drivers remain invisible to the buffers till it hits them.
We can fix it by refreshing demand outlook during the Replenishment Lead Time and using it to set dynamic inventory buffers.
Demand Sensing is a key mechanism in setting such demand based inventory buffers.