Demand Driven S&OP – Maximizing Output To Match Demand Variation

In today’s globalized world, where organizations are present in various geographies, insulation from market fluctuations is essential.

There is an urgent need for the executive management of such large organizations to remodel their business model to accommodate demand and supply variations in the various markets they operate in and implement a customer-oriented approach throughout their organization. Although the current supply chain focus for the majority of companies is based on supply, this is rapidly changing, with customers driving a demand-centric economy where specialized products are increasingly sought and product group complexity is veering towards the vast.

This realignment from supply-driven to demand-driven is particularly important for large organizations because without a change in their planning approach, they will remain supply-driven and Cost of Goods Sold-centric rather than purchase cost-centric, meaning less profit-oriented. This will place them at a disadvantage compared to the many organizations which have now shifted their production facilities to the ultra low-cost regions in Asia and Africa.

The key components in Sales & Operations Planning (S&OP) – Demand, Customers, Products, Organization, Finance and Operations are all considered from a different viewpoint, with focus on volatility, variety and value. The focus shifts from internal to external, with emphasis on delivering customer value while managing the demand complexities, maximizing capacity utilization and improving profitability.

This white paper aims to highlight the new focus that needs to be established for an organization’s S&OP to become more demand-driven.