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In this series, CEPHAS principal Fane Friberg highlights the interdependent elements of an effective S&OP process for leaders of supply chain management. While some companies tend to fall back on the status quo, Friberg highlights why it’s critical to actually increase the frequency of the S&OP rather than decrease the operations. He has reviewed the importance of staying committed, strategic imperatives, participation, technology, and rough-cut capacity planning. Today, he discusses suppliers.
Focus #6: Suppliers
As you work the S&OP process, a very key element is understanding if/how your suppliers will support your new plan. It is known that decentralized planning results in loss of efficiency and increased cost and lead-times. Work in full transparencies with your suppliers on a quantitative approach to determine short-term and long-term optimization.
Have the turbulent times caused by the pandemic caused your new plan to include some level of new product introduction (NPI)? Does your new normal require the supplier to pull in or push out their commodity to your organization? Do you have a systematic closed-loop process in place with your suppliers to run analytics as to how your new demand profile will be executed by the supplier? Does your plan create lumpy demand, and how might that affect the minimum/economic-order quantities?
Ensure that, in the new normal, the lead-times of your suppliers are loaded into your ERP system, and hold those suppliers accountable to those dates. If you have a supplier scorecard, continue to robustly use that tool; if you do not, make one. Also, if there are known restrictions identified from your supply partners, regardless of where that limitation is within the indented bill of materials, your overall plan must reflect this as part of the S&OP alliance.
Fane Friberg is principal of CEPHAS.