SUMMER 2023

126
THE DISTRIBUTOR’S LINK
NELSON VALDERRAMA OPTIMIZING INVENTORY: HOW AI IMPROVES S&OP from page 78
New launches and mid-growth distributors must
prioritize optimizing inventory. It strengthens sales,
ensures customer loyalty, and increases the Return on
Investment (ROI). However, optimizing inventory requires
distributors to bring tools and tactics to their S&OP
sessions.
Optimizing Inventory Takes Planning
Distributors hold S&OP meetings to lay out
strategies for reaching business goals. The meetings
group people from sales and operations functions to
align their plans and actions. They will meet again
to monitor the alignment, its results, and needs for
improvement. The distributors need a clear and specific
approach to balance information on customer demand
with operations’ capabilities.
The lean org chart at small and mid-sized companies lets
them easily pull the responsible parties together. But growthphase
and large distributors conduct S&OP at the executive
level. They schedule C-suite management in finance, sales,
marketing, operations, and inventory management.
Agendas for S&OP monthly or quarterly meetings
usually include:
¤ Performance Check: Meeting members will
debrief the performance since the last meeting. They
will identify any variances, root causes, and corrective
action. Meetings expect members to present related
data and acknowledge accountability.
¤ Demand Forecast: The sales team will present
its goals, given existing market trends, historical
transactions, and insights into marketing conditions
and customer behavior. The sales team should focus
on customer demand; their presentation leads to their
demand pull on operations to meet sales expectations.
¤ Supply Situation: The operations team reports
on the distributor’s operational capabilities. They must
have current and accurate information on inventory
levels, lead times, and supplier issues. Operations must
expect to meet customer demand or offer options.
¤ Trade-offs: The team must reconcile any
differences between supply and demand. The meeting
provides the occasion for coordination on schedules,
resources, and alternative options. The S&OP meeting
leader must drive the teams to make the trade-offs
necessary for success.
¤ Direction: The sales and operations approaches
merge into a sequential move forward. The joint plan shows
the promised production goals, resource allocations,
inventory objectives, and financial projections. The best
plans have key performance indicators or pain points
identifying potential weaknesses.
S&OP Occurs In Some Form In Every
Business. But …
CEOs should encourage holistic approaches to
planning. For example, the S&OP sessions described
above do not include voices at the table. The agenda
needs more time and space the people responsible
for finance, marketing, and inventory management. The
meeting should also invite inputs from shipping and
handling, human resources, and procurement.
The S&OP described confuses coordination and
collaboration:
¤ Coordination organizes activities, efforts, and
resources. It is a principle of mechanics involving
assemblage, balance, timeframes, timelines, and
alignment of functions. Coordinators monitor KPIs to
intervene where operations have hit a pain point.
¤ Collaboration encourages joint effort among
members to work towards a shared goal. Diverse
viewpoints generate solutions with collective decisionmaking.
Coordination relates to systems and processes.
The C-suite needs to know what happens in operations.
But coordination issues are best solved by responsible
managers on the floor. If the C-suite has complete,
current, and accurate information, S&OP can do more
with an agile and holistic approach.
CONTINUED ON PAGE 152