Consumer products companies face a dynamic landscape, in which they must quickly respond to shifting demand trends, decreasing product lifecycles, and supply chain disruptions to maintain their market position. To proactively and successfully navigate this environment, CPG companies must consider the following best practices for Sales & Operations Planning (S&OP) and Integrated Business Planning (IBP) process improvement: 

1. Data Integration: Integrate internal and external data across the end-to-end supply chain 
2. Technological Solutions: Incorporate advanced methods for predictive analysis 
3. Collaborative Planning: Cultivate key external partnerships both up- and down-stream  

3 Considerations for S&OP and IBP Process Improvement

1. Data Integration 

In today’s omnichannel environment, there is a critical need for CPG companies to integrate external data into their IBP/S&OP process. Gone are the days when one source of data (i.e., shipments) is sufficient for creating a demand forecast or a supply plan. Instead, all data points within the supply chain should be considered as these plans are crafted. A critical data point is Point of Sale (POS) information. As eCommerce has increasingly become the customer’s preference, retailers have begun shifting their fulfillment model – moving away from their brick-and-mortar stores to meet the growing need for localized eCommerce fulfillment centers. This shift has required a change in the demand and supply planning models.  

Companies have identified the critical need to incorporate POS data into their planning process on a more real-time basis, as POS data can provide a more accurate near-term demand forecast by using real-time feedback of current consumption trends. This allows a company to respond to significant oversells of forecast quickly as well as gives demand planners insight into the impacts of seasonal events and promotions, helping sharpen the longer-term demand plan.  

Using POS data also supports improved inventory management in two methods. First, by leveraging the POS data, the total inventory in the supply chain (retail shelf back to your warehouse) allows supply planning to help craft a more accurate supply plan, as running inventory projections at multiple levels allows shortages to be identified. Scenarios can then be built to assess the financial impact if certain products were to go out of stock during a given period and also determine what effect a price reduction to move inventory would have on overall profitability. Those scenarios can then be used to craft the operating plan that will achieve the company’s desired goals moving forward. 

A second leverage point for POS data concerning inventory is that it allows for the replenishment of materials as they are shipped and sold. This inventory model improves a company’s ability to reduce excess and obsolescence, rapidly react to changes in product trends, and redirect orders throughout the network to use up product that isn’t selling in another market.  

2. Technological Solutions 

Many companies have yet to transition from manual processes and Excel spreadsheets to advanced technological solutions, resulting in an inability to create advanced scenario plans that support effective decision-making within the S&OP process. The manual collection and analysis of data is time-consuming and renders data that is out of date. Additionally, Excel-created scenario plans limit an organization’s ability to incorporate nuances brought in from the trends within today’s complex data.  

There needs to be an emphasis, instead, on using advanced technological solutions that can support the creation and visibility of insights and recommendations from the real-time incoming data. Technology solutions today can utilize artificial intelligence (AI), machine learning, and external data, and can be connected to your ERP system to allow for data integration and aggregation. These tools also support automated analysis and scenario planning, giving planners the tools they need to create various scenario plans (i.e., probability of occurrence, risks, and opportunities, etc.) that improve insights and recommendations during the Management Business Review.    

The integration of an advanced technology solution can enable an organization to move its focus from execution to predictive planning. This shift allows for the business to respond to demand in the marketplace, ultimately increasing sales revenue, decreasing inventory investments and supply chain costs, and improving customer responsiveness. 

3. Collaborative Planning  

Collaborative planning doesn’t stop with the annual account planning session. Instead, to ensure the best information is available for the IBP/S&OP process, collaborative planning with key customers and suppliers needs to become a consistent monthly event. A well-run Collaborative Planning, Forecasting, and Replenishment (CPFR) program focuses on your key customer and suppliers’ changes in demand and supply. Areas of interest should focus on integration and visibility, improved forecast accuracy, reduced inventory costs, enhanced relations, and efficient replenishment.  

CPFR requires careful planning, alignment, and continuous effort to succeed; it also requires that both organizations should be committed to the sharing and security of information, alignment of business goals, the use of technology and infrastructure, recognition of and management of complexity, and change management. Without commitment from both parties, the process has a higher chance of failure. 

The benefits gained from the CPFR relationship can positively impact your forecasts, making them more accurate and resulting in reduced safety stocks on raw materials and finished goods. CPFR further brings an increased certainty around what demand will be, a change in material procurement supported by the utilization of a consignment, VMI, and/or a just-in-time model. Also, if your model includes in-house manufacturing, this can also improve the manufacturing scheduling process supported by improved communication and strategy alignment, thus reducing production changes. 

Looking Ahead 

The ability for CPG industries to keep pace with rapid change requires improvement in data and technology integration and usage as well as extended communication throughout the external supply chain, both upstream and downstream. Achieving increased customer satisfaction, a rise in profits, and an expanded market penetration can be supported with AI or ML technology. Cultivating collaborative relationships with customers will help shift your process from reactive to proactive and keep you ahead of the marketplace trends. 

Get in touch with our supply chain experts to continue the conversation. 

Contributions by Ryan Mueller