Once the product is in market, the Commercial team brings in data on actual sales and future demand, as well as knowledge of other factors that may influence forecasting. The Operations team reports on actual production and advises on performance and metrics for both manufacturing and quality. Both sides also bring information on outlying obstacles, such as upcoming shutdowns, tech transfer, new regulatory approvals, or label and market expansions. The Finance team presents performance to budget and supports decisions on accelerating or slowing down investments. S&OP provides the forum for each of these critical functions to accurately report its performance, creating an opportunity for the organization to identify gaps, adjust plans and optimize future performance.
I emphasize to our clients that it is never too late to implement S&OP. Even companies that think they “tried and failed” can benefit from establishing a very basic S&OP process. There are many benefits to implementing some level of S&OP strategy and regularly reviewing assumptions and forecasts.
- Functions can align and react quickly to shifts in demand, supply shortages & uncertain events.
- Companies can react while a “problem” is small or an error/omission is rectifiable.
- Companies can analyze performance against forecast.
- It provides insights for better management of working capital & cost reduction.
- Leadership can make informed decisions about product demand, patient forecast & supply.
- It drives competitive advantage and helps improve key business performance metrics.
In one of our recent engagements, an emerging company benefitted from having an S&OP process in place when a competitor’s drug did not receive FDA approval. Through S&OP, their Sales team had a routine forum for sharing potential shifts in demand. The Manufacturing team had predictable metrics to project inventory coverage and an ability to increase production. The Finance team could predict any increase in both investments and revenue to adjust budgets accordingly. Working together, they were able to react and capture market share.