The importance of Logistics in S&OP planning

Companies across many industries have long known that Sales and Operations Planning (S&OP) is an effective technique for aligning sales, marketing, supply chain, manufacturing and finance around a single plan. The result when it is done right is an improvement in companies’ business performance. Not as recognized within the process is the importance of logistics, especially the transportation function. After all, what’s more important than getting the goods your company produces to the customer’s dock on time?

Here are a few ways logistics plays a key role in S&OP planning.

First, it helps to improve asset utilization for companies operating their own logistics assets – be it trucks or warehousing. It’s also a good thing for companies who outsource some or all of their transportation functions to Logistics Services Providers (LSPs). The reason is because the nature of S&OP is to put emphasis on good planning. This information is important – and useful – to LSPs.

Better forecasting and demand planning is helpful when it comes to securing capacity which is especially important when times are tight as they are now. To realize these benefits it requires transportation partners who can utilize the information and be flexible with their services and capacity. Equally important is that S&OP enables companies to develop closer and more effective supplier relationships.

Some additional benefits of S&OP include reduced spending on premium freight because better forecasting and planning allows the lowest cost mode to be chosen more often. This means, for example, less reliance on air freight or gaining the ability to combine LTL shipments into lower per unit cost modes like truckload or intermodal.

The key to making it work is the flow of information and data availability. If your company has implemented an S&OP approach, don’t overlook the potential benefits to your logistics operation. Working with LSP’s experienced with S&OP will help to ensure they’ll put this information advantage to good use.

Would you like more information? After spending 38 years in logistics, I’ve developed a StrategicLogistics© Assessment that may be quite an eye opener for you. It’s free and obligates you to nothing. Send me an email,  miker@4way.com to find out more.