Thriving in VUCA
We live in a world, which is witnessing volatility, uncertainty, complexity, and ambiguity (VUCA) on a continuous basis.
It is therefore imperative for businesses to rethink their processes, particularly the ones that have a bearing on customer engagement. Inputs related to sales plan, production capacity, material planning, and logistics are part of routine sales and operations planning (S&OP) activities. Irrespective of the industry, be it chemical, automotive, or FMCG, most of the companies’ S&OP framework covers these aspects in detail.
We discuss a few other areas of S&OP such as warehousing, workforce and HR, finance, and regulations which have started gaining importance. Evaluating their real impact on the business will go a long way in ensuring a stable and effective planning approach.
New focal points
It is imperative for manufacturers to understand how these factors will play out in the future.
Warehousing: While sales and production planning covers all the requirements for the forecast period, the need for warehousing – when accounted for at the beginning of planning cycle – goes a long way in debottlenecking key operational areas such as:
Warehouses, which play the role of low-scale blending setups, can help in last-mile differentiation by demand sensing and fulfillment at short intervals leading to superior delivery performance and reduction in product obsolescence.
Workforce and HR: The production team and sometimes the logistics team get hit by lack of key human resources at the start of the production cycle. This problem can be solved if workforce requirements are shared and made available as part of the S&OP cycle itself. This addresses the concerns around:
In the chemical industry, for example, technology advancements such as remote monitoring, control, and correction have been in place for many years to reduce errors that lead to product loss (incorrect dosing, wrong blending), structural degradation (gauge failure, valve damage), and financial losses. With a focused S&OP process, key talents can be identified to play a more proactive and de-risking role there. Shop floor talents, who can react faster to change-over requirements and are receptive to change-in process and formulation, can be groomed to mid-level managerial roles with proper career guidance.
Finance: Manufacturers should focus on improving the visibility of key finance areas such as working capital allocation and asset turnover. Those are key to ensuring consistent business orders, which include better margins, better value, and volumes are executed on a regular basis. Laggard-type orders, orders which usually enter the planning cycle after defined cut-off dates regularly, are held up on the other hand for accountability with the concerned team and removed from the funnel thus releasing useful capacity and resources.
That helps the finance team to go for quick-win opportunities with focused S&OP actions by driving pricing flexibility for key end products. This can be done by using favourable positions such as drop in crude oil prices, distress sales-driven input feedstock availability from key vendors, and product mix-driven additional production resource availability.
For example, companies can buy input materials – either in bulk or in contracts for fixed period – based on forecast plan for 6 months. This can help make alternate pre-blend grades with approved formulation inputs, to generate operational flexibility for key process during peak production periods.
Regulations: Regulatory and legal changes play a critical role in how the plan captures these changes and in what frequency and manner. The reasons are:
To minimize any impact on the brand or corporate entity, that the business represents.