Effective S&OP can drive significant value in private equity portfolio companies. Here’s an article that explains why and how firms can generate results both in the short and long run.
In today’s higher for longer interest rate environment, manufacturing companies and their private equity backers must pull off a delicate balancing act. Excess or incorrect inventory leads to unnecessary financing costs, while insufficient inventory risks delaying order fulfillment, leaving customers without the goods they need. The supply chain reorganization since the pandemic, along with many other global disruptions, has further complicated these challenges.
However, there is a solution: effective Sales and Operations Planning (S&OP). By implementing S&OP, private equity backers can avoid these pitfalls, enhance overall portfolio company efficiency, and boost growth prospects—all in a relatively short period.
In our latest article, TBM’s Private Equity Practice leader, Ranjith Rajendran, and Supply Chain Practice leader, Chip Barth, debunk the myth that S&OP requires excessive time and resources to deliver value. They outline the benefits of S&OP and how to achieve rapid results.
Key Benefits of S&OP
- Optimized Inventory Management: Effective S&OP ensures companies maintain the right inventory levels, minimizing costs and meeting customer demand promptly. By aligning all parts of the organization—sales, operations, engineering, and production—around unified goals, businesses can anticipate demand rather than react to it.
- Enhanced Operational Efficiency: S&OP fosters collaboration across different business functions, breaking down siloes and synchronizing processes. This improves overall productivity, forecasting accuracy, and responsiveness to market needs. Customers benefit from reliable order fulfillment, while employees gain better decision-making and problem-solving skills.
- Sustainable Growth: Implementing S&OP can lead to significant revenue improvements and higher profitability. For instance, a hair product manufacturer we worked with increased its supply fulfillment rate from 60% to 99% in just four months. Another company saw a 10% revenue boost without acquiring new customers, simply by synchronizing revenue, costs, and cash flow.
4 Steps to Successful S&OP Implementation
- Leadership Commitment: Top leadership must drive the S&OP initiative, setting clear expectations and KPIs to ensure all staff are aligned and motivated.
- Unified Data Systems: Consolidating data across the organization provides a single source of truth, enabling better decision-making and coordination.
- External Expertise: Bringing in S&OP experts can accelerate the implementation process, providing valuable insights and avoiding common pitfalls.
- Continuous Improvement: Regularly reviewing and refining the S&OP process ensures it remains effective and adaptable to changing market conditions.