As revenues remain volatile, disruptions plague supply chains, and interest rates remain high, executives' ability to build revenue, margin and working capital predictability and improvement takes on an elevated importance.
Turbulent times are upon us. According to Reuters reporting from the Bank of America, geopolitics has leapfrogged inflation as the most significant risk to the market, and that was proven true as the market slumped with the expectation of Iran's attack on Israel.
The supply chain is in a constant state of disruption. As we discussed on Supply Chain Chats, simple backup plans are no longer enough. In fact, you can look at recent events and determine if a backup is sufficient. Starting with the pandemic, of course, most if not all companies didn't have a sufficient enough backup plan.
Clients are struggling to keep up with customer's changing requests. Order backlogs remain relatively high (depending on the industry), but customers are pushing orders out at the last minute, pulling orders in without notice, adding future potential orders, and changing requirements on the fly. Production is scrambling to keep up.
In the last month, clients have been proving the critical importance of SIOP (Sales Inventory Operations Planning), also known as S&OP or IBP (Integrated Business Planning) time and again.
Global supply chains are on the move. Executives have been hit with the harsh reality that the risk (supply chain, geopolitical, cyber, IP, etc.) is far higher than they realized when they outsourced with an eye to cost.
Manufacturing is in a state of flux. After seven straight months of contraction in manufacturing, it is not surprising manufacturers are thinking about cutting back. On the other hand, in many industries, manufacturers continue to have a robust backlog and are growing faster than their capacity.
Making the appropriate business decisions will make or break success. Executives get paid the big bucks to make these decisions. Unfortunately, one poor decision can outweigh thousands of good ones rapidly. SIOP (Sales Inventory Operations Planning), also known as S&OP, is a tool that will optimize these tradeoffs for effective decision making.
Globalization is not working. Geopolitics abound. For example, the war in Russia and Ukraine ravages on. There are concerns around the nuclear power plant in Ukraine, occupied by Russia. And that is aside from the impact on oil, food, commodities and much more. China continues to threaten Taiwan and has already changed Hong Kong. It is no longer the same for business. There are countless risks throughout the world.
If you want to serve your key customers successfully (with high on-time-in-full (OTIF), short lead times, and proactive service) so that you can take advantage of the opportunities coming down the pike while addressing the hard realities of the current business environment (potential recessions, high interest rates, and less access to capital), you MUST balance sales, operations and inventory.
