Do not rely on sales growth for your profits

Roger OakdenGlobal LogisticsLeave a Comment

Plan your business.

With most countries of Europe and America in a situation of either recession or no growth, many businesses will not experience an increase in sales. But for businesses in all regions of the world, profitability can be improved through a focus on improving business flows.

Flows consist of items, money and information and too often they are seen as independent of each other, with management (and performance measurement) divided between different functional parts of the business. In the mid-1980’s, Sales & Operations Planning (S&OP) began its slow journey towards recognition as a core business process. Yet in 2012, so many articles are being written and seminars held about this topic that are saying the same things that I advised a client in 1990, when I led my first S&OP implementation.

The effort being expended can only mean that the message of viewing a business entity and its supply chains as one interlinked system has not been widely adopted; too often companies say they have implemented S&OP when actually all they have is a glorified monthly budget meeting.

And why not? Outside of the few universities offering degree majors in supply chains and logistics, courses in commerce, international trade and accounting are unlikely to focus on flows and their links, so new hires do not know why there is a need for S&OP.

Include all parts of your business

Of late, articles have promoted the incorporation of finance into S&OP (and of course, giving it a new name); but how your business can have a successful S&OP without incorporating finance is beyond me. Management of cash flow (accounts receivable and accounts payable plus international trade risk assessment and financing) and working capital relies on effective supply chains and logistics. Likewise, for effective supply chains and logistics to happen requires the effective management of cash flow and working capital.

Think of S&OP as the hub of your business; it is neither complex or reliant on sophisticated software applications. Its success relies on the ability of people throughout your business entity to work as a team in implementing a major change in the way the business is managed. As always, this is the hardest to achieve, because we behave how we are measured.

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...

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