{"id":19312,"date":"2024-10-24T11:39:39","date_gmt":"2024-10-24T09:39:39","guid":{"rendered":"https:\/\/eyeonplanning.com\/blog\/abc-xyz-segmentation-copy\/"},"modified":"2024-12-16T11:12:11","modified_gmt":"2024-12-16T10:12:11","slug":"planning-systems-discrete-manufacturing","status":"publish","type":"post","link":"https:\/\/eyeonplanning.com\/blog\/planning-systems-discrete-manufacturing\/","title":{"rendered":"S&OP is broken in discrete manufacturing: why it’s time for a new approach!"},"content":{"rendered":"

By Wout Vrijkorte<\/a><\/em><\/p>\n

Sales & Operations Planning (S&OP) is intended to be the cornerstone of efficient business operations, helping align supply and demand while providing a clear roadmap for decision-making. Yet, in discrete manufacturing\u2014where engineering plays a crucial role, such as in project businesses, defense, aerospace, and complex machinery\u2014S&OP often fails to live up to its potential. The complexities of intricate Bills of Materials (BOMs), limited visibility into cash conversion cycles, and fragmented data undermine the effectiveness of traditional S&OP.<\/span>\u00a0<\/span><\/p>\n

Inaccurate cashflow forecasting<\/span><\/b>\u00a0<\/span><\/h3>\n

In industries with long cash conversion cycles, like aerospace and defense and machinery, payments are often tied to project milestones, extending DSO (Days Sales Outstanding) significantly. For companies like <\/span>Boeing<\/span><\/b> and <\/span>General Dynamics<\/span><\/b>, it can take <\/span>12 to 24 months<\/span><\/b>, or longer, to fully convert investments into cash. The frequent project delays and design changes disrupt production timelines, leaving components sitting in inventory and resulting in unreliable cash flow forecasts.<\/span>\u00a0<\/span><\/p>\n

This is where S&OP should act as the backbone of financial planning, but many companies fail to integrate lessons from previous projects, leading to overly optimistic and inaccurate forecasts.”<\/span>\u00a0<\/span><\/p>\n

\"\"<\/p>\n

Dealing with complex bill of materials<\/span><\/b>\u00a0<\/span><\/h3>\n

Manage their complex Bills of Materials (BOMs) is critical in discrete engineering, as these BOMs often involve thousands of parts from multiple suppliers. Minor design changes can ripple through the supply chain, delaying production and escalating costs. Frequent updates, whether due to engineering revisions or customer demands, make it difficult to maintain timelines.<\/span>\u00a0<\/span><\/p>\n

Decoupling the engineering BOM from the Planning BOM can help solve this issue. A Planning BOM focuses on critical materials that have unpredictable demand or long lead times, enabling companies to forecast more accurately and avoid premature procurement.”<\/span>\u00a0<\/span><\/p>\n

Despite these strategies, many companies lack the necessary data and tools to manage BOM processes effectively. This often leads to imbalances in inventory, increased excess and obsolete (E&O) stock, and supplier disruptions.<\/span>\u00a0<\/span><\/p>\n

Inability to properly plan critical resources<\/span><\/b>\u00a0<\/span><\/h3>\n

Furthermore, a common struggle is the challenge of planning critical resources due to fragmented data and poor visibility across departments. This misalignment between engineering, production, and supply chain teams leads to inefficient resource allocation. Additionally, a lack of robust scenario planning tools prevents companies from anticipating risks like supply chain disruptions or changing demand. As a result, companies often respond reactively, leading to higher costs and delays. They also fail to learn from past projects, repeating the same mistakes and neglecting the need to plan for specialized skills, which creates bottlenecks during critical stages.<\/span>\u00a0<\/span><\/p>\n

Why a new S&OP approach is needed<\/span><\/b>\u00a0<\/span><\/h3>\n

To regain control over project timelines and working capital, discrete manufacturers need an S&OP process tailored to their specific challenges. A more agile, scenario-based approach is essential for navigating the complexities of discrete manufacturing. By integrating financial planning with project milestones and leveraging advanced forecasting tools, companies can better manage both operational and financial risks. This approach provides greater flexibility, helping to optimize capacity, address engineering delays, and improve cash flow forecasts.<\/span>\u00a0<\/span><\/p>\n

Ready to transform your S&OP process and take control of your project timelines and cash flow? Download our interactive infographic<\/a> to discover how a new approach to S&OP can help you overcome these challenges and drive sustainable growth.<\/span>\u00a0<\/span><\/p>\n

\"\"<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

This article explains the complexities of intricate Bills of Materials (BOMs), limited visibility into cash conversion cycles, and fragmented data undermine the effectiveness of traditional S&OP.\u00a0<\/p>\n","protected":false},"author":17,"featured_media":19315,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":""},"categories":[237,16,14],"tags":[241,240,125],"class_list":["post-19312","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-advanced-planning-systems","category-high-tech","category-news","tag-discrete-manufacturing","tag-planning-systems","tag-sop"],"acf":[],"yoast_head":"\nEyeOn<\/title>\n<meta name=\"description\" content=\"To regain control over project timelines and working capital, discrete manufacturers need a S&OP process tailored to their specific challenges.\" \/>\n<meta name=\"robots\" content=\"index, follow, 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