The Ultimate Profit Opportunity

To make informed forecasting and replenishment decisions, many companies bring together operational elements of production and distribution with sales and marketing, executing Sales and Operations Planning (S&OP) collaborative improvement processes. As cross-functional and consensus-based processes, S&OP activities create value by keeping supply and demand in balance. But most S&OP arrangements fail to consider or fully account for the effects of pricing and promotional strategies on the upstream supply chain. How does the use of sales and marketing instruments affect upstream replenishment capabilities and overall profitability? How do capacity, lead times and production status relate to the company’s ability to react to pricing or promotions-induced demand swings? Accenture’s research and client experience confirms that this combined effort can help maximize a company’s profitability and accelerate its journey to high performance. Among other benefits, coordinating dynamic pricing, promotional and operational decisions will help reduce the costly bullwhip effect. In the bullwhip effect, small variations in orders get amplified up the supply chain, causing anything from inventory shortages, to lengthened lead times and lost sales, to decline in customer service. A synchronized approach also helps to improve both the revenue and cost sides of the profit equation.