2. Why is the financial modelling part of S&OP useful? Many businesses depend on their ability to perform a perpetual balancing act between supply and demand. Throw in too many orders and the plant becomes overloaded, with the threat of leaving customers dissatisfied. Manufacture too much product and the plant shifts the other way, tying up money and filling storage space with unsold stock. At ICI Chlor-Chemicals a process known as sales and operations planning (S&OP) works to ensure that the business keeps all the promises it makes to its customers. The S&OP process helps the business to order the raw materials and services it needs with accuracy, while also providing its plants with information as to which products to produce and in what quantity. The process has the power to plot the best plans and schedules for virtually any set of circumstances – planned or unplanned –

in a way that will make the best use of all the company’s resources. By running a financial model, it is possible to find a solution to unforeseen production problems by rescheduling production in ways that keep customers satisfied and avoid a potentially damaging impact on the bottom line. By providing accurate estimates of future demand it helps the procurement process and reduces the amount of both raw materials and products that need to be held in stock.

The interface with the S&OP programme is via intranet connections that allow customer service staff to view the production plans for the coming days and weeks. Every time customer service staff pick up the telephone to take a customer’s order, details of the relevant production plans are displayed automatically on screen to allow an instant and informed response. Receipts of raw materials trigger payments to the supplier, just as dispatches of finished products trigger the raising of an invoice to the customer. By providing more people with more information, S&OP helps the company’s staff to take better decisions – for the benefit of the business and its customers.