Extending Sales and Operations Planning to Logistics: A Path to Better Reliability for Chemicals Manufacturers

Supplier reliability ranks among the top preferences for chemicals industry buyers as they evaluate their choices of suppliers. Adding a logistics component to a traditional products-based Sales & Operations Planning (S&OP) process presents a key opportunity for chemicals companies to extend traditional planning processes to include the supply and demand of scarce logistics assets in order to improve supplier reliability.

Logistics assets represent the critical ‘last mile’ of delivery to the customer and thus are as important as product availability itself. In short, a Logistics Sales & Operations Planning (LS&OP) process can yield a more reliable supply experience for the customer and, therefore, should be integrated into a broader S&OP process.

What makes LS&OP so relevant now? As a consequence of the recent economic downturn, we have observed carriers that have downsized or right-sized their fleets to match demand. Others have simply exited the transportation industry altogether. These actions have resulted in a more limited supply of carrier options, which requires the manufacturer to be more diligent than ever in projecting demand to carriers. Failure to do so means shipping with non-preferred carriers on a spot basis—a costly side effect. Meanwhile, from a demand side, segments of the economy are beginning to show improvement. Therefore, there is an increased need for manufacturers to focus their efforts on reducing supply risks as they relate to transporting their goods to customers. The risk of not doing so could result in higher freight prices or premiums, or, even worse, no ability to supply a customer, thus damaging the reputation for reliable supply.

Robust supply chain planning introduced in LS&OP helps companies build closer carrier relationships and integration, which yields better demand signals closer to the beginning of the supply chain.

Jean-Paul Masso is a senior manager in Accenture’s Chemicals and Natural Resources industry group. He has an extensive background in supply chain strategy, distribution (global), transportation, logistics operations and asset utilization. He also has held several positions in international sales, logistics operations and procurement within the oil and chemicals industries. Based in Houston, he can be reached at jean-paul.masso@accenture.com.

Michael Insogna is a manager in Accenture’s Management Consulting Resources operating group. His focus is primarily the chemicals industry, although he has worked across the products, high-tech and aerospace industries as well. He has 14 years of experience in the chemicals industry in a variety of both strategic and operational roles, including sales, product management, supply chain management, IT and R&D. More recently, his focus has been on developing Sales & Operations Planning work processes and operating models for large, global chemicals manufacturers. Based in Philadelphia, he can be reached at michael.a.insogna@accenture.com.