Profit, Sales &

Operations Planning
A Key Component of Supply Chain Mastery
2
Today, supply chain leaders must know how their decisions affect and
control revenues and margins across the enterprise—how supply chain
operations can dovetail most effectively with yield management.
Simply put, companies need a more advanced approach to sales &
operations planning.
Globalization. Product proliferation. This is not to say that margin and involves; how it supersedes, yet
More multi-channel sales. Rising profitability considerations weren’t builds upon, traditional S&OP
volatility in raw material costs. previously part of most companies’ approaches; what advantages it
Increasing demand for customized supply chain perspectives. Yet at most offers to companies across multiple
products and experiences. Few could organizations, supply chain decision- industries; and why it can help
debate the ubiquity and complexity making has tended to be dominated forward-thinking implementers in
of these supply chain drivers Nor by unit- and volume-focused their quest for high performance.
would many disagree that, as a result, perspectives. Today, however, supply
there has been a huge increase in the chain leaders must know how their
number of supply-chain-related cost/ decisions affect and control revenues
benefit tradeoffs that companies need and margins across the enterprise—
to consider. Moreover, these tradeoff how supply chain operations can
decisions often involve financial dovetail most effectively with yield
variables that didn’t used to be part management. Simply put, companies
of the supply chain management need a more advanced approach to
equation. This means that many sales & operations planning.
companies’ sales & operations
planning (S&OP) models and processes The mission of this Accenture Point
must now go where few models and of View is to profile that process—an
processes have gone before: to a place updated, more-bottom-line-driven
where supply chain decisions are methodology known as Profit, Sales
guided by corporate profitability. & Operations Planning (PS&OP).
Following is a look at what PS&OP

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The Why:
Examining the
PS&OP Opportunity
PS&OP fully considers each customer’s relationship with the
company’s bottom line.
As noted earlier, sales & operations
planning has historically been a
unit- and volume-focused exercise.
Revenue and profitability issues are
acknowledged, but usually after
the fact—once an execution-level
decision has been made. Finance
organizations are forced to react
rather than act, which often provokes
delays and/or adjustments. Consider
a product shortage or allocation issue
involving two customers. Traditional
S&OP processes and technologies
would likely treat the problem as
an inventory allocation decision,
rather than looking at the issue
holistically (concurrently examining
financial and logistical implications).
In the traditional scenario, the larger
customer would likely prevail because it
contributes more to the manufacturer’s
revenue—regardless of whether the
customer contributes more or less
from a margin perspective. However, a
different conclusion might be reached
if a Profit, Sales & Operations Planning
process was applied. This is because
PS&OP fully considers each customer’s
relationship with the company’s
bottom line: optimizing the balance
4
between profit and volume, as well as
maximizing profit over time.
Another common problem is excess or
constrained capacity. Standard S&OP
processes rarely incorporate profitability
implications into manufacturing
decisions (e.g., cost/benefit tradeoffs
for overtime or the fiscal impact of
expedited freight). However, capacity
can be an important planning
lever—one that a PS&OP process fully
supports. In fact, one of PS&OP’s
great strengths is profitably allocating
scarce capacity.
A third scenario might involve product
lead times that vary due to multiple
sourcing locations or transportation
modes. With traditional sales &
operations planning approaches, supply
chain network lead times tend to be
analyzed and considered only when
physical changes are made (e.g., revising
network configurations or adding/
shuttering facilities). Lead times are
rarely assessed on a day-to-day or
week-to-week basis. Profit, Sales &
Operations Planning can help companies
regularly explore the financial impact
of varying a product’s or product line’s
lead times. PS&OP spans the complete
product life cycle, while tailoring
recommendations to each stage.
In net, by upgrading from a traditional
sales & operations planning capability
to one of Profit, Sales & Operations
Planning, companies can:
• Integrate unit/volume planning with
financial/profitability planning (focusing
core operational decisions around
bottom-line results, while reducing
operational and financial risk).
• Shape demand by considering
production, inventory and distribution
strategies across customers with
varying demand characteristics and
service-level requirements.
• Factor capacity and inventory
constraints into decisions about
promotional strategies and optimal price
points using pricing elasticity.
• Incorporate a deeper operational and
financial perspective through scenario-
based modeling.
• Improve product life cycle decisions
and asset/product utilization.
• Continuously and rapidly assess and
refine profit/volume tradeoffs across
products, channels and geographies.
Why PS&OP? And Why Now?
Traditional decision-making
processes often lack the ability
to address customer demand
profitably.
One reason is the changing dynamics
of balancing supply and demand. More
cost/benefit tradeoff variables are
involved, along with a greater need to
quickly grasp the financial impact of
key decisions.
Globalization has complicated
the management of end-to-end
supply chains.
The number of sales channel/product/
geography decision points has increased
significantly. To respond effectively,
companies must become leaner and
more agile. They also must develop a
deeper understanding of
the relationship between operations
and profitability.
Supply chain models across
industries are changing.
In the retail space, many companies
are moving toward a limited inventory-
ownership model: leveraging scale
and access to consumers as their
primary assets and pushing suppliers
to take more ownership of inventory
and replenishment. How well a
supplier performs in this capacity
(e.g., understanding connections
among consumer demand, product
performance and bottom-line
profitability) often dictates how
successful it is in this new role.
Consumers want more
customized product offerings
and buying experiences.
Take Walmart’s “store of the
community” initiative, which seeks to
tailor the product mix and assortment
of each store based on consumer
demographics. Best Buy utilizes similar
“buyer profiles” to drive store-level Economic uncertainty has
assortment and stocking decisions. reduced many companies’ risk
With such complex store-level models,
it is vital that upstream partners make
tolerance.
As a result, the need has increased for
smart, finance-based pricing, inventory
comprehensive due diligence. PS&OP
and service choices.
processes help generate the information
needed to make this happen.
New channels and customer
preferences have led to a
Products, technologies and
proliferation of products. market dynamics are evolving
However, many bigger retailers are
pushing to trim product offerings
faster than ever.
Companies must respond with agile
and improve shelf profitability. This
will require more account-specific
geographic/channel strategies, new
customer-development approaches, and
merchandising plans and spur
flexible supply models that are built in
joint efforts between retailers and
to collaborative supplier relationships.
manufacturers to increase profitability.
This puts enormous pressure on
upstream manufacturers to balance
supply and demand in the most cost-
effective and profitable manner.
Companies need new business
models and services that can
help them maintain growth as
various legacy products and
services become commoditized.
For example, members of the wireless
communications carrier industry are
evaluating future growth strategies
to determine where they should
focus (e.g., build out application and
data services versus concentrate on
network maintenance). These decisions
must take into account the complete
financial picture associated with
each option.
Better analytical capabilities and
tools are re-grading the playing
field.
New ways must be developed to
analyze financial/profitability scenarios,
such as gross margin improvement and
working capital requirements.
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The What:
Understanding PS&OP

PS&OP takes sales & operations planning to the next level by

incorporating more financial modeling techniques, tools, skills and
capabilities to create more-profitable operating decisions that can
raise yield and revenue.
Think of Profit, Sales & Operations
Planning as an integrated process
environment where empowered
stakeholders make business decisions
that concurrently optimize sales,
balance demand and supply, and
maximize profits. PS&OP takes sales
& operations planning to the next
level by incorporating more financial
modeling techniques, tools, skills and
capabilities to create more-profitable
operating decisions that can raise yield
and revenue.
Given its broader scope and direct
focus on profit, PS&OP is clearly
different from traditional S&OP. Yet
similarities remain: Both S&OP and
PS&OP are iterative processes focused
on integrating demand and supply
planning for enterprise-level decision
making and execution. Six of PS&OP’s
most-critical components actually
mirror those of traditional S&OP:
• One plan: It is vital that all
contributing parties maintain, have
access to, and measure performance
based on the same plan and a single set
of numbers.
• Cross-functional teams:
Representatives from marketing,
finance, sales, manufacturing, supply
chain and product development all
must participate. Each role must be
clearly understood.
• Accurate data: Organizations need
accurate data to perform sensitivity
analyses, build and assess multiple
scenarios, and ensure precise
performance measures.
• Optimal consensus: High degrees of
commitment and agreement must be
reached about expectations, authority
and accountability.
• Explicit performance measures:
Both S&OP and PS&OP measures
must be structured to appropriately
align operational behaviors with
company benefits.
• Use of analytical tools: Savvy use of
leading-edge technology is needed to
maximize data visibility, make decisions
and measure performance.
However, PS&OP adds an important
new dimension because it focuses most
intently on financially-based scenario
modeling to create profitable outcomes.
As shown in Figure 1, the PS&OP

What sets PS&OP apart from traditional S&OP is that its focus is
always on where or how the company can make the most profit and/or
generate the most revenue.

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Figure 1. PS&OP integrates planning activities and scenario modeling for profitability
into the end-to-end decision-making process
Conduct
Demand Shaping Business Planning
• Sales revenue goals Review performance
Analytics and root cause
• Margin/profit goals
• Product/Geo/ Channel • Geographic strategy
mix change scenarios Discuss PS & OP
scenarios
• Forecasts scenarios Marketing Planning
• Brand/channel position and pricing PS&OP
Demand • Pricing/promotion • Brand/channel events/promotions Agree on demand,
Probabilistic
scenarios calendar supply, marketing &
Scenario Modelling
Prepare pricing plans
Catagory Planning •• Profitability scenarios
• Product mix/placement/pricing •• Pricing scenarios Collect and analyze
• Product lifecycle plan
•• Product/channel/ Scenario results
• Product sales forecasts
geo mix scenarios
Demand Forecasting •• Capacity/ Conduct
preliminary S&OP
• Statistical demand forecast manufacturing
activities
PS&OP
• Historical demand scenarios
•• Inventory cost
Responsive Supply Operations Planning Develop agenda &
scenarios
Analytics • Order fulfillment distribute plans
• Merchandising •• Root cause of plan
• Cost adjustments to actuals

Supply • Inventory availability Supply Planning •• Demand shaping Execute

• Supply forecast opportunities
• Capacity scenarios • Replenishment plans Modify plan
• Lead time variability
• Manufacturing throughput Communicate plan

Distribution Planning Execute plan

• Inventory deployment
• Capacity constraints
• Transport costs Traditional S&OP Measure performance
and profitability
Enhanced PS&OP

process extends core aspects of demand
and supply planning to perform and
evaluate scenarios related to capacity
constraints, demand/supply changes
and allocation priorities.
The PS&OP cycle is enhanced by
measuring financial and operational
performance, and by aligning execution
to control financial outcomes and
profitability targeting.
PS&OP is set apart from traditional
S&OP because the focus of PS&OP is
always on where or how the company
can make the most profit and/or
generate the most market share. For
example, when projecting margin and
revenue outcomes, PS&OP scenarios
consider not only price and quantity,
but the relationship to capacity and
inventory constraints. With PS&OP,
financial decisions are continuously
evaluated and updated based on the
latest supply chain conditions.
Following are some of the ways that
PS&OP enhances product life cycle
planning, market life cycle planning,
operational execution, and the
organization as a whole.
Enhancements to product life
cycle planning.
PS&OP is designed to drive continuous
financial reviews. Companies
traditionally conduct profitability
analyses during annual or quarterly
planning cycles, or at the onset of
large operations programs. However,
few entities “re-review” the actual
results of their profitability forecasts
or seek to determine on an ongoing
basis if the assumptions they have
made are correct. One example of this
differentiating capability is PS&OP’s
overarching view of the complete
product life cycle, including managing/
balancing service levels and costs
differently at each stage (Figure 2).
Potential rewards in this case include
fewer stock-outs at product launch;
lower costs and higher margins
throughout a product’s life; and reduced
obsolescence costs or value erosion at
the end of a product’s life.
Consider marketing analysis performed
by a typical consumer goods company
during a product launch—a time when
financial considerations can easily
become separated from supply chain
issues. During demand forecasting
analysis, organizations need to
understand the spread of new products
based on factors such as innovation,
imitation, market size, and pricing and
promotional mechanisms. Profit, Sales
& Operations Planning enhances this
capability by helping companies:
• Assess pricing strategies based
on quantity, customer segment
and locations.
• Simulate various cost scenarios
by examining incremental costs for
each strategy. For example, shifting
production, producing additional
inventory, or prioritizing manufacturing
capacity based on product portfolio
characteristics may also change the
fixed and variable cost structure for
each production strategy. Fixed and
variable portions of promotional or
advertising costs should be similarly
considered as part of cost analysis.
• Maximize profit by considering all
variable demand opportunities and
supply costs when decisions are made
or changed.

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Figure 2. Typical sales volume relationship along a product’s life cycle.

Volume of Business

Introduce Retire

Maximize Optimize

Time

Enhancements to market life models are typically needed to reduce plan-source-make-deliver decisions.
cycle planning. supply capacity and costs. These characteristics obviously
Every company experiences upturns change according to existing market
These events are generally tied to dynamics and the point a product or
and downturns. As shown in Figure
a specific combination of product, product line has reached in the market
3, the challenge (and PS&OP’s
geography and sales channel, rather life cycle. Consider the following
contribution) involves planning, shaping
than across the entire business. For driver characteristics in the current
and adjusting operations to maximize
example, the last major downturn (sputtering) economy and how they
bottom-line performance. When times
affected the technology industry most might be addressed by PS&OP:
are good, for example, companies must
significantly, while the industrial sector
manage their pricing and promotion
experienced a new growth cycle. And • Demand drivers. Spending decreases;
strategies to determine where and
since most companies service multiple consumers become more sensitive to
how to make a finite number of
industries across multiple product price than to value; more promotions
products generate the most profit.
lines and geographies, the challenge is cause margin erosion. To cope with
With PS&OP, high demand and
determining which combinations these shifts, companies can leverage
limited availability trigger a move to
and permutations have the most PS&OP to help shape demand
higher prices and higher margins for a
profitable impact. through more creative pricing and the
particular segment and time period
(a “yield management period”). development of differentiated pricing
In any economy, Profit, Sales & strategies by customer segment.
Operations Planning capabilities offer
In challenging times, there is often
significant value. During a recession, • Operational drivers. Capital
a need to find price points that help
however, there is additional potential expenditures fall; stable inventory levels
sell what you have: driving sufficient
for adopters of PS&OP to minimize become harder to achieve; production is
revenue to cover variable costs (a
the damage, and to adroitly position often pared down to align with reduced
"marginal economics period"). To make
themselves to move ahead when the sales; pressure to contain variable costs
this happen, pricing and promotion
storm abates. One reason is that PS&OP increases; use of flexible/temporary
strategies may be adjusted to
processes excel at blending demand, workers grows, reflecting reduced
accommodate expected margin erosion;
operational, financial and supply driver demand. By performing continuous
production plans may change to cover
information to help hone a company’s reviews of inventory, PS&OP can help
drops in demand; and flexible operating
reduce the number and impact of slow
movers that increase the cost of capital.

8
Figure 3. PS&OP focus across the market life cycle.

PS&OP Focus in an Economic Upturn:

• Integrate demand plans with pricing and promotional strategies
• Determine how best to utilize constrained assets to satisfy demand
• Link dynamic pricing to customer sensitivity to maximize asset utilization
• Emphasize financial metrics focused on profitability

Over-Heated
Transition Period

Upturn:
Rising Expectations
Market Life
Cycle
Downturn:
Contracting Demand

Bottomed-Out

PS&OP Focus in an Economic Downturn:

• Revise pricing and promotional strategies to contain margin erosion
• Manage pressure on asset utilization in light of falling demand
• Reduce production plans and contain variable costs
• Reconsider price elasticity curves
• Emphasize financial metrics focused on operational survival

• Working capital drivers. Focus on
liquidity increases; cash-to-cash
cycle times become more important;
companies place more emphasis on
return on assets and shareholder equity.
PS&OP helps companies do a better job
of managing excess inventory, which in
turn releases cash for reinvestment in
more-profitable areas of the company.
• Supply drivers. Pressure to
renegotiate delivery and payment terms
increases; companies work harder
to shift ownership of inventory to
suppliers; incentives increase to reduce
supply variability. PS&OP provides the
analytics and information needed to
help companies decide which supply
side activities have the most favorable
impact on the bottom line.
Enhancements to operational
execution.
Traditional order fulfillment processes
use a standard “available-to-promise”
(ATP) approach to allocate and fill
orders. This is normally based on a first-
come-first–serve basis based on product
availability and time of order placement.
Somewhat more advanced are
“capable-to-promise” (CTP) approaches,
which incorporate manufacturing and
procurement capacity to determine
when and how to fill an order. The most
advanced state on this continuum is
PS&OP, which focuses on “profitable to
promise” (PTP). In this scenario, financial
costs and pricing are incorporated to
help a company determine if an order
should or should not be filled based on
the profit it generates.
Enhancements to the organization.
Although PS&OP uses a structure that
is similar to traditional S&OP, the
fact that decision criteria and data
analytics are focused on maximizing
profit and minimizing cost means that
different skillsets are required. Most of
these capabilities reside in the finance
organization—for example, the ability
to analyze and review operations and
operational decisions pertaining to
factors such as revenue, profit margin,
total cost of sale/ownership and
return on invested capital. However,
to optimize PS&OP, these skills and
knowledge must be part of a cross-
functional PS&OP team, as well as
resident in the finance organization. In
this context, financial and analytical
skills should complement (not replace)
operationally focused activities.
Moving an organization toward this
model may require any combination of
the following:
• Modifying the existing operating
model to structure teams, individual
roles and responsibilities.
• Training resources in financial
modeling concepts and the associated
impact on operations.
• Establishing new and more
appropriate metrics for individual and
organizational performance measures.

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The Where:
PS&OP Scenarios in
Various Industries
A PS&OP process allows manufacturing and planning organizations
to explore tradeoff scenarios for leveraging available capacity, while
yielding the most beneficial financial results.
PS&OP has a broad applicability across
a wide range of industries. Following
are several examples.
Consumer goods
A key determinant of high performance
for consumer goods companies is
knowing how best to balance supply
with dynamic demand, and how
changing costs affect operating
margins. The two issues are highly
interrelated: Operating decisions are
a consequence of planning for supply;
respecting constraints; satisfying
demand while reducing cost of goods
sold; improving gross and operating
margins; and maximizing assets. Some
of the capabilities that PS&OP brings to
this decision-making process include:
• Cost of goods sold (COGS) as a
percent of sales. For consumer goods
companies the average annual COGS
as a percent of sales (currently about
47 percent1) has been increasing due to
rising commodity costs. PS&OP offers
new ways to contain these
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costs through better forecasting,
hedging, sourcing and inventory
management practices.
• Selling, general and administrative
(SG&A) expenses as a percent of sales.
The industry’s mean SG&A as a percent
of sales is approximately 25 percent2.
Enhanced PS&OP capabilities have the
potential to optimize trade promotions
and advertising investments to generate
higher sales.
• Inventory turnover. Inventory turns
in consumer goods average about six
per year3. PS&OP can help companies
handle demand fluctuations more
proactively through better point-of-
sale-related collaboration with retailers.
• Profitability ratios. Two ratios—return
on sales and return on assets—are an
integral part of any PS&OP discussion
in consumer goods. The mission is
to understand how effectively a
company is leveraging its assets to
generate revenue.
Aerospace & defense
Major aircraft manufacturers face
complex planning challenges that
PS&OP can help address. Manufacturing
operations, for example, are typically
incented to maximize asset use and
smooth production/capacity; yet when
planning horizons often reach a decade
and products cost hundreds of millions
of dollars, the cash flow implications
are enormous. A PS&OP process
allows manufacturing and planning
organizations to explore tradeoff
scenarios for leveraging available
capacity, while yielding the most
beneficial financial results. Moreover,
arming the sales organization with
information that balances supply chain
and financial information helps sell
available manufacturing capacity in the
most productive manner.
PS&OP allows for more effective and efficient planning—even when an
industry’s inventory is “virtual.”
Electronics and high-tech
In electronics and high-tech
(computers, mobile handsets, TVs,
cameras, etc.) life cycles are often
short and products depreciate rapidly.
For this reason, cost and price must be
monitored especially closely. Timing of
component cost reductions (e.g., for
chip sets) affects cost of goods sold,
while price reductions in the retail
channel impact revenue. Leveraging a
PS&OP process can improve planning
by aligning product life cycle costs and
revenue more effectively. In addition to
addressing intra-life-cycle complexities,
PS&OP can improve EHT companies’
inter-life cycle planning—segueing
smoothly and cost-effectively from
retired to new products.
Media & entertainment
S&OP processes traditionally involve
the planning of inventory and product
volumes. However, media outlets
such as Web sites and TV/radio
stations also face planning challenges
relative to their unique kind of
inventory: advertising space. Planning
advertising placement requires a deep
understanding of financial implications.
For example, cost/benefit tradeoffs vary
according to time of day and genre of
programming. Contractual agreements
with advertisers and the actual number
of visitors/viewers drive additional
complexity and variability. PS&OP
allows for more effective and efficient
planning—even when an industry’s
inventory is “virtual.”
Oil and gas
In the refined products supply chain,
the goal of production planning is to
maximize margin within the refineries.
The key input to this process is the price
forecast for commodities, a measure
with exceptional price volatility.
Thus the outlook for future prices
drives a company’s decisions about
hedging strategies (go long, go short)
based on the supply chain’s own or
“system” demand. In addition, crude
oil, intermediates and refined products
are so widely traded among players
in the oil and gas supply chain that
sources of supply and demand for these
commodities are considered variables
in the regular planning process.
With PS&OP the scope and value of
production planning can expand to
include more rigorous treatment
of other external-to-refinery-
production cost components, such
as downstream distribution and
commodity sourcing strategies.
Mining and metals
In mining and metals, most products
are commodities. Pricing is typically
dictated by the market and products
generally reside several tiers down the
supply chain. As a result, there are
few opportunities for industry players
to truly shape demand, so control
of supply (i.e., capacity) becomes a
particularly critical lever. PS&OP can
help by increasing companies’ ability to
model the impact of capacity changes.
This in turn allows them to understand
how changing variables can affect
supply and demand and thus influence
the business’ financial performance.
Better long-term decisions about
network design, facility development
and production planning are often
the result.
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The How:
Summarizing PS&OP’s Contribution
to High Performance

Even “planning masters” often lack the ability to shape demand and
many do not consider price elasticity during the planning process. This
underlies our concern that, although competent sales & operations
planning is a vital base component of supply chain management,
significant opportunities are often left on the table.
In recent years, Accenture has supply chain masters’ ability to sense, In conclusion, consider the crucial
performed extensive research into shape and respond to demand, and to dimensions of supply chain mastery
the nature and components of high collaborate effectively with partners. identified by Accenture research, and
performance: how an elite group of However, Accenture also found that how Profit, Sales & Operations Planning
companies (roughly 10 percent across even “planning masters” often lack adds a layer of competence and reward
all industries) consistently outpace the ability to shape demand, and that is rarely achieved with traditional
competitors in terms of efficiency, many do not consider price elasticity sales & operations planning.
growth and profitability. In study after during the planning process. This
study, “supply chain mastery” has been underlies our concern that, although Dimension 1: The ability to
identified as a key contributor to high sales & operations planning is a vital manage product shortages and
performance: Most high-performance base component of supply chain allocations
businesses expect their supply chains to management, significant opportunities As companies’ supply chains become
contribute to growth. are often left on the table. The bright more and more extended, fluctuations
side, of course, is that transforming in demand, supplier variabilities and
Additional Accenture research on S&OP processes to become more operational disruptions are more
mastery in supply chain planning financially and profitability focused likely to result in product shortages.
found that sophisticated, integrated can drive greater bottom-line benefits. The priority thus becomes how best
sales, marketing and operations- This is what Profit, Sales & Operations to satisfy customer demand with
planning processes are critical to Planning is all about. constrained supplies. PS&OP can help
by providing a platform to analyze:

Transforming S&OP processes to become more financially and

profitability focused can drive greater bottom-line benefits. This is
what Profit, Sales & Operations Planning is all about.

12
PS&OP users often have an advantage because of their superior
ability to use pricing and promotional vehicles to lift demand without
diluting margins and brand image.
• Demand planning: Gathering and
analyzing end-customer demand (base
and incremental ) by category and
location for future periods with a focus
on shaping demand using profitable
promotional and pricing strategies.
• Supply planning: Helping allocate
existing inventory to the most
profitable customers, while clarifying
opportunities to back-order products for
willing customers. Even if goods have
not yet been produced, PS&OP can help
consider how best to allocate available
capacity to a company’s most profitable
customers—again maximizing margins
and realigning demand and supply.
Dimension 2: The ability to
handle excess or constrained
capacity
Regardless of economic conditions,
companies often are burdened by
capacity and asset-utilization concerns.
PS&OP users may have an advantage
because of their superior ability to 1)
use pricing and promotional vehicles to
lift demand without diluting margins
and brand image and 2) deploy
innovative marketing strategies or
re-plan new product introductions
that are adjusted to finalize aggregate
demand plans. Upstream, this will
improve “excess supply planning” by
aligning over-capacity with revised
aggregate demand plans.
Dimension 3: The ability
to optimize new product
introductions
Traditional S&OP models may not
support new product introductions to
the fullest degree possible. As a result,
decisions about new products may
be dictated solely by the marketing
organization using only high-level cost
assumptions and generalized input from
supply chain decision makers. A PS&OP
process model can help improve the
new product introduction process by:
• Involving the complete business in
decisions about cost/benefit tradeoffs.
Consider that new product launches
require well-thought-out demand
plans that are enacted by stages and
tightly linked to production plans with
clear inventory targets and margin
goals. PS&OP provides a forum for
collaborating on sales revenue and
profit margin targets at different stages
of a product’s life.
• Helping monitor and manage revenue
growth and identifying opportunities to
redirect or cannibalize older products
and manufacturing capacity.
• Synchronizing new-product demand
plans with aggregate supply plans, thus
helping to accelerate time to market.
The early-detection and mitigation
capabilities that PS&OP offers can
prevent sizeable margin losses and cash
flow problems.
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With PS&OP, supply chains acquire a mechanism for critically reexamining
supply chain cost/benefit tradeoffs associated with lead times.

Dimension 4: The ability to deal Dimension 5: The ability

more efficiently with lead times
In today’s multi-polar world, numerous
products are multi-sourced, with
logistical options that include various
transportation modes and distribution
models. Time (or lead time) is a key
variable but its financial implications
may not be fully considered. With
PS&OP, supply chains acquire a
mechanism for critically reexamining
supply chain cost/benefit tradeoffs
associated with lead times.
to streamline end-of-life
management
Managing a product’s end of life from
both a demand and supply perspective
is key to achieving supply chain
mastery. From a demand planning
perspective, the kind of cross-functional
collaboration that PS&OP makes
possible is needed to identify non-
performing products, rationalize SKUs
to reduce clutter, and align category
and brand strategies. On the supply
planning side, PS&OP can add value by
re-drawing product mixes in aggregate
production plans and financially
assessing margin erosion associated
with markdown costs, inventory
carrying costs and disposal costs.

The Bottom Line is the

Bottom Line
Clearly, there is no shortage of
ways that Profit, Sales & Operations
Planning can broaden the scope and
value of supply chain management.
But when it comes to PS&OP, the
bottom line must be top of mind: To
help companies achieve and maintain
high performance, today’s supply
chain decisions must extend all the
way from the store room to the board
room and back—with a sharp focus on
profitability all along the way. Profit,
Sales & Operations Planning can help
make that happen.

14
About the Authors
Mohammed Hajibashi is a Partner in
Accenture’s Supply Chain Management
Service Line. He leads the Supply Chain
Planning Practice for North America
and is the Global Profit, Sales, and
Operations Planning Offering lead.
Mohammed has 16 years of supply
chain experience in global supply chain
transformation, supply chain strategy,
planning, fulfillment, and analytics.
He has worked across the
communication, high tech, consumer
products, and retail industries. Based
in Austin, he can be reached at
mohammed.hajibashi@accenture.com
Arjun Mukherjee is a Senior Manager
in the Accenture Supply Chain
Management Service line. He leads the
Forecast Optimization services for North
America and has deep background in
S&OP practices in Consumer packaged
goods, durable goods and high tech
industry. Arjun is based in Washington
D.C and can be reached at
Arjun.mukherjee@accenture.com.
Steve Puricelli is a Senior Manager in
Accenture’s Supply Chain Management
Service Line. He has an extensive
background in sales and operations
planning including forecasting and
production planning, both as a
practitioner and a consultant. He has
worked across the high tech, consumer
packaged goods, aerospace & defense,
and automotive industries. Based in
San Francisco, he can be reached at
steven.j.puricelli@accenture.com
Mary Rollman is a Senior Manager in
Accenture’s Supply Chain Management
Service Line and is currently the global
Research and Development Lead for the
Strategic Planning Services practice.
She has an extensive background in
supply chain planning and collaboration
across several industries including
retail, consumer package goods and
pharmaceuticals. Mary is based in
Washington DC and can be reached at
mary.j.rollman@accenture.com
Radica Sipcic is a Senior Manager in
Accenture’s Supply Chain Management
Service Line and is the NA Public
Service “Go-to-Market” Lead for
the Profit, Sales, and Operations
Planning Offering. She works with
clients in government, consumer
packaged goods, telecommunications,
and high tech industries to improve
their performance through supply
chain strategy development, business
process re-engineering and software
solution implementation. Based in
Reston, she can be reached at
radica.sipcic@accenture.com.
15
About Accenture
Accenture is a global management
consulting, technology services
and outsourcing company.
Combining unparalleled experience,
comprehensive capabilities across
all industries and business functions,
and extensive research on the world’s
most successful companies, Accenture
collaborates with clients to help
them become high-performance
businesses and governments. With
approximately 177,000 people serving
clients in more than 120 countries, the
company generated net revenues of
US$21.58 billion for the fiscal year
ended Aug. 31, 2009. Its home page is
www.accenture.com.
Copyright © 2009 Accenture
All rights reserved.
Accenture, its logo, and
High Performance Delivered
are trademarks of Accenture.
About Accenture Supply We collaborate with clients to
Chain Management implement innovative consulting
and outsourcing solutions that align
The Accenture Supply Chain
operating models to support business
Management service line works
strategies, optimize global operations,
with clients across a broad range of
enable profitable product launches,
industries to develop and execute
and enhance the skills and capabilities
operational strategies that enable
of the supply chain workforce.
profitable growth in new and existing
For more information, visit
markets. Committed to helping clients
www.accenture.com/supplychain.
achieve high performance through
supply chain mastery, we combine
global industry expertise and skills in
supply chain strategy, sourcing and
procurement, supply chain planning,
manufacturing and design, fulfillment,
and service management to help
organizations transform their supply
chain capabilities.
References
1 Accenture research
2 Accenture research
3 Accenture research