The Sales & Operations Planning (S&OP) process has been around for decades, with many of the largest and best-known retailers using this approach to align their expected consumer demand with inventory buying. Sales, marketing, procurement and the C-suite have gathered in bi-weekly meetings to ensure projects are in place and to track performance against those plans. In all that time, however, the transportation leaders tasked with implementing the plan have largely been ignored.
This isn’t a new issue. Toyota pioneered just-in-time (JIT) inventory management in the 1950s and 1960s, ignoring the same transportation leaders as well. It took 60 years, but the pandemic opened the eyes of every supply chain practitioner relying on a lean approach. S&OP and JIT manufacturing have long existed under the assumption of unlimited capacity to move goods, but this has been proven false time and again, especially with retailers trying to keep pace with consumer demand shifts.
Transportation is a Blind Spot for Retail Marketing
One of the most apparent gaps between transportation and S&OP lies in retailer marketing initiatives. A company may have three marketing plans that they want to launch in the next month. To create a contingency plan in case one of these initiatives misses the mark with the intended audience, the company may buy thousands of gift with purchase (GWP) items, expecting the inventory will be used as a fallback option. They’re creating an extra lever to pull in the event a deal doesn’t entice consumers on its own.
However, knowing the locations of where those GWPs are being shipped, stored, and when they’re available can create a challenge. This is especially true when warehousing space is nearly impossible to find. Los Angeles warehouse space is near 98% capacity as of writing, so storing “emergency inventory” in a traditional manner might cost more than the benefit the inventory brings to sales.
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Incorporating the operations and transportation teams into this process allows retailers to access non-traditional options. For example, assuming the GWPs aren’t perishable, storing them in a trailer outside a warehouse might be less expensive. The transportation leader can also have contingency capacity lined up. This makes it so that when the marketing team elects to push a GWP offer forward, the transportation team can execute on moves instead of sourcing truckers at the last minute to ensure goods are where they’re needed.
Importing Stands to Benefit from Transportation Alignment
Another gap where transportation experience comes into play is in importing. During the height of the pandemic, more than 100 container ships were waiting off the Ports of LA and Long Beach, collectively the San Pedro Complex, which hosts roughly 40% of goods imported into the U.S. Unfortunately, at this time, only 10% of ships were operating on time.
Transportation leaders are seasoned at handling impromptu challenges and finding creative workarounds that ensure goods move from point A to point B. Many of the best-laid S&OP initiatives fell apart because of massive congestion at the ports. A quality logistics leader could have helped with contingency plans that improved the availability of goods, perhaps leveraging an opportunity to build micro-storage capabilities that keep goods closer to storefronts to more rapidly replenish inventory on shelves.
S&OP is an established practice across many of the biggest and best-known global retailers. However, its full value has yet to be recognized since there’s a disconnect between the leaders that are building plans and the logistics and transportation executives who execute the projects. By offering the latter a seat at the recurring S&OP meetings, this gap can be eliminated, and retailers can be more agile in the implementation, including contingency planning, of their overall S&OP-based approach.
Mike Bush is the Head of Comms and Brand at NEXT Trucking, a FreightTech pioneer and drayage leader connecting some of the world’s largest shippers with carriers. He has nearly 20 years of experience in supply chain, logistics and transportation. Connect with him on Twitter: twitter.com/mikebush.
