Traditionally the S&OP process was about just balancing supply demand. But where do new product introductions or slow moving or obsolete inventory fall in this process?
As the business environment has changed, we have seen S&OP adapt to become a centralized business process that enables coordinating decision making. With this, a Product Review or Portfolio Review has become a critical step in mature or vanguard organizations to better understand and manage product offerings and inventory.
What Is The Product Review?
Although the Product Review is typically held in the final week of the month, it is really starting the process off for the month to come. It really is the first step in a well-defined and mature monthly S&OP process. It allows us to take the strategy from executive S&OP and build on it with a product strategy that can guides demand and supply discussions.
In this S&OP step, Directors or VPs of Product management, business development managers, and supply, demand, and financial representatives analyze the health of products in the market and product pipelines and arrive at decisions about product planning.
This is the forum to discuss the current and future product portfolio, New Product Launch and End of Life strategies, and portfolio optimization. That’s not to mention SKU complexity and component rationalization. These decisions might include setting dates for new production or sunsetting to determine project prioritization and resource allocation.
Product reviews are a basic necessity of the business and a core competency of strategic planning.
Other topics discussed in this phase may include the impact on existing products when a new product is introduced, also known as cannibalization, or supersession. Product reviews are a basic necessity of the business and a core competency of strategic planning.
Product Reviews Are Key To Lifecycle Management
Some will contend that their business is not that dynamic and either attempt to integrate portfolio management into other S&OP reviews or do it with less formality. While this may work and there is never a one size fits all, there are clear benefits for a formal process phase. For companies that don’t have a good handle on their product life cycle management process, formalizing this process with a Portfolio Review can help a great deal.
For organizations that do not have a strategy or accountability for slow moving and excess inventory, a monthly meeting for this discussion adds visibility and actions. For companies that are commonly surprised by new products or have an inability to sunset old ones, a simple but regular product review promotes the required collaboration and information sharing.
On the other end of the spectrum, companies in the fast-moving consumer goods, fashion or high tech industries where very short life cycles are the norm, a strong Portfolio/Product Review can be a competitive differentiator. In fact, for these industries and for all companies with large, dynamic product portfolios (SKUs numbering in the hundreds, thousands, or even tens of thousands) a Portfolio Review is a must.
A Product Review means you manage your products instead of them managing you.
Without this formalized, structured step within a mature or vanguard S&OP process, your portfolio and inventory strategies become unmanageable and chaotic. With a strong Product Review kicking off your monthly S&OP cycle you get visibility that enables better demand and supply planning and allows you to manage your products instead of them managing you.
While most companies have implemented some form of an S&OP process, many are still figuring out how to include the Portfolio Review component as part of their regular monthly meeting cadence (e.g. Demand Review, Supply Review, Pre-S&OP, Executive S&OP). As S&OP has evolved to integrate more functions of the company, the Portfolio Review has emerged as a highly valuable process that has significant positive impact on inventory, revenue, and cash flow.
For practical tips on integrating a Portfolio/Product Review into your S&OP, check out this article.
If you’re looking to make S&OP a reality in you organization, join Eric Wilson at IBF’s Virtual S&OP & IBP Boot Camp on February 22, 24 and 26, 2021. It’s the world’s leading S&OP training course that gives you the skills and knowledge to set up your own S&OP process.