Marketing is focused on volume, the next ad campaign, and a budget increase to cover inflation. Procurement is anticipating a materials cost increase. Manufacturing needs more capacity if the marketing campaigns actually deliver. Supply chain is wrestling with escalating fuel costs, driver shortages, those service enhancements negotiated unilaterally by marketing, sharply higher transportation costs, and port handling charges because of the new Pacific Basin outsourcing initiative. That same outsourcing initiative blindsided you last year with international duty and tax costs and the 3-month in-transit inventory "float" that somehow got left out of the planning.
Everyone has an opinion about inventory. Manufacturing needs the plant warehouse space for expansion and is talking up pushing it to the field and "postponing" final processing. Distribution is championing "risk pooling" and wants it centralized. Marketing says that we are "getting killed" by competitors who have better stock availability.
Finally, the CEO is being hammered on the quarterly analyst calls because of stagnating profits and wants some answers…soon. He or she is being judged in the boardroom and on "The Street" by the profit numbers.
And you are caught squarely in the crossfire of warring spreadsheets, a process that repeats itself every month when marketing and manufacturing face off in the sales and operations planning (S&OP) update meeting.
IEO (Insight Enterprise Optimizer) is the breakthrough product that goes well beyond S&OP and even Integrated Business Planning (IBP). It identifies the marketing initiatives (“campaigns”) that you should actually implement (as well as those that you should not approve) and allocates those budgets to the markets, channels, and products that yield the greatest margin, while simultaneously evaluating the impact on the entire supply chain, from raw material procurement to final customer delivery. IEO shows you which markets, channels, and products are winners and which are losers. It identifies the optimal set of locations and associated volumes and costs for each commodity and time period. In particular, it replaces arguments based on spreadsheets with truly advanced analytics that can directly handle the complexity of supply—demand synchronization in S&OP that is typically poorly addressed.
The above “cost-to-serve optimization” is very useful in analyzing and quantifying all supply chain costs and activities required to fulfill marketing initiatives and corresponding customer demand. In short, it identifies the ultimate objective of senior management: a profit-maximized corporate strategy.