S&OP is an integrated business management process through which planners, managers and the leadership team continually achieve focus and alignment among all functions (sales, finance, manufacturing, procurement, supply chain, etc.). It enables the company to take the best course of action in maximizing the balance of inventories, service to customers and operational cost.

 

Read more about how to develop a strong S&OP process and organization here (link)

S&OP traditionally provides an excellent framework to decide among different business scenarios. So, if companies are working with CO2 metrics why not plug these into the S&OP process? This will provide great visibility in the carbon impact and enhance S&OP decision making. Ultimately contributing to supply chain performance, strategic alignment, the sustainability agenda, and brand image. In this article we will discuss how it would work in practice.

Why would you combine S&OP with Carbon?

We see several business reason why to include CO2 in S&OP:

1. To have insight in overall carbon footprint and impact of S&OP decision making
2. To create increased awareness of carbon impact of the company and the supply chain
3. To have the ability to make carbon footprint reduction decisions (which typically also have a cost reduction effect and improve supply chain resilience)
4. To potentially optimize of the product portfolio profitability
5. To contribute to engagement with stakeholders and meeting customers’ and governments’ rules and regulations

How would it work in practice?
The first step is to link the company’s carbon metrics to the related supply chain activities. Every supply chain activity from sourcing, manufacturing, transportation to sales is responsible for a certain amount of CO2 (refer to the upper quadrant of figure 1 for a visual example). In the most mature form, the metrics will allow the company to calculate total emissions (across scope 1, 2 and 3), carbon intensity (e.g., CO2 per euro of margin per product), energy consumption per supply chain stage, carbon footprint per product, and several other metrics. The more complete the set of metrics is, the more sophisticated the scenario calculations can become, but it is smart to start simple.

The second step is to integrate CO2 information into the S&OP tools (including the addition of master data tables and enriching calculations, dashboards, and reports). This will give S&OP decision makers visibility on the CO2 impact of their S&OP decisions. For example, what is the CO2 impact of sourcing raw material from supplier A as compared to Supplier B? How much CO2 do we save if we produce at facility X instead of Y? In the overview above, you can see an example of supply chain scenarios and the number of questions your company will be able to answer.

Choose the right implementation approach
Of course, a single size does not fit all. Your company may currently not have all or the required granularity of carbon information. That is why we have designed 3 different complexity levels to support your journey.

Get in touch
To kick-start Carbon-enhanced S&OP within your organization, get in touch with us via paul@4supplychain.com or valerio@4supplychain.com