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Strategic Planning

The S&OP process is more focused on the allocation of scarce resources on a global scale. It looks at common components or available capacity. Instead of most of the energy being invested into getting the forward projection right as well as short-term priorities, effort should be placed on ongoing orders, and long-term potential activity.

Lead time
In project supply chains, another big challenge is determining the lead time commitment in the bid. The lead time is not constant; it is a function of the current load of projects on the factory network, which can be highly variable. This is different than make-to-stock, where typically there is a standard lead time to negotiate a promotional campaign, and there is less need for visibility into production loads and capability.   

The fact that the business model of project supply chains involves an understanding that the customer will wait for the product can create a disincentive to improve reactivity. The head of S&OP at a major industrial company explained: 

“We absolutely do not see it as a priority for competitive advantage to have more clarity and shorter lead times. I haven’t seen lead time in general high on the agenda of decision-makers.” 

This can encourage siloed thinking, the executive continued: “[Factories] typically have no visibility of their products. They measure their own on-time delivery, but whether the products are delivered late to the final customer — they don’t have a clue.