ning, forecasting, and replenishment (CPFR) process.
CPFR is a business practice developed by the
Voluntary Interindustry Commerce Solutions (VICS)
organization to help trading partners share market
intelligence for planning and fulfillment of customer
demand. By marrying the two, Sony hoped to achieve
results that go beyond the traditional, short-term benefits typically realized from each process on its own.
Here’s how Sony accomplished this integration and
improved its supply chain planning process to meet the
new realities of the consumer electronics marketplace.
SHIFTS IN THE COMPETITIVE LANDSCAPE
Sony Corporation, with its history of innovation, has
long held a leading position in the consumer electronics market worldwide (see the sidebar, “About Sony”).
In mid-2009, however, the company had to address
shifts in the competitive landscape in order to maintain its market position.
In the previous five years, the television industry had
been revolutionized by flat-panel LCD (liquid crystal
display) technology, a development that opened the
way for new competitors that specialized in execution,
speed, and cost control rather than product innovation and quality. Next, the “Lehman shock” in late
2008 caused a worldwide contraction of trade and
credit that led manufacturers and retailers alike to
intensively focus on cash flow and inventory. Then, the
second-largest consumer electronics retailer in the
United States, Circuit City, ceased its retail operations—an event that not only demanded Sony’s
immediate, tactical attention but also mandated a significant adjustment to its channel strategy. In this
challenging environment, it was becoming clear to
Sony executives that better supply chain management
would be critical for maintaining the company’s competitive edge in the future.
Sony reacted quickly to its most pressing supply
chain issues at the global level. Executive Deputy
President Yutaka Nakagawa reduced the number of
parts and materials suppliers by more than 50 percent and targeted purchasing cost reductions of 20
percent in fiscal year 2010 through process improve-
WHAT IS SALES AND
OPERATIONS PLANNING
(S&OP)?
Sales and Operations Planning (S&OP) is by now a
well-known principle. But many companies have
yet to implement it, and not everyone is sure
what it exactly means. Sony Electronics has found
the following definition from APICS Dictionary, 9th
ed., to be helpful:
A process that provides management the
ability to strategically direct its businesses
to achieve competitive advantage on a con-
tinuous basis by integrating customer-
focused marketing plans for new and exist-
ing products with the management of the
supply chain. The process brings together
all the plans for the business (sales, market-
ing, development, manufacturing, sourcing,
and financial) into one integrated set of
plans. It is performed at least once a month
and is reviewed by the management team
at an aggregate (product family) level. The
process must reconcile all supply, demand,
and new product plans at both the detail
and aggregate level and tie to the business
plan. It is the definitive statement of the
company’s plans for the near to intermedi-
ate term covering a horizon sufficient to
plan for resources and to support the annu-
al business planning process. Executed
properly, the sales and operations planning
process links the strategic plans for the
business with its execution, and reviews
performance measures for continuous
improvement.
ments and rationalization of payment terms. Sony
also divested manufacturing assets through alliances
with contract manufacturers. However, these cost-reduction initiatives were just the first step; the company also needed to find ways to collaborate more
effectively with its key retail partners. It was at this
point that Sony Electronics stepped to the forefront
