In this second post in our series of S&OP myths we highlight the need for flexibility in the S&OP process to facilitate a robust and repeatable process that can support your company’s business objectives.
Myth: “S&OP is Rigid; Our Business Moves Quickly and is too Unpredictable”
This myth has been propagated and reinforced due to a misconception that an S&OP process needs to be run in a standard way to be effective. For years consultants have talked about a standard 5-step S&OP process (Product Review, Demand Review, Supply Review, Financial Review, Executive Review). In reality there is no standard process that will work for every company. Just like when implementing new transactional business processes supported by an ERP solution, the S&OP process and supporting technology needs to be configured to meet your companys unique business requirements.
Another reason this myth stays alive is due to the fact that many S&OP processes are supported by inflexible technology (spreadsheets and ERP systems). The technology supporting the process makes it difficult to adapt the S&OP process to changing business requirements even variations within your own company. Too much time is required to compile new data, reconfigure the data to reflect the change in tables and graphs, and to meet the monthly planning needs of new S&OP participants. The inability to adapt and change causes missed opportunities, missed deadlines and a deterioration of the S&OP process.
Reality: “S&OP is All about Planning for and Managing Change”
S&OP provides a “window into the future”, so that you can 1) see potential problems ahead of time, 2) take proactive and corrective action, and 3) prevent potential issues from becoming problems that spiral out of control.
Sales & Operations Planning is all about determining whether future demand can be met with projected supply in a way that meets financial objectives and customer desired service levels. The S&OP process needs to look far enough in the future to provide adequate time to make required people, process, capital, and business strategy changes (see part 1 of this series for more information).
Often companies are too focused on the short-term spending almost all of the time ensuring orders are fulfilled on time and extinguishing the latest fire. You get into a perpetual firefighting mode because you don’t have the time to get out in front of the next wave of issues and actually start taking proactive steps to head off the issues before they happen. You need to start identifying capacity issues, supply issues, distribution issues, financial issues and more with enough time to develop action plans to mitigate the issues before they happen. There still will be fires to fight, but by avoiding the majority of surprises the team can spend more time on “what-if” scenario analysis and other value-added activities.
Of course you need to have a system that is designed to handle the data and process facilitation complexities while providing the power to visualize data, analyze problems and develop solutions in a user friendly interface and with the flexibility to easily change as required to meet new business needs. Today’s modern S&OP / Integrated Business Planning (IBP) solutions are designed from the ground up to meet the challenges of advanced business planning.
What myths or untruths have you heard about S&OP?
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Fifteen years ago, I worked for a company that embraced Lean 6 Sigma as a core operating fundamental. Just about every member of the management team w