First off, the processes I managed were very short-term and detail-focused. It’s natural to want to solve problems that the company is dealing with in the near term. Fighting fires becomes addictive: people love to point to recent accomplishments and bask in their ability to solve complex problems to save the day (I know I did). Managers who like to dig into the details enjoy solving near-term challenges. Problem is, if you let the S&OP process become just a detailed review meeting, it becomes difficult to refocus the process at an aggregate level, where it adds the most value. A near-term focus ignores strategic and tactical changes in people, process, capital, market, and financial strategies.
Through trial and error, I have learned how difficult it can be for the S&OP leader to facilitate this data intensive, highly collaborative process. To achieve balanced and aligned plans, the team must share its data in the right format, aggregation, and units for each key stakeholder. Participants must be able to contribute feedback back in a timely fashion. A series of cross-functional consensus meetings must be coordinated to synchronize the plan and possible scenarios.
I was told, “You don’t need a software system to run an S&OP process.” I can tell you today that I learned my lesson: spreadsheets can’t facilitate the process. It takes a dedicated S&OP solution with embedded collaborative workflow and rules-based exception messaging. I wish I’d had access to today’s S&OP systems when I was implementing S&OP processes 10 and 15 years ago.
Do not underestimate the time and effort required to get the right data in the right format. Aberdeen reported that 65% of S&OP time is spent gathering, collating, verifying, and manipulating data. The process is data-intensive, with data originating in multiple systems. Because the data exists in different aggregations, timeframes, and units of measure, it requires scrubbing, correction, and synchronizing before any analysis can take place. Most companies still use spreadsheets to manage their S&OP process, which only makes matters worse. Spreadsheets are not designed to handle and manipulate large amounts of data. For anything beyond a limited S&OP pilot, spreadsheets quickly deteriorate and fail.
Sales & Operations Planning should be more than just a basic demand — supply matching exercise; it should mitigate and plan for events in critical business areas such as finance. Aligning financial and operational plans is the best way to ensure executives stay engaged in the S&OP process. Strategic planning, financial planning, and S&OP should be closely tied together. Otherwise, separate planning processes based on different data and assumptions and run by different teams of people inevitably lead to completely different, unaligned plans. Decisions made in the strategic or financial planning processes cannot be easily translated to the S&OP process, while decisions made in the S&OP process are not reflected in strategic or financial plans. All this leads to missed opportunities and disassociated goals and objectives.
Integrating S&OP and strategic planning into one comprehensive Integrated Business Planning (IBP) continuum revolutionizes the insight available for management teams to guide the business. Global, regional and multi-divisional organizations can examine accurate data from budgets, forecasts, orders, inventory, and production plans. All plansno matter what their level of aggregation, units of measure, or timeframeare built from the same base data. Plans that are fully integrated and reflect the latest company-wide intelligence ensure informed decision-making.
Best of all, it eliminates the all-to-common questioning of “which data is right” or “whose plan is better.”
The objective of a mature S&OP process is to ensure supply capabilities (manufacturing, purchasing, distribution, etc.) can meet projected customer demand in a manner that meets or exceeds the company’s financial goals. Less-developed S&OP processes spend more time building a consensus demand plan than determining whether that demand plan can actually be accomplished with supply capabilities. Too often, the production team decides that the consensus demand plan is infeasible or does not align with their objective of minimizing manufacturing costs. Purchasing may determine that the consensus demand plan contradicts with their objective of minimizing purchasing costs. When this happens, the demand plan is not used or, alternatively, excess is purchased for better prices. Expected savings from an improved forecast is not realized. I know it can happen because it happened to me.
I learned that for an S&OP process to be truly effective, you need to align objectives and analyze the tradeoffs between supply, inventory, purchasing, and distribution. It is critical to run multiple “What-If” scenarios to visually and numerically compare projected volumetric, financial and customer service outcomes.
Im not completely convinced that a time machine would be a good thing, based on the scary idea of time paradoxes. Changing our supply chain past might alter the present in unexpected ways. But it sure would be fun.
What changes would you make to your past supply chain processes, based on what you know today?
Product Marketing Director Hank brings more than 25 years of experience building high performance supply chains. This experience includes evaluating, selecting, implementing, using and marketing supply chain technology. Hank’s graduate degree in SCM from Michigan State, numerous SCM certifications, diverse experience as a supply chain practitioner and experience in senior marketing roles with leading supply chain solution providers helps him to bring a unique perspective on supply chain best practices and supporting technology to the Voyager Blog.