Sales and Operations Planning (S&OP) is a fantastic concept when you first hear its tricks and promises. It helps organizations align their demand and supply to meet the needs of their customers and achieve their business goals. Imagine all critical business functions with a common purpose and optimized supply chain plan. But unfortunately, the reality is otherwise.
Organizational complexity and the inability to deal with massive data are no longer acceptable excuses with all the advancements in data sciences and technology. Since Sales and Operations Planning is about the right combination of people, processes, and technology, it can excel only when all of these aspects have been considered:
The success of S&OP depends on the effective collaboration and communication of various stakeholders within an organization. The most common cause for unsuccessful S&OP is people. For S&OP best practices to succeed, stakeholders must be engaged and committed. This requires effective leadership, training, and support to ensure that everyone is aligned and working towards the same goals.
A poorly designed process will fail at the risk of stating the obvious, leading to inefficiencies and missed opportunities. For S&OP to be durable and successful, much depends on its design and implementation. Equally, as businesses evolve, the S&OP process must get refreshed to meet changing realities Regular reviews and adjustments ensure that it remains aligned with the changing needs and goals of the business.
With the right enabling technology, the perfect team of people and process will find it easier to get value from S&OP. An advanced supply chain planning technology can help house, organize and manage data and functions in today’s complicated and chaotic world. Considering the vast economic benefits, S&OP affords both companies and consumers, we’ve compiled a list of common reasons Sales and Operations Planning can fail:
1. Poor Leadership
Every S&OP process needs the support and involvement of the C-suite. Therefore, it is best to have P&L leaders with supply chain knowledge leading the front. A McKinsey research found that at high-performing organizations, a higher proportion of executives have an understanding of data and analytics concepts, giving them a better understanding of their organizations.
2. Lack of Functional Involvement
Supply chain management is a collaborative process that combines disparate teams, including finance, marketing, sales, logistics, operations, and supply chain. The idea is that Sales and Operations Planning teams work synchronized on a single platform with a balanced emphasis on sales and operations. Yet as the heartbreaking results of a recent survey illustrate, only 60% of companies have marketing involved, and only 75% have logistics involved.
Without a full bench of business functions, supply and demand planning can never succeed.
3. Complicated Process Design
The success and scalability of S&OP depend on its design and implementation. Too much emphasis on caveats and exceptions makes it hard to see the big picture, and you will invariably find your colleagues or consumers sitting on the 8th meeting of the month with little progress to show.
4. Poor implementation process
Implementing an S&OP process requires significant time and resource investment. Even the best process designs and plans won’t accomplish the expected results if they are not implemented correctly. See Zen and the Art of S&OP Implementation for a roadmap to overcome difficulties in the implementation phase.
5. People-Dependent Tasks
As humans, we like to think that we do our jobs perfectly. The reality is, especially regarding data management and analytics, that having a people-dependent process means bigger delays and errors. An ideal S&OP strategy should minimize the people-dependent tasks and let technology do the grunt machine work while focusing the team’s efforts on making more complex decisions.
6. Poor Forecasting
Almost all S&OP decisions, such as stock levels and production/procurement plans, depend on demand forecasts. Forecasting, therefore, is vital to Sales and Operations Planning. Your forecasting tool must sense demand and deal with large data sets and uncertainty while dynamically learning trends and patterns. However, it is crucial to remember that demand forecasting is not enough, and work must be done to build good decision-making processes using the forecasts as guidance.
7. Lack of Corporate Memory
Scaling and sustaining a robust S&OP process comes down to building corporate memory. First, all relevant data and documentation should be available to stakeholders at any time with one established corporate truth. Unfortunately, reliance on spreadsheets and abundant data control issues make it impossible to achieve this.
Second, independently and consistently tracking and reporting performance indicators is vital for S&OP’s success. Only by recording and monitoring KPIs to minor details can help you build a memory to learn from past mistakes and inoculate your S&OP process from making those same mistakes again.
I know now how messy the reality of S&OP planning is from the textbook version. Yet we must resolve to continue to work on getting the right people, process, and technology to strengthen Sales and Operations Planning. At Solvoyo, we are determined to build the right technology to support S&OP because the rewards of a well-working S&OP process are worth it.
Take Your Sales and Operations Planning to the Next Level
- Eliminating Excel-based and error-prone reconciliation of your S&OP processes
- Harmonizing enterprise data with external data to solidify your tactical demand plan
- Making the most of the new AI/ML technologies with your existing IT investment
Solvoyo is a Gartner-recognized vendor that supports integration with many commercial 3rd-party ERP systems and homegrown systems. Our Sales and Operations Planning capabilities support our other services that range from Demand and Supply Planning to Store Replenishment.