Sales and Operations Planning (S&OP) is an amazing concept when you first hear its promises. Imagine all of the key business functions working together with common purpose with an optimized business and supply chain plan. The reality is perfect S&OP is darn difficult to achieve.
As a freshly minted industrial engineer graduate perhaps I am naïve and idealistic? In my role as an analyst at Solvoyo, I’ve gotten opportunities to work with supply chain teams at different customers improving their supply chain performances. Yet, when it comes to S&OP, the gap between the theoretically possible and the actual business reality seems to be getting wider. Considering the huge economic benefits S&OP affords – I can’t help but investigate why it is so hard for companies to achieve S&OP perfection.
For me – organizational complexity and inability to deal with huge data are no longer acceptable excuses in 2016 with all the advancements in data sciences and technology. Since S&OP is about the right combination of people, process and technology, I’ve organized my findings around these three key ingredients.
The most common cause for unsuccessful S&OP is people. For S&OP to succeed, all stake-holders need to be engaged and committed. To achieve this, 2 things are critical: (i) awareness of its benefits, and (ii) basic understanding of supply chain fundamentals.
1. Poor Leadership
Every S&OP process needs support and involvement of the C-suite. It is best to have P&L leaders who have supply chain knowledge leading the front. Unfortunately, only 48% of P&L leaders today have an understanding of supply chain which often results in poor S&OP leadership dooming the process. (1)
2. Lack of Functional Involvement
S&OP is about a collaborative process that brings together disparate teams including finance, marketing, sales, logistics, operations and supply chain. The ideal is that S&OP teams work synchronized on a single platform with balanced emphasis on sales and operations. Yet as the heart breaking results of a recent survey illustrates, only 60% of companies have marketing involved and only 75% have logistics involved. (2) Without a full bench of business functions involved in thr process, S&OP can never succeed.
At risk of stating the obvious, a badly designed process will fail. For S&OP to be durable and successful, much depends on its design and implementation. Equally, as businesses continue to evolve, the S&OP process must get refreshed to meet changing realities.
3. Complicated Process Design
S&OP processes that even their designers themselves struggle to understand are not recipes for success. Too much emphasis on caveats and exceptions make it hard to see the big picture and you will invariably find people sitting on the 8th meeting of the month with little progress to show. As a wise man once said; ‘Simplicity is the ultimate sophistication.’
4. Poor implementation
Even the perfectly designed process is worthless if poorly implemented. See Zen and the Art of S&OP Implementation for a roadmap to overcome difficulties in the implementation phase.
The perfect team of people and process without the right enabling technology will find it difficult to get value from S&OP. An advanced supply chain planning technology can help house, organize and manage data and processes in today’s complicated and chaotic world.
5. People Dependent Tasks
As humans, we like to think that we do our jobs perfectly. The reality is, especially when it comes to data management and analytics – having a people dependent process means higher rates of delays and errors. An ideal S&OP process should minimize the people dependent tasks and let technology do the grunt machine work while focusing the team’s efforts on making intelligent decisions.
6. Poor Forecasting
Almost all S&OP decisions such as stock levels to production / procurement plans are dependent on demand forecasts. Forecasting therefore is vital to S&OP. Your forecasting tool must be able to sense demand, deal with large data sets and uncertainty while dynamically learning trends and patterns. It is important to keep in mind that demand forecasting by itself 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 strong S&OP process all 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. A reliance on spreadsheets which have huge version and data control issues makes it impossible to achieve this. Second, independently and consistently tracking and reporting performance indicators is key for S&OP to succeed. Only by recording and tracking KPI’s to the smallest details can you build 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 text book version. Yet we must resolve to continue to work in getting the right people, process and technology to strengthen S&OP. At Solvoyo, we are determined on building the right technology to support S&OP because the rewards of a well working S&OP process are absolutely worth it.