I saw an interesting article from Dave Jordan at the Supply Chain Blog. In it, Dave points out that many companies will be quick to say that they have a sales and operations process (S&OP), however if you look a bit deeper, you find that they are really just going through the motions. The company that Dave looked at had the following issues;
- The marketing plan had a 1 month horizon – nowhere near enough visibility
- The demand planning group was not engaged so the supply planner had to make their best guess as to what the forecast would be
- As a result, procurement planning was a guess at best
- There was no flexibility in financial targets so no alternate scenarios considered
- KPIs were not used to drive improvement
- No agendas, no minutes, no executive commitment
So, how do you ensure that you don’t slide down into this trap? How do you ensure that your sales and operations process (S&OP) continues to add value – more importantly how do you ensure that your S&OP process adds MORE value over time?
- Executive Commitment and involvement – An effective sales and operations process (S&OP) sets forward a plan, and then ensures that plan gets executed. If the people attending the S&OP meeting don’t have the authority to make a decision and see that it gets implemented, the likelihood that the plan get executed has now reduced significantly
- S&OP is used to run the business – In a previous life, I was responsible for preparing our divisional S&OP plans. S&OP was done in Excel, the rest of the company planning happened in the ERP system. It was always a battle to make sure that the S&OP Plan was reflected in the ERP system. At the time, there weren’t any alternatives. Today, you have decision support and planning tools that allow you to do your day-to-day planning and S&OP in the same system. In this way, daily decisions are taken in the context of the S&OP plan.
- Accurate S&OP data – The decisions you make is only as good as the information you have. If the data is weeks old, inaccurate or has calculation errors. You will make bad decisions. As in the last point, if the data used to drive S&OP is the same data that you use to make your day-to-day decisions, you know it’s going to be current (it’s live data after all) and you know if there were accuracy issues they would show up in your daily activities.
- Solutions – not just problems. An effective S&OP meeting is not a whining or blaming session. Effective S&OP is all about creating a plan. If there is an issue, make sure you bring forward AT LEAST one solution to the problem.
- Scenario driven – There is rarely ever a single solution to a problem. Yet how many times have we sat in S&OP meetings where an issue was raised and only one solution was presented? Traditional S&OP tools didn’t allow us to consider multiple solutions, however with today’s scenario based tools and fully integrated data, several possible scenarios can be considered and compared.
- Run effective meetings and keep meticulous minutes - We’ve all been in the meetings from hell. No agenda, hashing the same issues out without finding consensus and then finally after wasting several hours we go away…only to come to the next meeting to discover that no-one captured the decisions. Effective meetings have;
- An Agenda – with realistic time guidelines. Remember that effective S&OP meetings need to include the executive team. Make sure that their time is well spent.
- Defined roles; someone tasked to chair the meeting, someone tasked to keep minutes, and sometimes a timekeeper to make sure the agenda is met. If you are really struggling with effective meetings you can engage a facilitator for a while who will help guide the meeting process.
- An action log that is followed up each meeting until the action is complete.
How do you ensure that your S&OP process maintains its effectiveness and relevance? Comment back and let us know!
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