S&OP: The essential do’s and don’ts for Sales & Operations Planning
Sales & Operations Planning (S&OP) is indispensable for all organizations with a sizeable goods flow, yet many companies struggle with it. We have put together an overview of essential do’s and don’ts.
Hans van der Drift, a partner at Involvation, sees many European organizations struggling with Sales & Operations Planning. “For an S&OP project to be implemented successfully, it must be built on the following four pillars:
- The process
- The roles
- The people
- The culture
The project is destined to fail if any of the pillars are weak or missing.” To increase the chance of success, van der Drift offers some tips and advice, as well as a word of warning about common pitfalls.
“If employees lack the right competencies, you should not be afraid of moving them into different roles.”
1. DO: Start with the ‘why’ of Sales & Operations Planning
S&OP is important for an organization, of course, but that fact alone is not enough to justify its implementation.
“The decision to implement or improve S&OP must be based on a business driver,” says Van der Drift. ”This ‘why’ subsequently helps to get the relevant people involved.”
2. DO: Involve the right people
Virtually every book about S&OP states that commitment from the management team is crucial. “So what happens? The management team is invited to attend the meetings as soon as S&OP starts to be discussed. But first it’s important to look at which process has to be set up.”
“If you’re still discussing the operational process, there’s no point in involving the management team,” comments Van der Drift. Likewise, there is little sense in inviting operational people to discussions about setting up the tactical process. “If you do, you’ll get an operational approach to tactical or strategic issues, and that never generates the right answers.”
3. DO: Use S&OP to determine the right planning horizon
“There are various aggregation levels in terms of preparations, data and precision. A short-term plan should be much more detailed than a long-term one.”
An organization cannot determine the right horizon and associated aggregation level until it has a clear understanding of why the S&OP process is being set up. Only then can the organization involve the right people in the project.
4. DO: Move employees into different roles if necessary
For a project to be implemented successfully, it is important that the process design works. Besides the structure and the systems being aligned, the people must also be able to operate within that process.
“This means that employees must have the right skills, and you can train those if necessary. However, they must also have the right competencies, and you can’t always train those. An organization should not be afraid of moving people into different roles if they lack the necessary competencies.”
5. DON’T: Focus only on the ‘hard’ side of the S&OP process
According to Van der Drift, one common mistake is that companies often focus on the ‘hard’ side of the process and forget all about change management.
“S&OP in most cases is supply chain-driven. Supply chain colleagues often understand the reasoning behind it, but other departments have a different take on things. If you fail to translate it into benefits for the other departments, supply chain will remain a lone voice in the wilderness and it will be difficult to gain commitment from the other disciplines.”
This means considering how each department works, what they can get out of the S&OP process and how they want the information to be presented to them.
“For example, if you involve sales without creating sufficient commitment, they will vanish again as soon as they become busy and their priorities shift – which is precisely when the S&OP process is important.”
6. DON’T: Put everything on the agenda and hold endless meetings
When you’ve got a number of managers together for a meeting, it can be tempting to put all kinds of side issues on the agenda too – matters that do have some relevance for supply chain, sales and finance, but are not related to planning.
“If you’re not careful, you’ll end up with a huge agenda and the team will spend half a day discussing pretty much everything except planning. When deciding on each agenda item, ask yourself whether it really relates to planning or whether it should be discussed during a different meeting.”
7. DON’T: Assume that the organizational culture is irrelevant in S&OP
The organizational culture is one of the success factors in S&OP, but it is an aspect that is often overlooked. “It’s important to define which cultural habits within your organization could stand in the way of the project’s success,” says Van der Drift.
“That could be anything, from a weak supply chain to a lazy meeting culture. If you fail to tackle these aspects, you considerably reduce the likelihood that your S&OP project will be successful.”
This interview has also been published by MT.nl
