Sales & Operations Planning is essential in organisations with supply chains of any substance. Many companies struggle with it though. A summary of do’s and don’ts.
Hans van der Drift is partner with Involvation, a consultancy that focuses on supply chain management. He observes that many organisations struggle with Sales & Operations Planning (S&OP). “For a successful S&OP project, four aspects have to be addressed: the process, the objectives, people’s abilities and the company culture. If one of these pillars is weak, then there is a big risk that the project will fail”. In order to increase the likelihood of success, van der Drift has a number of tips and recommendations. And warnings for common pitfalls.
Of course S&OP is important for organisations, but S&OP is a means to an end, not an objective in itself. “There have to be business drivers behind such an initiative”, says van der Drift. “This ‘why’ subsequently helps to get the right people at the table”.
Virtually every book about S&OP will state that management team commitment is essential. “So what is the consequence? The MT is invited automatically to the S&OP meetings. But it is important to consider what sort of process is being implemented. In an operational S&OP process, there is little added value in having the MT at the table”, says van der Drift. Nor is it a good idea to invite operational people when defining a tactical process. “In that case you will get an operational approach to tactical and strategic questions and that will never lead to the best answers.”
“There are different aggregation levels for preparations, data and accuracy. A short term plan is much more detailed and analytical than a midterm plan.“ Once an organisation has determined why it is implementing an S&OP process, the right horizon and aggregation levels can be determined and the right people can be involved.
For the successful implementation of a project, the process design has to be right, the structure and systems have to be aligned, and the people have to be able to fulfil their roles in the process. “This means that the people have to have the right skills and competencies. Skills can be trained, but learning new competencies is not always possible. Consequently, organisations should not refrain from giving people other roles if necessary.
An important pitfall according to van der Drift is that companies mainly focus on the hard aspects of the process and forget about change management. “This can be particularly harmful if S&OP is driven by supply chain. Different functions have different views and priorities. If supply chain fails to make the right translation to the other functions, they will struggle to really involve them.” A right translation takes into consideration how these other departments operate, what is in it for them and how they want information to be presented to them. “E.g. if sales participates in the process but is not really committed, then they may not attend when the pressure is on and priorities change. Exactly when S&OP could have the highest added value.”
When a number of managers get together for a meeting, it is tempting to put all sorts of issues – that may affect supply chain, sales and finance, but have little to do with planning – on the agenda. “The risk is that the agenda becomes overfull and the team spends half a day meeting about many topics except planning. Before adding anything to the agenda, validate whether it really is a planning issue or whether it could better be discussed in another meeting.“
One of the prerequisites for S&OP is the right company culture, but this is a factor that is often forgotten. “It is important to define which cultural habits in a company could jeopardise a successful project,” says van der Drift. “This can be many different things, like a supply chain that does not have a strong position or a laid back meeting culture. If these aspects are not addressed, chances of a successful S&OP project will be reduced.”
Source: MT.nl