First emerging well over 35 years ago, sales and operations planning (S&OP) has moved from catchphrase status to mainstream adoption among the world’s large supply chain-focused organisations. A current Google search turns up over 78 million entries and a search on the professional networking site, LinkedIn, finds more than 32 000 individuals who list the term ‘S&OP’ in their profiles.
The appeal of S&OP lies in its ability to drive dramatic improvements in key business performance metrics — operating costs, inventory requirements and top-line growth. (Read how a leading plastics manufacturer for the personal care and pharmaceutical industries used S&OP to greatly improve customer satisfaction.)
A recent study indicates that top performers apply S&OP to a far greater extent than those companies that merely practise S&OP. In fact, these top performers have also begun to take the next step of integrating their S&OP and financial planning processes to drive truly integrated business planning (advanced S&OP). As a result, top performing organisations find that S&OP is 68% more effective at driving benefits than it is for other organisations. These companies develop highly mature S&OP processes that leverage key best practices and, as a result, realise significant performance improvements and create an opportunity for competitive advantage.
Following are seven key practices that will help you unlock the benefits of S&OP in your organisation:
- Match objectives to processes
Review your S&OP meetings to identify more efficient or more inclusive methods that could improve results. S&OP should marry all four levels of decision-making: strategic, tactical, operational and executional.
- Adopt an integrated value chain perspective
Advanced S&OP processes need to be inclusive: Within the manufacturer, cross-functional executives from sales, marketing, operations, finance, R&D, and IT need to be included. Beyond the manufacturer, it is critical to include suppliers and retail players to align processes to plans and expectations. (DOWNLOAD the Value Chain Transformation through Integrative Improvement eBook to find out more about achieving end-to-end value chain transformation.)
- Reflect tailored business streams in policies
Tailored business streams are a necessary operating model to manage complexity. Therefore, S&OP policies need to reflect the number and types of business streams and the policies associated with each.
- Leverage technology
Today’s vast amount of data is more detailed and more quickly and easily available. Incorporate technology that offers real-time, decision-based information, linking suppliers to manufacturers and retailers.
- Get closer to demand
In the past, S&OP data was mostly historical, relying on high-level averages based on regional sales for the previous month. With more detailed data available, S&OP can improve forecasts by assessing and dealing with the drivers of variability in the supply chain.
- Account for variable elements in new product and promotion cycles
Advanced S&OP processes are integrating predictive models to simulate the impact of various supply and demand scenarios, including the impact of pricing and merchandising decisions. In addition, more companies are looking to situations that are the exception rather than the norm, managing these circumstances with exception alerts and policies focused closer to near-term consumption.
- Align to joint KPIs
Historically, companies have relied on dissimilar metrics across different functions. Decisions have been based on reaching department targets rather than thinking about what would be best for the company as a whole. More companies today are ensuring that performance metrics and targets are aligned across functions within the company, and also across different companies in the value chain.
The best S&OP leaders create a culture that leads to one concise plan and great transparency; so the first step to ensuring success is having a process with agreed-upon timing and objectives. Once agreed, follow standard operating procedures, schedule meetings up to six months in advance, and be alert to identify struggling elements before they derail the process. The reward will be ample, as you’ll soon realise that few business improvement initiatives match the economic return that implementing an effective S&OP process can generate.
|The TRACC framework helps organisations build standardised and integrated good practice and performance capacity across their Plan, Source, Make and Deliver functions. Simultaneously it accelerates their collaboration and alignment capacity to build world class end-to-end value chains, enabling the organisation itself to become the ultimate source of sustainable competitive advantage.|