Alignment. Results. Sustainability.
Part 2 - Strong Regional/BU Process, but Global S&OP Needed and Missing at Corporate
This article discusses the case where the region or business unit has a functioning “True” Sales & Operations Planning process, but there is nothing at Corporate connecting business units to optimize the whole. As a result there is waste. Examples can be redundancy in discussion and reporting requirements, as well as disagreement on asset use or capital allocation among other things. First, three things to clarify.
1. True Sales & Operations Planning always needs clarification
True S&OP is the management level, aggregate planning and decision making process across functions. Financial plans come from volume plans providing the direct and integral financial integration. Equivalent names for the process are Integrated Business Planning, Sales, Inventory & Operations Planning (SIOP), or Executive S&OP. We defer naming to client preference on projects, but we call it S&OP in our material. The important point for this article is what S&OP is not. This is not some tactical, order-level detail demand and supply process that is usually led by a manager who runs around struggling to get demand information while finance has their own plans and reviews. Lagging organizations often call this, or whatever they do S&OP. It’s a buzz word and people throw it around. If this describes your situation, I suggest Part 1 of this article is more applicable.
2. Not all enterprises need the Corporate (Global) S&OP level
The primary acid test is if regions or business units share assets, then you need Global S&OP. This is the case for most large companies. There needs to be a formal over-arching process with some structure to allocate on-going asset use and invest future capital. If Corporate is more of a holding company and there are not operational synergies or interfaces across the regions or business units, then a financial rollup is likely sufficient. This does not mean that Corporate adds no operational value. They could provide some operational oversight (like a Private Equity firm does across a portfolio of companies) and/or provide central back office functions to leverage scale.
3. I’m using the terms "regional" and "business unit" interchangeably for illustration
We know there are differences in the terms region and business unit, and of course business units often have regions within them. I am using the terms interchangeably for simplicity to refer to a parent/child relationship with Corporate and corresponding multi-level S&OP or lack thereof.
When you need Global S&OP and don’t have it, no one is managing the full picture as effectively as they could be
Some or all of the following are likely
- Processes and IT are inconsistent across the business
- Redundancies in organization structure and spend occur as business units fend for themselves
- Cross regional or business unit decisions occur haphazardly without sufficient input from the affected
- Disagreement over capital allocations is likely
- Business unit leaders see it, but focus on their own areas
- Corporate gets frustrated because the business units have varied capabilities, and some struggle with their mandates
- Corporate calendar requirements likely don’t consider the BU S&OP calendar
- Operational/S&OP metrics not managed at the corporate level, thus there are no uniform standards across the business where applicable
So What Can Regions or Business Units do when Corporate is behind?
Changing corporate behavior is usually very difficult without outside help. More of our work typically starts on the corporate end with the intent of making improvements across business units. Having said that, this article takes the viewpoint of the progressive regional or business unit leader, what can s/he do?
Ensure your own ship is tight
Recall the caveat for this article was, that you have a functioning True S&OP. Thus, you are likely ahead of other parts of the company resulting less friction with Corporate as discussed in Part 1. Your strong S&OP gives you the information to easily answer their basic questions and objectively challenge their decisions when needed.
Promote your best practices to Corporate
Quarterly business reviews or other enterprise-level events are opportunities to share your best practices. You may consider adding Appendix information where the corporate template is incomplete on S&OP topics (like KPIs for example).
Involve Corporate in your cross-business unit discussions
Maybe you already are, but make sure a leader from Corporate is there, especially central finance. Drag finance into the operational discussion if they are absent. This can be easier to say than do, but will be critical in the future.
Have and share options to buy or sell production or other asset capacity outside the company
You may need capacity from an asset outside of your P&L or have excess capacity yourself. We all know transfer pricing across business units can sometimes be sketchy and not always competitive. Outside bids that are more competitive can be another consequence of a lack of Global S&OP.
Share your best practices with another business unit
While there is usually a healthy competition across business unit leaders, sharing a few ideas across the company with peers helps the greater good. I suggest keeping your focus on maximizing the total enterprise. If your lagging peers implement True S&OP, it’ll build momentum for implementation at the corporate level too.
So, by improving your own business unit with True S&OP, bragging about it, and then helping others, Corporate finally gets it and decides to start a Global S&OP. So what comes next? You know already. As I said above, the items below are actually more of our work with large clients.
The immediate seemingly bad - maybe these things happen
- Reorg – Perhaps a centralized supply chain function, maybe you lose people (direct reporting anyway)
- Assets taken from you, managed centrally through a new structure
- Loss of control? Feels that way, but doesn’t have to be that way if done right
- More KPI targets, some perhaps not set by you
- IT systems – maybe yours, maybe a new one forced on you, maybe you’re first or last to get it
- Uncertainty and discomfort – Absolutely
The longer and greater good
- The improvements elevate the whole company – better talent, better practices, better IT, everyone grows as a result
- The company becomes more competitive – not doing this and remaining uncompetitive is a worse alternative and leads to worse consequences
- You know it is the right thing to do
In the end, it’s a long game and change is inevitable. We can get out in front of it, or wait until someone else does, and have it forced on us. Just keep moving forward.
See book on Amazon
See booklet on Amazon
Full content repository
Company Flyer
Training Flyer
You may also like
Nexview Consulting
We are a management consulting firm that specializes in Sales & Operations Planning and Supply Chain improvement. We leverage S&OP to be the platform for continuous improvement and profitability within client organizations. We also work with clients to improve organizational performance, structure, and enabling information technology. Consulting methods promote sustainability of performance improving behaviors, tangible results, and development of client team members. Our consultants are highly experienced business and consulting leaders with track records of delivering results for clients across the world, typically with larger well-known consulting firms. We are based in the Boston area, but travel worldwide to conduct training seminars, speak at conferences, and work with clients on high-impact, performance improving initiatives.
See also
© Nexview Consulting, LLC ® | Terms & Conditions, Privacy
