Growth. The holy grail of business. All business leaders want it. Success and often livelihoods are determined by it. It’s not so easy.
How many CEO’s or GM’s think about S&OP as a way to drive growth? More based on the topics we see being discussed, but it’s still a tactical process for most. Our 2018 S&OP Benchmarking Study shows that 70% of S&OP processes are sponsored through the supply chain or operations functions. While the majority of these leaders certainly care about growth, it’s not their primary charter and like most executives under constant pressure, they have their hands full with current duties.
S&OP is a process. It’s obviously not a silver bullet for the next killer app or blockbuster product. While the internal supply-side coordination is an important part of S&OP, it doesn’t have to be the only part. It can also be the process that promotes, stimulates, and manages growth. Teams that have progressed beyond the basics of using the process for demand and supply balancing can progress to the mindset of using the process for growth. Let’s discuss a few things to make this happen.
Vision and Marketing
Changing the way people perceive something is not easy, especially if it’s been a certain way for a long time. We were working with one company that was doing a re-launch with more commercially-oriented names for S&OP meetings. Perhaps that can help, but more is needed. If it walks like a duck, people will still see a duck. Meat must also be behind the marketing.
Update your S&OP Vision, promote, and then walk-the-talk
We suggest S&OP Visions that are 8-12 bullet points about what the process is and is supposed to do for us (including generating results). Work in a few growth-oriented bullets – revenue growth, new markets, new product introductions, margin management, this type of thing. Pull this slide out every chance you get and preach the gospel.
Add Real Commercial Meat
Only 22% of the companies in our 2018 S&OP Benchmarking Study have a regular portfolio review. Improve your Portfolio Review meeting (or start one) to manage growth discussions, here’s a few sample topics to consider:
- Different strategies for managing products through phases of product lifecycle (remember the BCG Growth Matrix?)
- Demand management for new products (defining aggressive profiles and actions to achieve)
- Promotions management
- Pricing and profitability reviews
- Moving at-risk inventory (avoiding write-offs is a form of growth!)
- Growth metrics (e.g. % revenue/margin of new products, new market penetration, new product cycle time, many others)
What about customer discussions? Sure, they need to happen somewhere. We don’t want to duplicate or highjack account planning sessions, but maybe higher level discussions as needed, or a summary metric can bring it together at an aggregate level in Portfolio or Demand Review.
Some of the type of topics mentioned above could also be worked into the Demand Review. Others may include:
- Market strategy
- Competitor activity
- Pricing discussions
- Selected customer discussion topics
- Focus on the committed budget and setting actions to achieve shortfalls before the fire is too high
It’s less important specifically where the topics are addressed, but more important that they are managed in a structured way that results in the right numbers going into a plan with the actions to achieve them using the reports and KPI scorecards to manage the discussions and results.
Figure 1. Serveral Companies Are Now Bringing Growth and Strategic Topics Into S&OP Meetings
The Other Meetings – Supply Review, Pre-S&OP, Executive S&OP
Yes, can all include growth topics, even Supply Review. What are we doing with our excess capacity? How do we improve throughput to accommodate growth? I’ll just leave Pre-S&OP and Executive S&OP for now as I want to focus mostly on the front-end meetings for this article.
If you’re a supply chain or finance leader, bolstering the commercial emphasis of S&OP is a way you can personally contribute to revenue growth! Cool, but you’re not doing this alone. Get your commercial leaders excited about the new meeting agenda (or meetings if need be), metrics, and discussion topics. Also see our article on Getting Sales On-Board with Demand Planning for related information.
By emphasizing growth topics and structuring the conversations around information and action, S&OP can be so much more than balancing supply with demand. It can be the platform for a growth mindset that ignites creative growth ideas and makes them reality.
Download a summary infographic on this topic, and see upcoming conference talks and S&OP training sessions in Asia
We’ll be speaking on “Driving Growth with S&OP” in Hong Kong (Supply Chain Planning & Forecasting Forum) and Jakarta (Indonesia Supply Chain Management Forum) in September and October, and leading 1 Day S&OP seminars in each city too. Please see more on those or just download a summary infographic of this post.