Alignment. Results. Sustainability.
Other terms for Sales & Operations Planning
There is much confusion and misuse of the term “S&OP”. As a result, you may have heard the term wrongfully associated with the detailed demand/supply SKU level process usually led by managers. You may have also heard or used other identical terms such as Integrated Business Planning (IBP), Executive S&OP, or Sales, Inventory & Operations Planning (SIOP). It doesn’t matter what you call it, only what you do.
True Sales & Operations Planning always needs clarification.
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Most leading companies have now implemented S&OP.
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Once the foundation is in place, companies typically achieve improvements of 10-30%+ in key metrics over the life of a project (months)
Operational KPIs Improved According to Survey Respondents
Source: Nexview Survey
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Financial KPIs Improved According to Survey Respondents
Source: Nexview Survey
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S&OP connects strategy to the detailed planning and execution processes below.
S&OP also provides an upward feedback check on the strategy. Is the strategy working, does it need to be adjusted?
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Mechanically, S&OP is a cadence of typically monthly meetings, that manage the components and build up of the operating plan.
This cadence structures the decisions, KPI management, and accountabilities across the functions that drive the operating plan.
Note there is an executive owner at each step, and this group convenes in the Executive S&OP step for the business level rollup discussion.
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This is a sample of a baseline design for illustration purposes. The design needs to be tailored to each company’s value chain, business structure, P&L structure, org structure and supported by an aligned IT reporting structure (see below 3 legged stool diagram). The same concepts apply to non-manufacturing industries, we just need to match the component meetings and KPIs to the right flow of the value chain. See our case studies here.
The build out of each component meeting has several items. In general, there's a little more to this than standing up a few meetings, as will be reinforced in subsequent sections.
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The cadence structures the decisions around numbers to balance often competing priorities to ensure the best outcome for the whole.
S&OP is the coach that unifies the team.
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All leadership teams discuss items such as listed below, the mature ones structure the conversations and decisions within the S&OP framework.
Topics managed throughout the S&OP meeting cadence, many are strategic.
Source: Nexview Survey
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KPIs are managed and layered throughout the meeting cadence.
KPIs are specific and lower level for the initial functional meetings, then become higher level for the cross-functional audiences of IOR and Executive S&OP.
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The perception of S&OP is too often limited to a control mechanism, it is that, but mature processes also manage and drive growth.
S&OP is not a silver bullet, but a platform to structure the growth discussions, decisions, and progress against goals.
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The S&OP meeting components are simple to understand, but designs, interfaces, and data flows can get complicated in large, global organizations.
This is a design example just for a system of Demand Reviews. Global organizations usually have multiple meetings of each type and layered S&OP between BU's and Corporate.
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The S&OP design needs to include and integrate the 3 legs below.
S&OP design efforts frequently surface inconsistencies across the 3 legs
- Awkward org structures will suggest there should be too many component meetings or multiple owners are needed for a single component meeting, we want one owner for each.
- Business Unit and/or org structure could be in flux due to unintegrated acquisitions or other reasons
- Internal financial reporting under the enterprise level doesn’t reflect the actual product roll-up or P&L rollup
- S&OP is a data intensive process. To aggregate and roll-up this detail to the right level, you will need an aligned data structure and IT automation, better check it and plan for it.
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If these legs do not align, the executive team needs to address these white elephants for S&OP to work optimally. We can start, but there will be rework when management sorts out the awkwardness that is readily apparent to the design team.
Financial Integration is difficult, but fundamental to a real S&OP process.
If integration is not a priority for your CFO, you will have multiple plans, monetary and volume plans that don't align, redundant management meetings, confusion, and frustration.
Finance is a critical partner, and there are differing priorities that need to be worked through during a project.
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The S&OP process not only aligns an internal management team, but also helps the P&L leader better integrate and manage upward.
There are 2 cases, whichever is your case, S&OP helps the P&L leader because the answers are usually already in your S&OP plans/process.
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We can start the meetings fairly quickly, but S&OP is a work-in-progress and is a maturity journey.
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S&OP is a major project with many integration points, high visibility, high risk, but high reward. It is what leading organizations across industries do to be competitive and keep improving.
Hopefully you have the following conclusions among others:
1.
This is no where near the tactical, SKU-level demand and supply balance that is often mislabeled as "S&OP". This is much more than a supply chain or ops thing.
2.
Strategy, Leadership, Customers, and Growth are part of S&OP.
3.
This is hard and involved, but will be highly impactful. ROI needs to be measured with executive accountabilities in place to keep the pressure on when the inevitable challenges arise.
4.
Directors and Managers have no chance of implementing or executing a successful S&OP process on their own. Uninvested cross-functional leadership leaves them and the company on the path to the order level detail only.
5.
What executive on any management team wouldn't want this for the good of the company?
6.
Complexity and challenge only increase over time, and this is your best chance of thriving within it. Your competition is likely already doing this and if you're not, it won't take too much longer to show.
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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.
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