Four Keys to S&OP Effectiveness (continued)

In my previous blog post, I compared a pilot flying from New York to LA at night without any modern navigation systems or instruments, to supply chain teams trying to effectively manage their organizations without a proper S&OP process. Obviously, the likelihood of either arriving at their intended destination in an effective and timely manner is quite slim. Successful sales and operations planning provides a navigation system to help determine where you are going, where you have been, when you are off course, and how to get back on course. To be effective, S&OP must:

• Bring together demand and supply planning (often referred to as East-West integration)
• Bring together Finance and Operations (North-South integration).
• Tie volume and mix plans together
• Facilitate S&OP on-demand, not only on-schedule

I covered the first two bullets in my last post, so let’s discuss the other two here.

Key #3 Tying together volume and mix plans

One of the stumbling blocks of traditional S&OP is that volume-only plans often end up being infeasible when disaggregated to the mix level. The challenge is to translate the aggregate, volume-level plans to a SKU or mix-level operational plan and then test the feasibility of the plans before committing to them. Otherwise, the S&OP plan will lose credibility within the organization. The second challenge is to keep the plan feasible. It sounds good to talk about aligning daily operations with S&OP objectives. But to achieve true S&OP maturity, executives and managers throughout the enterprise must find a way to reconcile demand and supply, Operations, and Finance on an ongoing basis, not just as part of a periodic planning and review cycle. The way to bridge the gap between volume and mix planning is to bridge the supporting systems and processes. For most supply chains, data needs to flow between different planning and execution systems. And it is what and how things take place between these systems that companies are struggling to manage.

Key #4 S&OP on-Demand, not only on-schedule

While the monthly S&OP meeting is important, mature firms develop a way to revise plans and take action any time the plan is at risk. Companies with a modern S&OP process enable a continuous flow of course corrections to help generate more effective results. Here are a few goals for S&OP on-demand, not only on-schedule:

Goal #1: Unshackle yourself from the calendar

You don’t want to review your plan (and your performance) only once a month. You need more flexibility to respond to any events that have an impact on your S&OP objectives. Having a complete representation of your supply chain enables people to understand cause-and-effect in real-time rather than as part of a review process.

Goal #2: Gather and analyze data faster

In some firms, it takes three or four weeks - or more - to do one cycle of S&OP data collection and analysis! This makes mid-cycle course corrections impossible. This is a direct result of the number of disparate systems being used to feed the S&OP process. When there are so many islands of data, the focus ends up being on data consolidation rather than data analysis.

Goal #3: Encourage collaboration across your enterprise

You need to exchange detailed S&OP data with every other function, location, division, and legacy system in your enterprise. And you need to support both planned and ad hoc discussion and consensus-building with multiple stakeholders in your company whenever it’s required. It is important that that collaboration happens in the same system in order to provide the right context and to track the analysis and commitments.

Goal #4: Support data integration across your supply chain

You also need to exchange detailed S&OP data with all of your trading partners across your extended supply chain. The most mature enterprises support ongoing decision making and consensus-building with outside partners, including suppliers and contract manufacturers. Finding a way to support on-demand S&OP may not be easy. This likely involves making changes to your process, information, and technology. But this capability is a vital key to the S&OP promise.

S&OP in the 21st CenturyAs the S&OP process continues to evolve and mature, a different interpretation and expectation for S&OP is emerging that entails better, broader goals. This recently published eBook elaborates on the evolving horizontal S&OP process capabilities that are required in order to achieve a transformation. Download your own copy here.

Additional Resources

• S&OP frequently asked questions