The Three P’s of Sales & Operations Planning Success
The formula for business success varies greatly from industry to industry. However, most business leaders believe when you focus on the right areas and create a winning culture, success will follow. Marcus Lemonis, the star of The Profit, a CNBC reality show about saving small businesses, says the three keys to business success are people, process, and product. When it comes to Sales & Operations Planning (S&OP) success we can slightly modify Lemonis’ advice for the 3 P's to people, process, and platform (enabling technology).
While providing his expertise to struggling businesses, Lemonis stresses the importance of having the right people with the right skills in the right roles to be successful. Having people with not only analytical skills but also people, communication, and negotiation skills is critical for S&OP success.
The person who owns the S&OP process must have cross-organization influence, be a strong leader, able to set an S&OP vision, and able to manage change to execute that vision. Key S&OP process participants also need to be very familiar with the company’s products, customers, and strategic objectives and goals to be successful in their planning roles.
Lemonis stresses both streamlined and documented processes are keys to ensure a business’s efficiency and success. S&OP spans business functions, pulls data in different formats and units from multiple systems, and requires significant collaboration to produce a balanced and aligned plan. A repeatable, documented process with a clear timeline, responsibilities, metrics, and outputs is key to success.
Lemonis’ final ingredient for success is a company’s product. Here we take a bit of a departure when applying the 3 P's to the S&OP process. Due to the data intensive nature of S&OP and the need to conduct rich and robust analysis, the third critical P for S&OP is the platform used to enable the process.
Many companies’ S&OP processes are still run on spreadsheets and home-grown solutions that require a lot of manual intervention gathering and manipulating the data. That leaves little to no time for value-added analysis and running the S&OP process. Spreadsheets and legacy platforms inhibit the ability to run multiple “what-if” scenarios, quickly balance trade-offs, and view your operations across multiple units of measure.
A technology platform that provides a rich set of capabilities will enable S&OP process participants to allocate their time to more value-added activities that lead to new opportunities and reduced risks.
With the right people and process in place, the enabling platform should speed and automate many of the routine processes, create dynamic visualizations of potential risks and opportunities, and drive cross-department and external collaboration. S&OP planners can now focus on the most critical opportunities and develop feasible alternatives for evaluation in the executive S&OP meeting.
The checklist below highlights the critical platform capabilities required to support a comprehensive S&OP process.
S&OP Enabling Technology Capabilities Checklist
- Integrate S&OP and long-range strategic planning under one comprehensive planning platform
- Perform fast simulations, comparisons, and ‘what-if’ scenario analysis
- Compare actual performance to plan
- Develop financial and volumetric plans with multiple currencies
- Plan across global, regional, and multi-divisional organizations
- Assess timing, impact, and risk of new product introductions
- Visualize operational risk and develop risk management plans
- Assess risks around key components and vendor capacity
- Model over multiple time horizons
- Translate between detailed and aggregate plans
- Support alternate product aggregations
Supply chain practitioners continue to struggle with balancing supply and demand even though the S&OP process, which was supposed to address this issue, was introduced more than 30 years ago. This is partly due to the inherent challenges of multifunctional processes and the ever-increasing complexity of the supply chain.
However, the benefits from mature S&OP capabilities are well worth the effort. According to Aberdeen Research, companies with best-in-class S&OP capabilities have a 21% shorter cash conversion cycle, 23.8% higher sku-level forecast accuracy, and a 4.3% customer service level advantage over all other companies.
If your company seems stuck and can’t get to the level of maturity you would like in your S&OP process, follow Lemonis’ 3 P's of Success modified for S&OP.