The Do’s and Don’ts of Sales and Operations Planning
Most business executives would agree that effective S&OP should lead to competitive success. But S&OP means different things to different organizations. What makes S&OP a "secret sauce" is dependent on a few key factors.
Having the right people in the bus. First and foremost, it is essential to obtain executive-level sponsorship. S&OP strategies fail without top-down support for the plan. Next, it’s important to create cross-functional teams that consist of sales, marketing, operations, finance, product development, and R&D. This step will eliminate organizational silos, promote shared communication and collaboration across the enterprise, and help gain better visibility into the pain points and success factors within individual franchise/business units.
Sales and marketing are brought in, but not bought in. Educating sales and marketing teams about the S&OP process is a start; over time it is simply not enough. Without a doubt, sales and marketing understand the importance of S&OP and believe demand and supply planning is extremely important. However, with the launch of any new initiative, as time passes by and initial excitement and interest fades away, the relevant benefits of S&OP compared to overcoming more immediate challenges, such as meeting quarterly sales targets, can become less of a priority. Continually reminding stakeholders about the importance of S&OP and how the benefit is not limited to operations, but extends to sales and marketing and the company as a whole, can create a more collaborative, engaged, and integrated S&OP process. Keep in mind sales personnel are optimistic; hence do not expect them to be forecasters.
Data quantity does not equate with data quality. The output of the S&OP process is limited by the quality of the inputs. Familiar with the term GIGO—Garbage In, Garbage Out? What comes out is only as good as what goes in, no matter how well designed the program or script may be. The same applies to S&OP. No matter how well designed and executed the process is, it will only pay full dividends when demand and supply plans are well founded, and those plans utilize quality inputs. Accurate and actionable demand inputs are the foundation for a strong forecast.
It takes two flints to make a fire. Operations teams with less visibility into their organization or low amounts of stakeholder engagement often feel they don’t get the data inputs they need. Information coming from commercial partners, who often have more influence in the firm, causes operations teams to feel there is little action they can take to push for more or better data. However, this type of thinking is what leads to a weak S&OP. Operations teams need to dig deeper into the data by asking questions, pointing out discrepancies, and noticing patterns from information sources that can greatly improve the quality of the inputs. This might require operations to provide their commercial partners with tools, such as checklists and framework to help them provide useful and accurate information. Hence a collaborative effort is needed between both operations and commercial teams for a rewarding S&OP process.
Every business has its supply chain planning puzzles. Some of those puzzles are large, some are complex, and some seem impossible to solve. In order for the S&OP process to be effective, as an organization we need to close the loop, requiring us to focus on five key areas:
- Tighter collaboration between sales and marketing
- Orienting the S&OP process toward profit and loss rather than the supply chain
- Aligning value-based KPIs and other metrics with organizational strategy
- Focusing on time horizons from short-term out to two or three years
- Implementing an integrated SCP/S&OP system rather than relying on ERP systems
An effective S&OP process is about piloting daily operations and monthly plans toward your long-term business goals. Better supply and demand planning outcomes mean better business and operational performance, which ultimately improves the financials. Improving agility by adjusting and responding to changes as well as customer inquiries can make the difference between losing the business and winning a new customer. This determines the true success and effectiveness of the S&OP process. Hence if done right, an effective S&OP process offers the ability to make faster and more profitable decisions, enhancing margins both internally and across the supply chain network.