In a recent article in Business Computing World, the author writes about the evolution of S&OP. Some may call it S&OP and others may call it Integrated Business Planning (IBP). The point is…it works. Listen to the IndustryWeek webcast featuring Cisco VP of Customer Value Chain Management, Karl Braitberg, and you will see evidence that Sales and Operations Planning drives financial and operations performance improvements.
So why why aren’t more companies adopting this? I was first introduced to the S&OP process over 15 years ago at a former employer. It was the heart beat of our company. It was a commitment on the part of Finance, Sales, Operations and Engineering. Metrics included Revenue, Margin, Inventory turns, Customer Delivery. However, we did have challenges. Everything was done in Excel and this is still the case with many companies today. The tools to enable S&OP have not been available.
Companies tend to identify the ‘process’ as their biggest challenge. Tools are given a last consideration. Do you know how many companies that do have an S&OP processes are still doing everything in Excel?? Think about that…their most mission critical business process driving all decisions in their business using a personal productivity tool. There are always reasons for this. The IT department will blame the users, saying that they should be using ERP. The users resort to Excel because it is their only option for creating versions and sharing copies. However the data becomes very inaccurate, it is very difficult to merge, and when they make a change to demand how does Excel know how to change the supply plan?
If you have adopted an S&OP process or are embarking on one, give consideration to the tools required. Ensure that your user community has the ability to easily create versions of your data, easily recalculate demand and supply considering all of your constraints, easily calculate the impact on metrics and consider the tradeoff metrics. (revenue versus cost for example). Every needs one version of the truth from where ever they sit in any part of the world.
Something else to consider is the dynamic nature of a Sales and Operations Plan. This is the biggest change I have seen over the past 15 years. My first introduction was a monthly process. This would NOT work today. In today’s world, your S&OP plan will be outdated the next day. The creation of the plan may be on a scheduled cadence, but course correction needs to happen every day. How many of you have waited in anticipation for the month end reports, only to ask yourself…’what happened??’ Painful root cause analysis can be avoided with daily course correction.
Has your company adopted Sales and Operations Planning or is taking this on as a new initiative? What do you see as your challenges?
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I see much of this when I am working with companies on planning incentive programs. My appraoch to these programs requires a complete review and understanding of the process flow before anything begins. Far too many companies think of these programs as “perks” and just want to get a budget approved and go shopping for the goodies (trips, merchandise, etc.). Of course recent times have out a crimp on that and as a result, my business is UP!
I would love to know more about this process as I feel it would serve my method well.
Carol, this particular post brought me back to my reengineering days, and with a smile. I used to do a lot of end to end business process and value chain analysis. To my amazement in many large corporations Excel was the tool of choice for forecasting, demand planning and even inventory management. I absolutely agree with you that SOPs and manual processes even when well documented, do not address the transactional and analytical aspects of the data management, especially when it comes to volumes around supply chain.
You made your point and did it well.
I recall reengineering days also Valery! Companies dont seem to realize that there are better ways to support the sales and operations process. Thanks for your comments.
Until the systems for Sales and Operational Planning are viewed a value-added and essential in making sound business decisions they will always be looked at as high maintenance.
My experience with a variety of Demand Planning systems has been the data that is entered from a sales forecast has a high degree of volatility.
The high degree of volatility has a direct impact on the spend efficiencies from a materials procurement,variable costs, efficient prodution scheduling of products with minimal changeover times and lastly to the direct labor utilization. All of which have a direct impact on the COGS.
Re-engineering processes and eliminating redundancy by not running parallel systems will assist in truly evaluating the true impact of Sales and Production Planning.