I’ve been in Phoenix the last few days attending the IBF Supply Chain Forecasting and Planning conference.
The uncharacteristically cool weather in Phoenix didn’t slow down the pace at the conference as people gathered to discuss everything from S&OP to supply and demand planning.
I attended one of the sessions where someone asked whether with new S&OP software speeding up the S&OP process, does it still make sense to do monthly S&OP planning or do we do it more frequently because we can. With the right S&OP software, companies have the ability to streamline the S&OP planning cycle reducing it from weeks to days.
What is needed to enable this kind of performance? A single system that:
- provides global visibility
- brings together high level demand planning and detailed supply planning
- enables collaboration across all stakeholders
- provides the ability to propose and evaluate multiple possible scenarios
Assuming that you have such a system, what would this mean for the frequency of S&OP cycles? Just because you can do S&OP on a weekly basis, does this mean you should? The answer is that…it depends (of course). Most companies run their S&OP process on a monthly basis. For most companies this makes the most sense. If you attempt to implement more frequent cycles, you are at risk of losing the engagement of the key executive stakeholders. It is easier to carve an hour a month out of an executive’s schedule than an hour a week. If your business is volatile enough, then it may make sense to move to weekly S&OP to ensure that the company is tracking in the right direction.
Some companies have taken the next step of the S&OP evolution. They have their monthly S&OP meeting but they will have adhoc S&OP cycles to respond to significant events that have rendered the assumptions behind the current plan irrelevant; significant supply disruptions, large demand changes, cost/price changes etc. With traditional S&OP systems, responding to events like these would require weeks of effort to pull together the needed information, put forward a proposal or two and gather consensus. With modern tools, those that encompass the capability I’ve outlined above, the same response can be done in hours. The S&OP team can come together, approve the plan and the company carries on.
Sometimes, however, there isn’t a single large event. Sometimes there are numerous small changes that occur over time and render the assumptions driving S&OP invalid; incorrect forecasts, a series of smaller supply disruptions, quality issues. Issues like these tend to build up until there is enough variation in what was planned versus what is actually happening that the S&OP plan needs to be revisited. At this point you again could bring together the S&OP team to decide a path forward. There is an alternative however. What if the people managing the day by day planning had access to the same metrics that the executive team had? Further, what if these people could evaluate their actions against these metrics? If these teams can make small adjustments for each of these changes, and those adjustments are in line with the goals set out by the S&OP plan, then the plan takes care of itself.
So imagine that you had this capability. That the decisions made by those doing the day to day work aligned with corporate goals and kept the S&OP plan on track…is there still a need for monthly S&OP? Yes! The S&OP meeting is still a critical process that brings the key departments together and aligns the company. By meeting on a monthly basis, reviewing key corporate metrics and addressing those areas where the plan has faltered. This process adds significant value even if there is are no serious issues to address.
Where do you think S&OP will evolve to? Comment back and keep the discussion going!