Kinaxis recently asked me to author a blog series on the topic of Sales and Operations Planning (S&OP). Naturally, I was flattered to be asked to contribute to their popular 21st Century Supply Chain blog. But I was also very excited, because as a strategy consultant at Accenture, I’m able to share a wide range of client experiences on ‘what good looks like’ and what business issues clients are facing across a wide range of industries. In addition, prior to becoming a consultant, I was a practitioner in industry, managing S&OP processes. That gives me a unique appreciation of the challenges organizations face, and what it’s actually like to be part of an S&OP team.
I’ve designed this series to focus on the most common or frequently asked questions I hear from my clients. In this first posting, I will provide an overview of the six key areas I plan to talk about in my blogs. Going forward, I will dive into the details around each of these areas, share examples, and highlight options you may want to consider in your organization. I look forward to sharing my thoughts with you and hope you’ll include this blog on your summer reading list. I also hope we can engage in an exciting dialogue on the topic of S&OP and how we can work to improve your organization’s performance and outcomes.
How can organizations better use S&OP?
I’m often asked as I travel around the country working with various organizations, irrespective of the industry: “What are the most common S&OP challenges facing organizations today and why isn’t our process working?” Many of the organizations are struggling with the long-standing dilemma of effectively balancing customer service with supply chain costs, yet all have some form or shape of an S&OP process in place. So what’s going on? Why is this happening? I get asked these questions all the time. And candidly, I see it all the time too in my everyday personal life… stock outs, backorders, inventory markdowns, and clearance sales. These symptoms all point to a failure or breakdown in an organization’s S&OP process. So, how can organizations better use S&OP to improve their agility and responsiveness to today’s dynamic markets?
As with any S&OP topic I blog about, you will get to read about the good, the bad, and the ugly that face organizations today, as well as the supply chain capabilities needed to better manage the service and cost tradeoff. The following offers an overview of the most common S&OP issues I see and hear about at organizations. I’ll explore them in more detail in subsequent postings.
- What is S&OP?
Let’s start with the foundation and define what exactly S&OP is? Executives often tell me that “we’re doing S&OP…we have a monthly meeting” or ask “should we be using a four-step process or five-step process?” Candidly, it doesn’t matter. You’re missing the whole spirit of S&OP if these are the questions going through your mind. To get my point across, I frequently joke that S&OP is actually NOT a process, but rather a governance model. It needs to be thought of more as a strategic operating model for making better supply chain decisions. Sure, leading organizations have monthly meetings and maybe a four step or five step process, but their mindset about the role of S&OP for their business operations is very different. Leading organizations use S&OP to proactively steer their business to meet internal objectives or anticipate and better manage the market dynamics they experience.
- Who owns S&OP?
Because S&OP largely operates as a team effort (in some cases virtual), a well-defined owner or champion is often missing. Organizations frequently struggle to determine the right ownership and the organizational implications around roles and responsibilities and decision rights. Unfortunately, there is no clear cut answer here and in true consulting fashion, the answer “depends” and I often ask: “who owns the inventory?” This question typically results in a quirky smile or completely confused look on my client’s face.The good news is: There are some likely owners or better candidates to own the S&OP process in most organizations. However, defining the right team is more critical than defining the right owner. Having the right cross-functional integration and engagement from across the organization is an imperative for a leading S&OP process. Sports teams, chefs and cooks in restaurants, and the military all generally operate as high-performing teams. Why do businesses and organizations struggle to do the same?
- What are new operating models for S&OP?
Unlike many other activities in an organization that are standardized and consistent across divisions, product lines, or brands (e.g. order to cash or AR/AP processes), S&OP is far more complex and needs to be appropriately tailored to the business area it serves. Many organizations today still use a “one-size-fits-all” operating model when it comes to S&OP.Managing all products, or customers, or geographies with an identical or common S&OP model restricts the supply chain’s responsiveness and effectiveness when faced with market volatility. Instead, leading organizations are segmenting their supply chains and S&OP operating models to those that are more “fit-for-purpose”. Appropriately segmenting products, brands, market channels and customers based on their behaviors and characteristics, and applying different operating models to manage them can help improve supply chain agility and competitiveness.
- What about the workforce?
People manage and operate supply chains… period. And it should be fairly obvious that S&OP is not a process that’s well suited for automation. As a result, how managers think about attracting the right talent and skills, as well as developing and retaining people is a key issue that organizations are addressing. It also is an area many companies are keen to address. Who would’ve thought 10 years ago that today’s top imperatives for supply chain executives had to do with people?We’ve come a long way from just focusing on system implementations and process standardization. Thinking about the workforce of the future and what is needed to effectively manage an S&OP process primarily requires addressing team skills and talent. Does the workforce really understand what is going on in the supply chain and do the people have the skills needed to make the right decisions when facing today’s volatile markets?
- How can S&OP leverage new digital technologies?
When it comes to S&OP, technology is often the differentiator between a good process and a great process. However, technology cannot turn a bad one into a good one. A solid foundation with the organizational and process components of S&OP is critical. Some very good S&OP processes run entirely on manual spreadsheets, much to my amazement, but it’s possible although not recommended.What that demonstrates is the importance of the other components beyond the fancy tools or technologies. Having said that, the new digital capabilities available to organizations today have evolved tremendously over the past few years and are incredibly powerful. Organizations are swimming in pools of data (both internal and external) with very limited capacity to do much with it. With S&OP operating primarily as a governance process for making good decisions, technology is an incredible enabler that helps convert data into actionable insights.New digital capabilities are making analytics and modeling truly usable, or rather accessible…finally. And a convergence of mainstream smartphone and consumer-like features and functionalities have been finding their way into enterprise S&OP solutions. The technologies available today are truly enablers, holistic solutions that support the workflow of S&OP. But how are leading organizations applying and harnessing these new digital capabilities?
- Why isn’t it working?
This is the most common question I hear, and it’s usually asked out of frustration. Would it surprise you to know that the majority of the professional golfers get golf lessons? Or that most professional hockey players get skating lessons? S&OP is one of the most complex business processes in an organization, but instant results are expected after implementing a tool, restructuring teams, or streamlining a process.The immediacy and need for instant gratification in our culture is in conflict with what is actually required to develop a leading S&OP process. I get golf lessons, and certainly need them…a lot in fact. But the guys on the pro golf tour? You bet. Golf is incredibly complex. To compete at the top, commitment to becoming the best requires patience and practice. No different than the top athletes in the world, successful companies with leading S&OP processes in place…practice, adjust, tweak, and do so with patience and dedication. What do you and your organization need to do in the months ahead to plot your journey towards improving your S&OP process?
I look forward to sharing many insights and having engaging dialogues as part of this S&OP summer reading series and hope you join us!