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Route to Market & Supply Chain Blog

A “Lite” Approach to S&OP

Posted by Christian Cusworth on Tue, Aug 17, 2010

Sales & Operational Planning (S&OP) has been used by companies now for many years as the planning process that provides “one set of numbers” for the organisation on which to base its business planning.  In many countries and cultures S&OP in its current format works extremely well and brings considerable bottom line benefits. However in many emerging markets their culture has not provided companies with an effective S&OP process due to a lack of many of the key organisational and performance drivers required to make S&OP work.  S&OP needs a working culture with totally committed leadership providing a disciplined and coordinated management approach that is totally supportive of the process not just in words but in actions.S&OP Meeting

For all its benefits S&OP is seen by some as a rigid, lengthy, expensive and cumbersome process of up to seven meetings and numerous reports to be repeated each monthly cycle.  These meetings can tie up the company’s management talent for considerable periods of time in preparing for and attending the S&OP meetings.  If the meetings are seen as a chore and not a valuable use of time then attendance will be erratic, preparation of data may not be as detailed and accurate as required and discussion and challenge may not provide the best use of the meetings assembled expertise.

Success is a great motivator and if the S&OP process fails to deliver a consistent level of demand planning accuracy and then subsequent operational planning accuracy the S&OP will not deliver the levels of customer service required to attain competitive advantage and bottom line results. Reliable indicators of an ineffective S&OP process are the accuracy of the demand plan, levels of customer service performance and the number of times the plan changes each month. 

So if we agree that “one S&OP size does not fit all” we need a different approach to developing effective S&OP in many emerging markets.  With all the time and expense spent implementing S&OP in a manufacturing company in these markets then an approach that improves what is already there and builds upon the positives found in the system is found to be the best way forward and to be the most cost effective and successful.

Typical symptoms of S&OP processes in emerging markets often include the following: – for each symptom we recommend a “lite solution”.

  • Obtaining the information required for S&OP monthly cycle is not always as easy as it should be.  In a perfect world the ERP system would provide all the reports required but in many cases the system holds the information but is not configured to provide it so spawning a plethora of standalone, varying format XL spreadsheets that of course take much time to design and populate with the inherent risk of keying errors and inaccuracies.

The lite solution - Define the basic S&OP data requirement, its source and procedures for information gathering. Develop departmental process alignment (ie. consistency of approach to the same task e.g. forecasting or capacity planning). Rationalise the multiple standalone spread sheets into a concise set of interim IT tools that are simple by design. In parallel specify developments or enhancements to the ERP system to support a gradual transition to one data source, removing manual workarounds.

  • Meetings are too long, poorly attended, sometimes missed altogether with in some cases different managers representing the same departments each monthly cycle with too and much time is spent reviewing and discussing information presented at the meeting rather than discussing the exceptions from pre-circulated reports.

The lite solution - Implement a simplified meeting structure and define a small number of required inputs and outputs for each step of the cycle. Assign an S&OP leader to control the meetings including duration, discussion points, minutes and follow up. Begin to include individual S&OP accountabilities in job descriptions and reward structure. Ensure that the GM has an active role in the process and attends the key meetings. Develop a meeting calendar with a one year rolling time horizon.

  • The process is in the main paper intensive with reports printed out for each member at each meeting, folders and filing cabinets get fuller and fuller.  The investment in the company ERP and intranet is not fully realised.

The lite solution - Establish a shared file on the company network for the organised storage of S&OP materials. During the meetings use a PC and projector to display the relevant information to the group. Ensure version control and access limitations of the files.

S&OP requires a dedicated meeting room equipped with network connections for each manager attending.  The manager will now be bringing his laptop rather than a folder full of papers. Meetings are now paperless with all information being received and entered on the network.

Image credit: HikingArtist.com


      Tagss: S&OP, Forecasting & Demand Planning