Getting Top Management Support for S&OP Does Not Mean Running to the Top

John Gallucci

John Gallucci

If you listen to the buzz about S&OP at an IBF Conference, you will hear a repeated theme.  This seemingly endless refrain is recited by Planners, Vice Presidents, and everyone in-between.   You all know the words, so say it with me, “If you want S&OP to succeed, you need  Senior Management’s support and ownership.”  Achieving this seems simple enough.  There is only one step required to gain success, right?  So, why is this challenge so widespread?

I have listened to many IBF members discuss their frustrations on this topic.  I have had my own trials as well.  The majority of feedback is that Leadership does not understand the value of the concept.  Is there truth to this?

Most cases that I have examined rely on a common approach that leads to this familiar result.  It begins by someone on the Planning Team asking for Senior Management exposure to “pitch” the S&OP concept.  With significant poise and confidence, the idea is presented.  Some leaders listen attentively, some shoot holes in the logic, while others check e-mails on their Blackberry.  The Planning Team resurfaces at the next IBF event, looking for more solutions.

This approach often fails because S&OP is strategic by nature.  Senior Management, the requested audience, is responsible for setting strategy.  The concept will not stand much chance when the Planning Team is indicating that  Senior Management’s current strategies are  not effective, and that a new solution like S&OP is needed.

Try this instead:

1)  Before you go to Senior Management, start by discussing S&OP with your functional leader.  This could be a VP Supply Chain, VP Sales, etc.  Schedule an hour, and review the concept.  Listen to their feedback.  Provide them with documentation on how it works, and what the potential impact can be.  Bring recent examples of situations that have diminished profit,  such as excess inventory or lost sales.  Make your stand on the point that an effective S&OP Process would have eliminated these issues.  Provide a dollarized impact in every possible example.   Gaining alignment may take months, but stay persistent.

2)  Once your functional leader is convinced, ask them to present the impact of S&OP to the appropriate functional Board Member (COO, GM, etc.).  Summarize and dollarize the impact.  Make this person your S&OP Champion.  Let her drive it as an agenda item at the next Board Meeting.  It may take several discussions before the Board aligns on this initiative.  However, if you have provided her with a solid case, she will stay persistent when it counts, which increases the chance of Board approval.

Once Senior Management aligns on piloting S&OP, the rest of the road is much easier to traverse.  Remember that most success stories are not built in one day.  The same cannot be said for failures!

John A. Gallucci
Director, Demand Planning
Nestle Infant Nutrition

7 Responses to Getting Top Management Support for S&OP Does Not Mean Running to the Top

  1. In my experience, the S&OP meeting digress into operational and tactical discussions. This may stem from the participants being mostly Sales and Operations. This months or next months sales / shipments / quota issues are not what top management want to focus on. Strategy is a longer vision than the tactical issues that many S&OP meetings spend their time on.

    The facilitator of an S&OP meeting has to be a brutal task master to keep the discussion up to the level that top managements wants. To do that the meeting that preceeds the S&OP MUST do the tactical stuff. All that should be left are decisions; that is how management makes their time worth while. S&OP is NOT a meeting; it is a process.

    Emmet

  2. Totally agree with the comments above. Firstly, S&OP is certainly a process and the selling of such a comment is complex because it is a relatively simple concept to understand – but “deceptively simply” to implement. One of the reasons is that it is inappropriate thought of as a series of operational planning decisions. As Emmet suggests above, one certain element of S&OP success is that the final Executive S&OP meeting in the process is one which makes good use of the executives time. The heavy lifting of scenario considerations resulting in a recommendation is done prior in the Pre-S&OP meeting when operational/tactical considerations are reviewed. The decisions placed in the executives hands will serve two purposes – resolve the issue at hand as well as help executives to understand where business policy/rules made need to change….they will surely see the value in that as it is much more strategic! Good luck to all embarking on this exciting journey!

  3. Totally agree with the comments above. Firstly, S&OP is certainly a process and the selling of such is complex because it is a relatively simple concept to understand – but “deceptively simply” to implement. One of the reasons is that it is inappropriate thought of as a series of operational planning decisions. As Emmet suggests above, one certain element of S&OP success is that the final Executive S&OP meeting in the process is one which makes good use of the executives time. The heavy lifting of scenario considerations resulting in a recommendation is done prior in the Pre-S&OP meeting when operational/tactical considerations are reviewed. The decisions placed in the executives hands will serve two purposes – resolve the issue at hand as well as help executives to understand where business policy/rules made need to change….they will surely see the value in that as it is much more strategic! Good luck to all embarking on this exciting journey!

  4. The successful S&OP process of which I was a team member was launched with a directive from senior management to the Supply Chain Group to “reduce the dollar amount in inventory, increase the inventory turns/year, and improve customer service.”

    The result of this directive was: an S&OP program which consisted of four conference calls per month with the “keymen” of four regions consisting of 40 field warehouses which stocked the material in question. The “keymen” were the 40 site managers, the 40 field engineers who planned the jobs requiring the components and the warehouse regional managers or their representatives.

    Each region conference call normally lasted two hours, with folks checking in and out as their area was called for a report. The area reports consisted of jobs the field engineers had scheduled for the next 2-3 weeks and the components required to complete the project. My responsibility was to identify shortfall component requirements at the market level, and locate the components at one of the other 39 field sites.

    This process was called “Dynamic Deployment”. With real time inventory access to all 40 sites, I would negotiate release of the material from the market with excess inventory and ship it to the market with inventory shortage.

    The second part of this process was control of the $150 MIL in open orders. Based upon the available inventory and short term requirements, open orders could be canceled, pushed out, or expedited.

    The third part of the process was Supplier Managed Inventory (SMI) implementation with our suppliers. Knowing the short term requirements of our customers, our open orders and inventory on hand, I could negotiate with the suppliers to maintain sufficient stock on hand for projects where our material was in short supply, or provide to other customers on material where we were overstocked.

    The results of this program were: cancellation of $30 million dollars of purchase orders where sufficient stock was on hand in the system; an increase of inventory turns of $150 MIL of inventory from 2 to 4-6/year in three months, implementation of a valid “demand forecasting” program, and customer satisfaction by being able to provide the component support to the planned engineered jobs and reduction of the job backlog.

    An S&OP program can be successful. It does not need buy-in from senior management. It does require a directive to improve a business process such as “increase the number of planned engineered job completion each month by improving component support” or “increase the number of inventory turns and reduce the dollar value committed to inventory” or “implement a Supplier Managed Inventory system”, or “implement a Demand Forecasting System”.

    S&OP has more chance of success if it is implemented as a process to resolve a general issue identified by senior management as part of their strategic plan.
    By
    Robert Gotsch

  5. Robert,

    Great post! My experience has been similar in almost every area except one: buy-in from senior management.

    I’ve seen S&OP at its best and at its worst in multiple companies. Early successes like yours are common when implemented with the apparent rigor and commitment demonstrated by your team’s success to date.

    My concern is for sustainability of what you have invested so much time and effort in. S&OP is supposed to be a tactical planning process that implements the strategic plans of senior management, as you noted in your closing comment. My experience and recommendation is that senior management has to buy into S&OP as THE process for how they want to run the company. THEY MUST LEAD the process, even though others in management may do the leg work and execution.

    Every instance of failure with S&OP that I have seen has been directly tied to the absence of senior management buy-in and process leadership. If sustainability and continuous improvement of the S&OP process is important, it is my opinion that senior management’s ownership and leadership in S&OP is an absolute requirement.
    By
    Mark Hardison Director Global Supply Chain Management

  6. Mark: The program has been successful in the start up and intermediate stage. Our management directive was to increase the turns of high value inventory (over $150 MIL) from 2-3/year to 6 – 8 to 12 turns per year. We were able to increase the turns to 4-6 per year three months into the program.
    The trap could be the success of the program. If within a year -15 months, a 12 turns/year goal is attained, the attention of management could be focused to operational shortfalls elsewhere, and eliminate the time spent on the S&OP meeting which is driving the program. Without the time spent on S&OP to drive the program, I could vision a relapse.

    Shareholders sometimes have short memories. When a project is successful, they tend to think it was always “that way” and selectively forget the “culture” and processes that enabled the long term practice of an inefficient business process.

    Management could also have another “crisis of the quarter” which will shift resources away from the successful program to “fight the fire” and obtain visible short term results.
    By
    Robert Gotsch

  7. Robert, thanks for the quick reply. You nailed it on the head; I couldn’t have said it any better! As the next “opportunity” surfaces, there is a tendency to shift to your “Crisis of the quarter.” Subordinates will wtch management shift their attention to something else and naturally choose to support their focus.

    Your insight into the potential for this is where the opportunity lies. If you can help your leadership grasp what you articulated so well, S&OP will remain vibrant and continue to improve as your go forward. If they assume S&OP will just take care of itself and delegate the leadership downward, the process will begin to deteriorate.

    My sincere compliments on your insights; they will do you well!

    Best wishes for success!

    Posted by Mark Hardison

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