Having worked in the industry, we all know that Sales & Operations Planning (S&OP) is all about mega decisions being made by executives about issues such as building factories, authorizing inventory or hiring people for major projects. We also know that executive decisions are made with limited information and, especially in the world of S&OP, with uncertain information as well. In a well functioning S&OP process, the consequences of decision making are made clear. However, with all of the weight that hinges on these things, information, decisions, and consequences provide an excellent opportunity to identify your organization’s top level business risks..
At Rolls-Royce, risk management and S&OP are very closely linked together. In fact it is firmly said and widely believed that if we did not have a S&OP process in place, Rolls-Royce will be at risk to be blindsided by major risks. For instance, we discovered first hand that a drop in demand for a particular product, could put a few of our key suppliers in financial distress even though overall demand was growing. We looked to S&OP to provide us with information that allowed us to developed and implement a risk mitigation process as well. We also found that building up our inventory in anticipation of an increase in orders from a major customer was ineffective thus causing Rolls-Royce to rethink how we design our products so as to minimize inventory exposure in future.
I firmly believe that S&OP is the pivotal point in capturing and managing risks provided your organization has implemented a proper risk management process. In fact, an active Risk Manager is an integral part of the S&OP team at Rolls-Royce. Obviously, not all risks are created equal. Some selective risks are reported to the company Board of Directors. This helps to get the executive help needed to mitigate these risks. Managing risks allows us to learn and develop new ways to escape the same risks in the future.
I very much look forward to being able to share some insights into Rolls-Royce’s “S&OP Journey.” More importantly I look forward to being able to learn from a large group of Professionals at the IBF & APICS Best of the Best S&OP Conference
Head of Sales and Operations Planning
Hear Sanjiv Speak at: