The biggest obstacle to S&OP implementation is fully engaging the Sales & Marketing teams. The involvement of Sales and Marketing is very low in S&OP when they should be integral to the process. Let us try and identify barriers to participation and see how we can overcome them by demonstrating the benefits for Sales & Marketing, and engaging them towards the final goal of total collaboration.
Who gets excited about S&OP?
Most organizations start S&OP from a purely operational perspective. It is usually initiated by the head of Operations. The process owners are typically the heads of the supply chain and S&OP is therefore a very supply chain focused area. It should, in fact, encompass all different departments. In reality, it rarely does.
Why Sales Departments Might Resist S&OP
Sales departments are recognized for sales and the profit they make, not administrative tasks. Time is money and any time spent on activities which do not lead to a sale is considered a waste of valuable time. Therefore, many of the sales executives you are looking to engage into S&OP will resist cooperation because they see no reward. Understand that their motivations are different to yours.
A quick look at KPIs can show the different priorities
| OPERATIONS | SALES |
|---|---|
Time: Reduce delays and cycle times. | Sales: Amount of Sales made |
Quality: Improve quality and customer satisfaction | Service Levels: Customer service levels |
Cost: Reduce waste and costs | Profit: Profit margins |
Personality Differences
For Sales, the glass is always “half full”. They are very optimistic by nature. Operations, however, deal with facts and details. While both departments have the common goal of total customer service, they approach the end result in different ways and use methods that are not synchronized. The reality is that drawing people together from these very different departments and reconciling their personality differences is very difficult.
| OPERATIONS | SALES |
|---|---|
Realistic, Data Driven | Optimistic |
Process Driven | Outgoing |
Disciplined | Emotional |
[bar group=”content”]
Conflict
Conflicts between Sales & Operations are sometimes so severe that the two sides hardly speak to each other. The two groups often work in their own silos and spend most of their time communicating through emails, gathering evidence against each other and marking copies to top management to justify their position.
While the primary requirement is increasing participation by Sales & Marketing, effectively managing their resistance to it is key to success.
Four Key Pillars of S&OP
- Top Management Support
The most important thing about S&OP is bringing Sales and Operations together in charting the future of the company. This can only be done by the person to whom both report. Without having the commitment from the CEO, the S&OP process will fail. - Consistency & Discipline
These are the framework of a robust S&OP process. Consistency is the difference between failure and success as it enables measurement, creates accountability, and reemphasizes the message. - Transparency
Transparency in all the S&OP data, the measurement metrics and the feedback loop encourage trust amongst participants. Follow-up actions from every meeting must be properly documented and communicated to all stakeholders. - Trust
The foundation of trust is built on by finding common ground. The common objective of the company is “We all want to serve the customer.” The biggest boost to trust levels can be brought about by having the S&OP leader report to the CEO.
Finally, Success
The most important input to the Demand Forecast comes from the sales team and they know more than anyone what the next few months will look like in terms of sales and which customers are likely to confirm and which orders could get delayed. They are closest to the customer and they know customer behavior better than anyone else. As such, the Sales team can add significant value to the forecasting process. We just need to harness the intelligence they possess.
Like the headlight of a car, sales input is expected to give the Demand Team the insight to future sales.
Once the Demand Forecast is agreed on by both the demand & supply team, it now becomes the company’s forecast for the next 18-24 months. Any discussions on Forecast accuracy should be on what WE got right, what did WE miss out, and how do WE improve the process. The discussion should not be on what the demand team forecasted.
I participate at IBF programs and look forward to possibility meeting you at an upcoming IBF conference. I am always happy to exchange ideas.