According to Merriam-Webster, “The English word chaos is borrowed from the Greek word that means ‘abyss.’ In ancient Greece, Chaos was originally thought of as the abyss or emptiness that existed before things came into being.” Bill Mrzlak, founder of ChainSequence, reveals how CEOs must combat business chaos with S&OP.
When chaos rules over everyday business operations, it isn’t just stressful for your employees, it can be devastating to your company’s bottom line. The cure for persistent business chaos—Sales and Operations Planning (S&OP)—was specifically developed to help companies move from reactive business decision-making, to a structured, measurable program that capitalizes on opportunities while minimizing barriers to future growth.
S&OP, which has actually been around for decades, is especially relevant today as a practical methodology to navigate a strategic pathway through today’s unpredictable global marketplace. As commerce becomes increasingly dependent on data, analytics, AI, and digital technology, a thoughtfully-designed S&OP program helps an organization 1) identify and map out a cohesive, goals-oriented business strategy, and 2) follow through on that strategy with robust forecasting and transparent reporting cycles.
A perfect storm of disruptive events has caused disruption to many industries in recent years
A perfect storm of disruptive events – the onset of digital start-ups, creative product innovations, and the evolution of e-commerce – has caused disruption to many industries in recent years. The result for competing businesses? You guessed it – chaos. If your business wants to respond effectively to the potentially negative impacts these disruptors may have on your organization, creating an S&OP program can be your best defense in safeguarding your market share, and reinforcing your strategic aims through common purpose. S&OP has proven its worth time and again, helping enterprises to effectively disrupt the status quo and change the direction of their business, build support for common goals, and lead to continuous gains and improvements over time.
Re-Routing Your Business Toward S&OP – Without Flying By The Seat Of Your Pants
We always recommend that business executives take the time to research S&OP, obtain a basic understanding of the mechanics of the process, and go about the work of building internal buy-in and support. There are several factors management partners must bear in mind before embarking on an S&OP deployment. Change Management is by far the first and most important consideration—know what you’re getting your business into and why. Often, changing longstanding behaviors and pivoting to new organizational processes can be more difficult than defining the actual process itself.
The first and most important question is, “Why do I want an S&OP process?” Years ago, Gartner published its five-stage S&OP maturity model, which offers a straightforward guide to help your business determine where it lands along the S&OP maturity spectrum. As a starting point, evaluate where you are currently and be realistic in where you’d like to go. If your organization has no process in place, an impartial evaluation conducted by an external subject matter expert can help you launch an enterprise-wide S&OP deployment effort on the right footing. Some organizations, for instance, confuse a basic demand/supply planning process for S&OP, so be cognizant of keeping S&OP, which is an oversight and decision-support system, separate and distinct from supply chain processes.
Understand the key drivers and objectives of your organization by 1) identifying the company’s strategic goals and financial objectives; and 2) ensuring that everyone within the organization know what these goals are. Be clear on what you want so that it can be achieved, whether that be for financial, operational, organizational reasons, or for behavioral issues such as revenue, profits, utilization, accountability, communication, or consensus.
Warnings, Detours, and Obstructions Ahead – Getting Around These Obstacles
The inherent psychology embedded in S&OP implementations—learning to work collaboratively instead of as independent silos—means that the road ahead has potential behavioral obstacles to overcome. Knowing these obstructions exist in advance will help you to cut them off at the pass –
- Some individuals may say, “We already have a process and have always been doing it this way.” But, are you performing to plan? Can you do better?
- Others may say, “The S&OP process is too rigid.” Don’t confuse rigidity with discipline. An S&OP process should be a consistent, repeatable process, month-after-month-after-month
- There may be a general perception that, “We already have an S&OP process.” But, do you really? Is the focus more tactical than strategic? Are you identifying potential issues at a point in time where solutions can minimize the potential impact of that issue or help you close on an opportunity?
- A time-tested favorite is, “Senior Management doesn’t have time or will never agree.” This very legitimate concern is the one that can be the deal-breaker. At the end of the day, if your senior management team doesn’t support AND own the S&OP process and its outcome, you would be almost certainly heading down a path of failure, even before you begin. Get executive sponsors involved, early and often, and sustain that level of engagement and ownership long after deployment.
Become Familiar with Hazardous Terrain Along the Way
One of your biggest assets for driving success will be your people and their ability to adapt. Deploying S&OP allows your management to understand the behavioral nuances and personal strengths of these staff members, and then use that knowledge to your advantage. While it would be ideal to have a team of evangelists that support you 110%, this won’t ever happen.
As the saying goes, keep your friends close and your enemies closer.
Some people are simply averse to change. It’s important to accept that there will be proponents that fully support you right out of the gate, and there may also be “antagonists” who, feeling threatened, will create roadblocks at every turn—some in very stealthy and passive-aggressive ways. Working with these individuals through education and collaboratively defining the process helps mitigate and marginalize these challenges. As the saying goes, “keep your friends close and your enemies closer.”
Be Optimistic, but Manage Expectations…
Because the journey to mature S&OP is a long one, don’t expect to get to your destination overnight. Have clearly defined and aligned goals and metrics and have a solution in place to measure their progressions accurately. Develop incremental achievable targets, because in S&OP as in life, the devil is always in the details. If you’re engaged with a multi-national company, eventually work toward a single, global process. If possible, start off by piloting a specific region or product. Enterprises can’t define a common global process if every region or product line has a different way of doing things. Keep in mind that there will always be specific unique requirements to address, but these anomalies run generally less than 20% of total requests. Once you’ve defined the process for one group, then take the initial lessons learned, tout the early positive results, modify as needed, and then replicate these best practices across the rest of the world and product lines.
Make the Journey Part of the Reward
Embarking on an S&OP program requires careful thought and planning, like developing an itinerary for an extended trip. Executing this plan is in some ways the easy part. Know that one size does NOT fit all, but that doesn’t mean you need a unique solution for each region and product line. As a therapeutic exercise, an S&OP program allows an ideal opportunity for self-reflection. You learn what’s really going on at your organization, and with that you are able to drive change.
IBF’s Business Planning, Forecasting & S&OP: Best Practices Conference in Orlando features workshops on how to deploy S&OP for better visibility into demand, streamlined inventory, organizational alignment and superior customer service. From 16 to 19 October 2018, this event is the biggest and best of it’s kind. Presenting companies include Nike, Starbucks, Target, Puma, and more. LEARN MORE.