Antonio Mangione
One of my favorite authors in this world we call S&OP is Tom Wallace, who co-wrote “Sales & Operations Planning, The How-to Handbook”. It’s one of the definitive texts on S&OP, in large part because it is both easy to understand and includes insight not found in traditional S&OP theory. It helped me understand what really matters in S&OP implementation, and I have used a lot of the ideas for this quick guide, which is designed to help you hit the ground running with your own implementation project.
For those venturing into the implementation and leadership role of this process, something that will be fundamental to your success is knowing that the process depends on more than just the statistical, process and knowledge elements. The Pareto rule applies here – in the S&OP process (both in its implementation and in its leadership) that 80% of success in S&OP depends on the people involved, 15% of the data and 5% of the hardware or software used. People then, are what will make S&OP happen – the data and hardware are secondary.
80% of success in S&OP depends on the people involved
Let’s take a look at the above and see how we can use it to our advantage. So, 80% of the success in S&OP depends on the people involved, but what do we mean exactly by “people”? It goes without saying that relationships play a fundamental role. When we occupy cross-functional and cross-leadership positions (positions where teamwork with different areas is the basis of the work itself), the way we communicate directly affects the outcome of the process. Communication and collaboration, therefore, are key in S&OP.
80%: The Human Element Of S&OP
One of the main challenges of the S&OP leader is to interact with different areas, speaking the language that each of them uses; with production I will talk about production volumes, frequency of maintenance, man hours required for each production step, production capacity meetings etc. With sales, I talk about sales volume, prices, market share, forecasts and forecast accuracy, and forecast validation meetings etc. When the process reaches maturity, we will talk to Finance, using such terms as sales budget, billing, profit margin, EBITDA, etc. All of this provides an advantage if the person in charge of S&OP knows the business fully. I do not mean necessarily that this person must be an expert in the business, but they should at least know enough so that meetings and discussions are consistent with company goals.
Have a systemic vision of the process and avoid the silo mentality
Have a systemic vision of the process and avoid the silo mentality, where everyone defends their own work area. The S&OP leader works as a conductor by aligning each point with the strategic plan with the operation, so they must be a person with good verbal communication skills and, importantly, courage. Courage is crucial because there will times when this person needs to “show their teeth” to get things done. Establishing requirements between areas without conflict is also key. After all, the S&OP process is central to the company-wide decision- making process, so all interested parties should be active participants in it. The S&OP leader must motivate that behavior.
Quantitative data is only the beginning because there are a lot of details that only the heads of departments know
15%: The Data & Where To Get It
15% of success in S&OP depends on the data. Obtaining data for the S&OP process is fundamental, in fact, without data there is no process to lead. One of the main consequences of the silo mentality is a lack of data upon with which to make decisions. Quantitative data is only the beginning because there are a lot of details that only the heads of Production, Finance, and Sales know. If the S&OP process is well laid out, these details will be taken into account. We’re talking about incorporating insight into new products, consumer demand spikes that escape statistical analysis, changes in consumer demand, and negotiations with suppliers etc.
Obtain all possible information from your Enterprise Management System with the help of the IT team. Look at the data and study its dynamics because it is necessary to understand how the numbers move along the cycle. It is very important to know how each area works and how it connects with the process. I recommend investing a lot of time in this step because by improving our information system with each cycle, new information appears that enriches the entire process.
Excel is a good way to kick-start the process and bring order and discipline to decision-making
5%: Hardware And Software
5% of success in S&OP depends on the hardware and software used. There are companies that have specific software for this, others only implement some parts of the process such as Demand Planning with Excel spreadsheets. In my first S&OP implementation project, I used Excel only. We all know that a spreadsheet is not the best tool for this, but it is a way to kick-start the process and bring order and discipline to decision-making. Then, as the process covers other regions and geographies, it is necessary to incorporate other technology, but to start with, specialized tools are not necessary.
For those of you undertaking this journey, don’t allow yourself to be discouraged, and don’t lose sight of what drives 80% of this process – that is to say, people.
‘Sales and Operations Planning: The How-to Handbook” by Thomas F. Wallace is available for purchase on IBF’s online store.