The purpose of this article is to make clear the essential requirements for sustainable S&OP process implementation. S&OP implementation has a high failure rate, with most initiatives not actually delivering any value and doing nothing to improve the balance between demand and supply. Using this S&OP kick-off guide, the chances of failure are much reduced, increasing your chances of leveraging S&OP as a growth driver that provides a real competitive edge.
Often the S&OP Process implementation initiative is carried out in a poorly structured way, especially when the implementation decision is made from the bottom up without executive sponsorship. The managers involved in this type of implementation end up not following the methodology completely, leaving out the essential pillars that are required to sustain the process. This means creating more work further down the line, day-to-day difficulties in the S&OP process, and, sometimes, damaging the credibility of the process which can result it its death. Haste and lack of capacity building are usually the key factors in the demise of the S&OP. S&OP is like building a house – it needs a strong foundation, and if the proper work is not carried out at the beginning, problems down the line can cause irrevocable damage. Here are some helpful pointers that will guide a successful S&OP, regardless of whether it is a top down or bottom up initiative.
Sponsor: This is the person who will provide the necessary support before, during and after the implementation of the S&OP process. This person must have great influence within the company, have knowledge of the process, and be able to carry out all the necessary alignments and approvals with the main managers. This person needs the necessary position and communication skills to open doors that may have been locked for years.
S&OP in the hierarchy: Normally the S&OP area is created within the Supply Chain, however, when the process leaves stage 1 maturity it is important that the S&OP area reports to a neutral entity (free of department specific interests) in the company, for example: Finance or a senior executive. S&OP and its management need to maintain the collective interest with focus on the best result for the overall business.
S&OP Leader: This person needs to have solid experience and knowledge in Supply Chain, as they will lead a wide range of different activities. In addition to the experience and technical expertise in the field, the S&OP leader will need to have great energy and discipline to meet the schedule, and a willingness to move people around and change processes to ensure integration. Ability to communicate at different levels is necessary.. Involvement of the human resources area is critical at this stage to find the right candidate. When choosing the right person for S&OP Leader, a junior profile will not cut it.
S&OP Team: As we are dealing with a total integration process, we absolutely must involve all areas, even if we have to demand it. An S&OP Committee is recommended for the initial phase, with all parties committing to collaboration and support of the implementation project. Choosing the right people and their backups is key to starting the process as well as maintaining it later on.
Roles and Responsibilities: Each S&OP member must have a clear role and defined responsibilities within the S&OP process. They need to be trained to contribute properly in the process – both inside and outside meetings – as facilitators and process owners. I recommend you use a matrix of responsibilities, train those involved and record all activities.
S&OP Meetings: All meetings must have: an objective, a duration, participants, inputs, discussions, outputs, attendance list, and a list of required actions. Participants at each meeting will need to be trained to ensure an effective meeting.
Meeting Schedule: All S&OP monthly and weekly cycle meetings need to be set in advance. In order for people to attend the meetings, invitations need to be sent as soon as possible. One recommendation is to keep the invitations sent for the next 3 months of meetings. It is necessary to pay attention to special dates like holidays and events that could affect attendance.
Documentation: The S&OP process must be formalized through documents like process flowcharts, procedures and operational instructions to ensure the decentralization of information and the survival of the process when a team member leaves. The is important in assisting standardization and proper management of S&OP documents. One of the most important documents is the S&OP policy which details S&OPs’ involvement in the business. In addition to containing all the requirements to establish and maintain the process, this document codifies the agreements and hierarchy of decision-making. It is a living document that must be kept up-to-date by the managers of the S&OP process.
Process Auditing: After a few monthly S&OP cycles, an S&OP audit process has to be defined to ensure that everything that was planned has been implemented in practice. This must be carried out by an independent team, who will have to be trained in S&OP to audit the process. In some companies this department already exists.
[Ed: These are the essential criteria for successful S&OP, that will both facilitate its implementation and sustainability. Only 1/3 of S&OP initiatives end up actually adding any value – make sure you lay the appropriate foundations to ensure yours is a real growth driver.]