After more than 20 years working in the planning area and more than 10 years in S&OP, I came to the conclusion that implementing, sustaining and evolving an S&OP process depends on 8 key factors that must be applied and reviewed frequently.
1. Don’t Neglect Medium-Term Planning
Even in the face of this global crisis we are experiencing due to the COVID pandemic, we need to maintain medium-term planning because, eventually, the new volumes will settle and we will return to good forecast accuracy. It is a mistake to abandon medium-term planning to focus only on the very short term. This planning mindset must always be present in the S&OP process, even with all the difficulties of forecasting.
2. Modify Your Language For Each Function
One of the most challenging pillars of S&OP is the integration of people and functions. To be successful, it is necessary to adapt how we communicate depending on which individual or function we’re talking to. This is necessary to integrating everybody into the S&OP process. With the Finance function, we talk about numbers, values and results. With the Sales team, we talk about customers, regions and channels. With Operations we speak at the SKU level, about plants, warehouses, production lines and so on. We modify our language and show all stakeholders the importance of their participation in the S&OP process.
3. Use Benchmarking
Benchmarking remains one of the best options for learning from the mistakes and successes of other professionals who have been where you are now. It allows us to know what good looks like and what to aim for, in terms of how we set up the different elements of our S&OP and KPIs. Check out IBF’s benchmarking research.
4. Tie S&OP To Strategy
The S&OP process cannot be half-hearted where we seek only to deliver some of the basics. The S&OP process needs to be strategically linked to enterprise-wide strategy and play a strong role in solving the chronic problems of the business. To make sure S&OP is serving the goals of the business, measure its performance each month through KPIs such as working capital, inventory turns, service level, costs, etc.
5. Meetings Are For Decision Making
Through my experience at S&OP consulting firm U.M Consultoria, one of the main reasons for the S&OP process to die or stagnate is the lack of decision-making in the meeting. In these cases, participants cling to the past, invest a lot of time in autopsies of what went wrong and too late to change, and neglect to look ahead and make the best decisions at that time.
When faced with this situation, the recommendation is to stay on track by reviewing the meeting agenda, making clear the purpose of the meeting and the inputs, discussions and decisions that need to be taken, then sharing them with stakeholders.
6. Continuous Improvement
The concept of continuous improvement has been a cornerstone of S&OP since its inception. Acting to improve poor performance is an obligation of the S&OP team. When we talk about improving the S&OP process itself, we need to have a roadmap to reach the next level of maturity.
There are different S&OP maturity stages that bring different benefits to the company. Every year we need to reflect on what we’ve achieved and update this plan for the coming year. With this, we will continue to evolve in accordance with best practices. IBF has a great S&OP maturity model which assess your maturity level with recommendations to improve.
7. Partnership with Customers and Suppliers
I consider this secondary a consideration because first we need to understand our limitations, bottlenecks, response time, and the size of our problem.
After that, we look for opportunities to improve our constraints in the supply chain through the CPFR methodology (Collaborative Planning & Forecasting Replenishment) where we share insight with our partners and together we validate forecasts, production plans, shipments, etc. The benefits are reduction of logistical costs, improvement in service, and reduced inventory.
And lastly, the most important element,
8. Focus on Results
Another factor in the failure of an S&OP process and any other initiative is not bringing positive results for the business. If S&OP is not perceived to be linked to real business improvements, it will be seen as a cost and will likely to be discontinued by senior management. We absolutely must ensure that everything we do serves to improve the KPIs mentioned above – every meeting must facilitate the decision making that will add value to the company.
As mentioned above, I highly recommend taking IBF’s S&OP Maturity Self Assessment to understand where you are at in your S&OP evolution, and to get valuable resources to help your progress. It is free to use.