I recently wrote an article titled, “Why Surging Adoption of S&OP is No Accident“. In it, I argued that S&OP remains key for any business contending with 1) external, fiercely competitive markets; and 2) internal, persistent directives demanding more agility and operational efficiencies.
Why, then, aren’t more organizations deploying this business process? In perplexing instances such as this, it can be more useful to play devil’s advocate and explore why more companies aren’t deploying S&OP, or at least not successfully. While S&OP promises a plethora of benefits, it is surprising that many businesses have been slow to embrace this transformative practice or have failed in their initial attempts. This article delves into the reasons behind the hesitancy, and offers insights to help organizations overcome these obstacles to reap the practical rewards of S&OP.
The Promise of S&OP
S&OP is a cross-functional process that involves all functional areas—Sales, Marketing, Operations, Finance, and Supply Chain Management—working together to develop one unified plan toward business goals. The primary objective of S&OP is to synchronize demand and supply over a strategic horizon, allowing organizations to optimize resource utilization, reduce inventory costs, enhance customer satisfaction, and increase profitability. Yet, despite its potential advantages, S&OP adoption has been far from universal. So, what’s holding some companies back?
Barriers to S&OP Adoption
1. Lack of Top Management Support: S&OP requires substantial organizational commitment and willingness to change. Without support from top management, it becomes both practically and politically challenging to allocate resources, implement necessary changes, and drive the cultural shift needed to make S&OP successful. Relapses can occur when there are regime changes at the top, especially if new leadership tries to mark their new territory by moving in a different direction.
2.Siloed Organizational Structure: Traditional hierarchical structures can foster the creation of silos within organizations, hindering the free flow of information and collaboration between various functional departments. S&OP relies heavily on cross-functional teamwork, making it challenging for companies with rigid structures to effectively implement the process. Whether intentional or not, it’s hard to overcome a tiered, closed-off system that promotes a “stay out of my sandbox” mindset.
3.Data Quality and Integration Issues: S&OP hinges on accurate and timely data availability from various sources. If a company’s data management systems are not up to par, or if there are ongoing, unresolved data integration gaps, the entire S&OP process can be compromised, leading to inaccurate forecasts and decisions. Making decisions based on bad data will only lead to one thing—a bad decision.
4.Resistance to Change: Introducing S&OP often necessitates changes in processes, responsibilities, and even company culture. Resistance to change is a natural human response and can emerge due to employee fears of job insecurity, loss of control, or unfamiliarity with the new processes and/or technology. What is true of any process change, but particularly so with S&OP, is that changing hearts and minds can really test an organization’s resolve to pivot from entrenched daily routines and move toward more forward-looking, sustainable strategies.
5. Lack of Clear Communication: S&OP demands a clear and transparent exchange of information between organizations. Poor communication and lack of strategic direction can lead to misunderstandings, misaligned objectives, and flawed decision-making.
6. Complex Implementation Process: Implementing S&OP may evolve into a more complex endeavour than anticipated due to a combination or even culmination of these potential barriers. Like any worthwhile endeavour, S&OP development and deployment involves substantial time, resources and a commitment to change to ensure success. Companies might shy away from adoption due to concerns about potential disruption to ongoing operations during the implementation phase.
Overcoming the Hurdles
1. Top-Down Support: For S&OP to thrive, leaders must champion the cause and demonstrate their ongoing commitment to the process and its benefits. Clearly defined strategic objectives and financial goals must be communicated throughout the entire organization.
2. Cross-Functional Collaboration: Breaking down silos and fostering collaboration between departments is crucial. Organizations can facilitate this by creating dedicated cross-functional teams and promoting a culture of cooperation to drive company-wide success.
3. Master Data Management (MDM) / Data Management Enhancement: The evidence is clear that investing in robust data management systems and integration capabilities will ensure more accurate, real-time information flow. It’s not uncommon to start with disparate systems bound together through Excel and other various query tools. However, develop a plan for technology deployment over time.
4. Change Management: Addressing employees’ concerns and providing adequate training can mitigate resistance to change. Transparent communication about the benefits of S&OP can also help ease the transition. Develop a change management program at the onset of your S&OP deployment project and designate an in-house articulate communicator/leader to champion this effort.
5. Project Management / Phased Implementation: Kudos to those businesses that adopt a phased approach to S&OP implementation to minimize disruptions and allow for gradual adjustments. In many cases a phased-in implementation is actually the smarter approach—first crawl, then walk, then run. S&OP deployments take time to mature, so set the expectation of improvement over time through continuous cycles of learning.
6. Technology Adoption: Leveraging advanced technologies such as AI and machine learning can enhance forecasting accuracy and decision-making in the S&OP process. Integrating new technology can also occur over time, but these advanced tools must serve the demands of the endorsed process, not the other way around.
The Bottom Line
Sales & Operations Planning still holds the promise of coordinating and reconciling an organization’s functions to maximize efficiency and effectiveness. However, businesses must recognize that the road to successful S&OP implementation requires commitment, collaboration, and the willingness to embrace change. Because of its transformative potential, enterprises that 1) are willing to self-evaluate to determine potential internal hindrances to S&OP adoption; and 2) implement appropriate, proactive measures to resolve or mitigate these issues are already way ahead of the game.
Whether your organization hasn’t started an S&OP deployment or continues to struggle in its efforts, achieving a better understanding of your own barriers to success is half the battle in conquering these obstacles. The recommended solutions outlined above can help your enterprise unlock the tangible benefits of S&OP, thereby gaining a more competitive edge in an increasingly dynamic market landscape.
To learn the fundamentals and best practices of S&OP/IBP, join us in Chicago from June 12-14 for the biggest conference of its kind. With several workshop sessions, networking, and panel discussions it is where you’ll make S&OP a reality in your organization or elevate an existing process. Click here for more details.