FAQs about S&OP

Bram Desmet
Dec 12, 2017 1:02:00 PM

Executive Sales and Operations Planning (S&OP) meetings support future decisions and keep the supply chain triangle of service, cash and cost in balance. But where should you start? To help you along the way, we’ve prepared this overview of some of the most frequently asked questions (FAQs).

What is the ideal agenda for an Executive S&OP meeting?

The agenda should consist of at least five items for discussion. First of all, you review the action items from the previous meeting. Secondly, you look at the overall business performance, expressed in financial terms (turnover, EBIT, ROCE, etc.). Thirdly, you can then dive deeper into the different segments, discussing any product-market combinations with unusual activity or figures. Think of new product introductions (NPIs) or particular market opportunities or risks. Double-check different scenarios and contingency plans and propose decisions. Make sure the focus is not only on reporting, but that you actually make decisions during the meeting too. Fourthly, it is important to review the decisions made and to enumerate the open action items. The fifth and final phase of the meeting is a round of questions.

Who should be involved in such meetings?

Ideally all decision-makers should be present, which in general means the executive committee. An S&OP meeting that is only supported by Sales, Operations and Supply Chain will not exploit the full potential. Finance should certainly be involved, but the presence of Product Management, R&D, Purchasing and even Human Resources can also be required. If there’s an issue about labor capacity, for example, it can be useful that the person who has the final say about hiring and firing attends the meeting.

Who has the overall responsibility and should chair the discussions?

The CEO or the business unit president should chair the S&OP meeting. Without the support of the CEO the S&OP process is doomed to fail, because the decisions made during the meeting have such an impact on the entire organization.

Who should take the lead for the preparation and the templates?

The preparation is done by the S&OP manager. Today, most S&OP managers report to the Supply Chain department although reporting to Finance can be another possibility. This can offer long-term advantages, since having an S&OP manager who reports to Finance can help to facilitate the essential adoption of the process by Finance.

Should we review overall business performance or specific KPI's?

A lot of supply chain organizations determine their Key Performance Indicators (KPI's) on the basis of the Supply Chain Operations Reference (SCOR) model. This is the world’s leading supply chain model, linking business processes, performance metrics, practices and people skills into a consolidated framework. Yet the SCOR model is incomplete because it doesn’t allow organizations to translate their strategy in relevant KPI's.

We believe that the ideal metrics dashboard for your S&OP meeting is based on the measurement of diagnostic metrics (or process metrics), the measurement of service/cash/cost metrics that include the value proposition, and the measurement of the financial results which are a combination of metrics. With those inputs, you can build a dashboard which will give you a complete overview of your business performance at a single glance.

How can we make effective decisions?

We are big believers in scenario-based decision-making. By running different scenarios, you can examine more closely the impact of the decision on the different corners of the supply chain triangle: service, cash and cost. Comparing different scenarios will facilitate the decision-making process.

What should be the time horizon for discussion?

A monthly S&OP cycle is most common although, due to the increasing dynamism of markets, we’re seeing a trend towards holding ad hoc meetings in between. An ad hoc meeting can be interesting when there is an urgent need to make an important decision. The time horizon for discussion also depends on the sectoral characteristics. In a fast-moving market, such as consumer electronics, it can make sense to plan meetings more regularly, e.g. bi-weekly meetings. On the other hand, in a market with long product life cycles – such as the aerospace or pharmaceutical industry – a quarterly meeting might suffice.

Do we need specific tooling or can we use Excel?

In the first instance you can make a start with S&OP using Excel sheets, but you will need proper applications to embed the process in your organization and make it sustainable. The more complex your supply chain is, the greater your need will be for an integrated and optimized solution such as Arkieva. Besides that, the S&OP process is not a stand-alone process; in other words, data has to be integrated from different sources. An integrated tool will allow you to run S&OP meetings based on a single version of the truth. Other advantages of a tool over Excel is better visibility, the possibility to conduct simulations and the use of real-time data. And, after all, you don’t want your experienced supply chain people to be tied up with gathering data. Instead, they should spend their valuable time on examining the exceptional use cases and coming up with possible scenario-based decisions.

Want to find out how Arkieva can support you in running your S&OP meetings?

Reach out to us!

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