Solventure blog

How to prevent your S&OP process becoming bogged down

Written by Bram Desmet | Oct 10, 2017 3:41:48 PM

Over recent decades Sales & Operations Planning (S&OP) has undoubtedly proved its worth. However, many S&OP processes get stuck at a certain maturity level or, even worse, start to regress after a period of time.

There are several reasons why S&OP processes stall, but roughly speaking there are three key elements that must be in balance: processes, tooling and culture.

Maintain a business focus

The big challenge process-wise is to make sure that the Executive S&OP meeting really is a meeting of all the senior executives. Unfortunately, a lot of the S&OP meetings today are not sufficiently relevant for the whole management team. Among other things, this is due to a failure to translate developments into financial terms and the lack of adequate real-time tooling. A simple example: most C-level managers, and certainly the CEO of a publicly traded company, think in terms of quarters. So why are the results shared at an S&OP meeting mostly displayed in monthly buckets? A report that shows the quarterly results is all it takes to avoid the whole management team having to do the arithmetic in their own heads during the meeting.

If the S&OP meeting is not pitched at the right level, the C-level management will eventually disengage, which is detrimental to the overall S&OP process. If the final decisions have to be made outside the S&OP meetings, it will increase the frustration of the S&OP members who are present and ultimately hollow out the process.

Another risk is that there are too few disciplines involved in the S&OP process. In some companies the S&OP process has become purely a Supply Chain exercise. The coordination, the preparation and the execution are all done by Supply Chain people. The only involvement of other departments is their presence at the monthly S&OP meeting, without any other active sponsorship. This makes it really hard to turn S&OP decisions into reality. Because the process must be supported throughout the entire organization, it is also important to think broadly enough about who should be present. Besides Sales and Operations, 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.

Invest in appropriate tooling

In the first instance you can make a start on S&OP using Excel sheets, but you will need proper applications to embed the process and make it sustainable. Speaking from experience, we can say that on average process maturity and tooling maturity differ by one level. If the process maturity is at level 4, for example, then the tooling maturity will usually be at level 3. Tooling is in that sense both an enabler and an inhibitor simultaneously.

Furthermore, 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. An effective S&OP tool is one that is continually refreshed with live data.

Create an open culture

Another potential obstacle standing in the way of a successful, long-lasting S&OP process is the organizational culture. Some employees within the company may take advantage of a not fully transparent process, e.g. salespeople who withhold certain information to safeguard their goals. If a Sales Manager assumes his team will generate a turnover of €160 million, for example, he may decide not to raise his initial forecast of €140 million while still in the budgeting phase because that could lead to hard-to-achieve objectives for the coming year.

In the S&OP meeting there should be an open culture, so that different interests can be openly debated. Only then will it be possible to make a final decision that is to the benefit of the entire organization. Changing measurement systems, KPIs and setting incentives that foster collaborative behavior can give the crucial support for creating such a culture.