This week, I attended a two day Sales and Operations Planning (S&OP) Summit meeting being sponsored by IE Group that took place in Boston. The conference was filled to capacity, indicating strong interest in the topic. After two full days of sessions, I came away with a variety of observations that I would like to share with our reading audience.
Each day was filled with many presentations from various manufacturing, retail and service firms. Their overviews represented various stages of maturity in implementing S&OP, from just getting started to being fully deployed, and certain themes became common among presenter’s experiences and lessons learned.
Many followed the standard five or six step S&OP process methodologies that have been outlined by various training and consulting organizations, and overall, a common conclusion was that a fully functioning S&OP process does help in aligning cross-functional teams on demand, supply and resource balancing. One of the most common descriptors was establishing a ‘rhythm’ for planning and operations. Many also cited the critical importance of executive level sponsorship and participation within the process. The latter stage of an S&OP process is the very important executive review meeting where the plan is finally adopted. The challenges for alignment of conflicting cross-organizational goals and alignment of reward mechanisms and forecast accuracy are often cited in most S&OP related experiences.
Most spoke to a monthly S&OP cycle while some, such as Sony, are embarking on a rather daunting weekly process.
There were also important watch outs cited. They included not getting too deep into granularity, but also having the means to quickly convert revenue dollars (executive communication and planning ) with required unit and time volumes (manufacturing and supply chain communication and planning). The overall process should be well understood in terms of the benefits for each stakeholder, and most noted that the input of data into the process needs to be as user-friendly as possible.
I’ll be providing some further ongoing commentary in the coming days, but I did have two take-away impressions. The first is related to what I feel is a misunderstanding on the role of IT applications as an enabler to the S&OP process. The end goal of S&OP is certainly the process itself, placing system automation before process implementation is a distraction. I noted this observation in my previous joint Supply Chain Matters and Kinaxis Expert Community commentary. I also noted that while I advocate process before automation, it is also rather important for teams to understand the four challenges that S&OP automation can overcome.
The second relates to overall S&OP process objective. Companies such as Coca Cola, Dow Chemical, Fairchild Semiconductor and Sara Lee noted that in the end, S&OP is a decision support process that aligns the supply chain to customer demand. It stems from informed stakeholders and participants that can adjust to changes in the business in a more timely basis. Sometimes, groups tend to focus on just the process, not the desired outcomes or expected benefits of the process. As an example, the early implementations of lean and six-sigma practices yielded significant results or reductions in waste in processes. Initiatives were quickly expanded to many other dimensions of manufacturing and supply chain, but sometimes the overall goal may have been obscured. Was it the implementation of lean in all aspects of the business or rather use of lean techniques to achieve a desired business outcome?. I would argue that the same challenges apply to S&OP, namely to maintain a focus on the desired objective of the process. Fairchild noted that during the recent global recession in late 2008 and 2009, overall revenues dropped dramatically in a very short period of time. The benefit of S&OP to the business was its ability to achieve quick course corrections and avoid unplanned surprises.
Overall there is a rather active state of S&OP adoption and many firms are garnering benefits and insights. The key objective however is to focus on the business outcomes desired.