How to make S&OP a win-win for your business

Does your organisation struggle with competing interests, is it a sales culture or a manufacturing culture, who gets to make the final decision, when competing interests cannot get resolved. Is the outcome always equitable?

Most organisations without a Sales and Operations Planning (S&OP) process will find themselves often in this quandary, especially as things become tight, problems are appearing and personalities rather than proper analysis are making decisions.

So what is S&OP? How does it work? Can I make it work in my business? What are the benefits?

These are all good questions and if you can bear with me I will answer these questions for you.

What is S&OP

S&OP is typically a multi-step monthly process, comprised of data gatherings and review, demand planning, supply planning, partnership meetings, and executive sign off.

It has two key objectives

1. To establish a business management process that continually realigns planning across an organisation to the business objectives and strategy

2. Planning and decision making framework that guides what, when and by whom key demand and capacity balancing decisions are made.

S&OP Integrates into the Overall Business Planning Framework, by aligning the inputs from the Long Term Strategic plan and the annual business plan with the outputs from the monthly S&OP and the weekly S&OP.

Each business department with a budget and a part to play in the overall business plan is required to contribute. The sales plan, the production plan, the inventory plan, the logistics plan all are key components of an S&OP.

The following diagram describes the Overall business planning framework.

How does an S&OP work?

From the above diagram we can see the key inputs and outputs required. Each business has a long term strategic plan with a comparable 12 monthly plan where the key business parameters have been set. Understanding business direction and intent alongside of key business goals and objectives.

With these key understandings in place each department brings its monthly plans to the S&OP process.

Sales

• Sales forecasts based on actual expected market demand, not previously agreed budgets, with tangible actions identified to close gaps to budget.

• Accountability for forecast accuracy and correction of bias.

Production

• Production to a required plan with accountability for schedule adherence, not seeking to maximise production capacity benefits, but to ensure consistent supply of defect free products on time.

Logistics

• Transport incorporated into the planning process as a constrained resource

• Participation in development of supply plans based on available capacity

• Accountability for availability of capacity based on agreed plans

Commercial

• Ownership of financial outcomes of S&OP process

• Cease or integrate other business planning, budgeting or forecasting outside of the S&OP process.

Planning

• Align planning activities with S&OP calendar

• Discontinue activities that duplicate or do not complement agreed planning activities

• Delivery of planned outcomes and agreed performance levels.

S&OP Output

One do-able balanced plan, with multiple units of measure

Can S&OP work in my business?

This is a difficult question to answer, as every business is a reflection of the people engaged in the business. The challenge for any business wishing to embark on an S&OP journey is commitment and a willingness to compromise departmental short term wins for longer term organisational wins. Decisive leadership with a view towards achieving overall business plans and a willingness to reward the organisation for its success not just department success. Many times this success comes at the cost of another department.

A key input into understanding if an S&OP will work in your business is talking to your customers. How does the customer see the business, is it viewed as fragmented, internally competitive, over promising sales team, or underperforming production team. Do deliveries arrive when expected? These sorts of issues are good indicator if an S&OP is needed and the area’s that need to be worked on.

What are the benefits for implementing an S&OP?

The benefits are aligned to the amount of commitment and personal risk each of the participants are prepared to input.

The key benefit for any business is the alignment of production with sales, delivered on time as the customer requests. By not having excess inventory, or production shortages and not being able to meet customer sales, means greater profitability for the business.

Another key benefit is communications. Each participant within the organisation are informed of the latest decisions related to supply, demand, inventory and customer backlogs

The end result when the S&OP is done properly is excellent customer service, well managed inventories and properly used resources.

In Conclusion

Modal Logistics has the knowledge and experience to work with your organisation in this specialised area of Supply Chain

If you would like to know more about the Sales and Operations Planning process contact Modal Logistics who will willingly talk to you about the opportunities and benefits available to your business