Sales and operations planning (S&OP) is a simple enough process, yet it’s one which many organisations struggle to implement and maintain successfully. To some extent this is perfectly understandable, since a successful S&OP process requires unfettered collaboration between multiple business teams. The sheer number of SKUs which many companies must plan for also creates planning challenges.
Often though, the sales and operations planning traps which companies fall into could easily be avoided or prevented.
If your company is getting ready to implement sales and operations planning, or if your management team is trying to improve the process, you might find the following list of three sales and operations planning traps helpful. Use it to understand some of the pitfalls to avoid or to help identify issues that might be hampering current S&OP performance.
1. Over/Under-reliance on Technology
Some companies seem to perceive the sales and operations planning concept as being primarily about using software technology. Sadly, many software vendors do little to dispel that particular myth. In reality, the best and most expensive S&OPs software application won’t improve a company’s ability to balance supply with demand if a robust process and management policy is not in place.
S&OP is based at least 50% on company culture, with the other 50% comprised mostly of process. Technology can make an important contribution, but should not be considered as the be all and end all.
At the same time, some organisations go to the opposite extreme and try to meet sales and operations planning objectives with nothing more than an excel spreadsheet or two. This is also a mistake. A software solution does not make S&OP, but a good-quality, purpose-developed application is necessary to successfully meet planning objectives
2. Failure to Engage Executive Leadership
As with so many initiatives, sales and operations planning is unlikely to realise its potential without executive commitment, buy-in and sponsorship.
Does your company CEO insist on heading up your monthly S&OP meeting?
If not, you are missing something important. Executive leadership should consider sales and operations planning as a mainstay of operational effectiveness. They need the information generated in order to assess supply chain risk and disruptions or spikes in demand.
Just as importantly though, CEO visibility in the process is essential to drive collaboration and impress the importance of S&OP on stakeholders who otherwise, can easily drift back into the habit of protecting their own territory—a major stumbling block for S&OP effectiveness.
3. Allowing S&OP to be Constrained by the Financial Budget
Sales and operations planning should do what it says on the tin. It should be all about formulating plans for what are believed to be the most likely demand and supply scenarios.
Tying the S&OP process tightly to a financial budget just constrains it; potentially to a point at which it’s ineffective.
Budgets can become old and out of date very quickly, so the results of S&OP should be seen as the basis for budget updates, not something which should be constrained to numbers that fit the original budget.
S&OP: A Key to Outstanding Supply Chain Performance
When it’s executed effectively, sales and operations planning can make a significant contribution to supply chain performance improvement. This post is intended to inform you about three important mistakes to avoid if you want your S&OP process to be effective. There’s a lot more to know though, about implementing and leveraging S&OP for supply chain success.
To find out more about best practices in S&OP, along with some other key factors in supply chain management excellence, why not check out The 7 Supply Chain Keys? It’s just one of my books written for supply chain professionals who desire practical, actionable knowledge about managing supply chains effectively.
To learn more or to get your copy, just stop by at The 7 Supply Chain Keys product page, where you’ll also find out about some free bonus items that come packaged with the book.
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