Sales & Operations Planning
Sales & Operations Planning and execution is the engine of the company. However, ’traditional’ S&OP reflects the environment of ten years ago and can be dangerously outdated. S&OP must now include supply, demand, financial results, inventory, and customer service. Perhaps, a more accurate term should be ’SOFI&CSP’ – Sales, Operations, Financials, Inventory and Customer Service Planning. While more accurate, we’ll continue to use the traditional ‘S&OP’ acronym to encompass this more inclusive set of activities.
Components of a Successful Agile S&OP: Framing and Executing the Vision
Different companies' products, customers, suppliers, and product flows typically have both significant variances and significant commonalities among them. While processes and metrics should be specific to the organization, it can be a waste of time to re-invent the wheel at every stage.
- Organization and accountabilities: An operating model, with clear accountabilities and authority, that deals with constant volatility with a sense of urgency: Most of the key tenets in the design of an agile S&OP operating model seem pretty obvious: multi-functional executive sponsorship, specific accountabilities and nominating a head of the process. But one of the key actions often ignored is the clear executive (preferably the executive team) communication to the organization outlining the key accountabilities, objectives, scope of responsibilities, team to design the process, importance to the company, and what’s expected of the other functions. This is a first step to ensuring success.
- Process and metrics: Driving towards low latency and coordination: Ideally, organizations should adopt an integrated, comprehensive S&OP and interlock process with daily updates, linking planning with execution. The process should be near continuous and drive towards zero latency between information and execution.
- Analytics: New analytics and tools to predict, analyze, and make superior decisions: With new capabilities in collecting and managing a wide variety of data (including sensor and equipment data, partner data, and unstructured data) and the use of more sophisticated analytics tools and techniques, managers can achieve new levels of understanding of what is happening in the supply chain in real time, as well as analyze the options and their impacts, enabling them to act more quickly and with greater flexibility.
- Information, data and technology: The glue of the supply chain: Information – accurate, complete, standardized, and real time (or as near real time as possible) – is the glue of the supply chain and its currency. The Enterprise Resource Planning (ERP) system environment is a key element in bringing the enterprise together and coordinating activities. It is vitally important to understand that technology is not a solution, it is just an enabler! On the other hand, new developments and innovation in technology can drive changes in process. The business strategy must always lead the solution; the human elements of organization, adoption and governance are essential and the processes must be aligned to goals.
- The extended enterprise: Embrace the extended supply chain network: An agile S&OP process must include the key players in the extended supply chain network. Some leading companies have certain critical suppliers and channel partners present in S&OP discussions. This includes suppliers, contract manufacturers and co-packers, third-party logistics and lead service providers, channel partners and fulfillment partners.
Change, not stability, is the true reality of supply chain operations today. Every company is dependent on the actions, capabilities, and response of its supply chain partners. Urgency, speed of response with high financial performance and customer satisfaction, is the action imperative – in other words, the responsive, agile, resilient, and proactive supply chain. The agile S&OP process is the engine for achieving this future state.