Sales & Operations Planning
Discord happens between sales and operations when expectations are different. The sales team makes a sale and expects operations to simply fill the order. The operations team pushes back on the fact that the forecast was nowhere near the sales written up, arguing an inability to react so fast. This is the classic disjoint between constrained vs. unconstrained demand, for which the effective use of Sales and Operations Planning (S&OP) could help resolve the failure. S&OP brings about an integrated approach to supply and demand based on processes that balance projections against reality. This all starts with a good demand signal, built on forecasts from the sales force at large, that is tempered by sales management bringing visibility to market insights and product requirements. Generally known as the unconstrained demand forecast.
There is cross-functional feedback that supports evaluation, analysis and improvement.
Next in the process are demand and supply reviews intended to test assumptions, validate probability, and align resources to the demand plan. Committing to the plan requires some understanding of planning horizons to enable capacity commitments from the supply side to keep the projected business level with the agreed limits and avoid the discord. These horizons move along a continuum from fixed in the short term to more flexible in the medium to long term. The process helps set expectations and balance capabilities between sales and operation aligned to inventory holdings and financial implications. This gives us a constrained demand plan that is aligned with the supply plan.
This is where Reveal brings its expertise to the table with a focus on relevant data needed to drive decision-making. By implementing best practices, organizational change and aligning business rules and business behaviors, Reveal provides clarity around the levers to manage changing business conditions.
Effective Sales and Operations Planning
Sales and Operational Planning is intended to get the company to march to the same tune, which necessitates involving the right stakeholders in a collaborative way. Sales, finance, operations and product management at minimum needs to be included otherwise we run the risk of failure in translating functional views and impacts or worse still leave out key role players with essential insights.
The sales team looks to drive revenues by business account and that is a key input; Operations needs to know what to produce and when, demand in units by product by time period; Procurement need to know what raw materials are needed; and Finance is responsible for net margin targets in the company. Effective S&OP therefore means having a single source of the truth in terms of the information/data needed by stake holders to participate and make decisions.
When the S&OP process is leveraged well, it works in a reliable and sustainable way to support business objectives. Teams gain the skills, efficiency, and tools for collaboration and have robust conversations about where things are going well, where help is needed, and what must be done. The focus is on plan alignment and that first alignment is with reality. Then, targeted actions are layered in to improve performance and resolve gaps. We establish the reasons to believe in order to think critically and determine not only what we can do, but what we should do.
The result of quality S&OP is more stable product lifecycle management, faster and more controlled new product introductions, inventory optimization, reduced obsolescence, improved sales forecasts and scenario planning, shorter customer lead times, and an overall better customer experience.
Supply Chain Challenges in S&OP
A disparate string of spreadsheets and PowerPoint slides cobbled together to provide a view into the future. With this kind of technology backbone, it is inevitable that things will fall through the cracks and “what-if” scenarios will take hours or days to deploy. This is not harmonious with agility, opportunity and rapid response to changing markets.
An S&OP process without active executive involvement. In this case it is merely a tactical plan with limited strategic importance. Without an effective S&OP strategy, there is a mad rush to meet the monthly report-out to senior management, limited cross-functional collaboration, and everyone operating from different sets of numbers, often using figures from weeks ago. Team members rely on a great deal of data and cannot understand why that data yields little information and few actionable insights. Every monthly cycle feels like hitting a reset button rather than a continuous flow of relevant, reasonable, and action-oriented intelligence. It is anything BUT empowering- which is a primary goal of a solid S&OP framework.
When executive leadership does not fully engage it is often because they feel the key information needed to run the company is missing. A sound technology platform, e.g., SAP supported by good people and sound business processes will provide and enhance business capability.
In an age of volatility, uncertainty, complexity, and ambiguity (VUCA), fast and agile adaptation becomes the key to integrated business planning and increased market share.
But as business conditions continue to evolve, so do the challenges. On one hand, the amount of data currently being produced is truly staggering. On the other, it takes a colossal effort to unearth the nuggets of relevant information and insight at the speed of business. S&OP is the framework for scenario planning that can be implemented for evaluation or for efficiently driving vetted insights into executable plans. The path to a quality S&OP framework is filled with bends, curves, and bridges to cross. Getting there is a journey- but the view is worth it!
Whether it’s optimizing supply chain performance or implementing additional SAP functionality, Reveal’s oVo® methodology helps organizations improve internal business processes, educate users and deploy the smart use of SAP to achieve sustainable, tangible value. By challenging organizations to move away from being transactionally driven and move towards information-users that manage the process and apply knowledge, improvements in agility, service, cost, and inventory performance are achieved.