Academic journal article The Journal of Business Forecasting

10 Proven Steps to Successful S&op

Academic journal article The Journal of Business Forecasting

10 Proven Steps to Successful S&op

Article excerpt

One-number philosophy, perfect data, everyone showing up in a scheduled meeting, and support from top management are the keys to the success of an S&OP process ... there will be many people to discourage you, but your persistence will prevail ... describes every little detail to assure successful implementation of the S&OP.

This article is a roadmap for starting a Sales and Operations Planning (S&OP) process in your company. There is no sense in "reinventing the wheel." So read on and internalize this street-smart pragmatic approach on how to implement S&OP, which is based on my real-world experiences. Even if you have already started, you will find some tips that will enable process improvements.

S&OP OVERVIEW

My definition of S&OP goes like this. It is a top management's handle on business, which requires balancing demand and supply on a regular and formal basis. Here, top management means the company president, the people who report directly to the president (direct reports), and a few other selected people like the demand manager. When top management has a handle on the business, it means the president has the ability to make fact-based resource decisions quickly By "regular" I mean at set intervals, such as monthly, and by "formal" I mean that there are very specific data formats, meeting agendas, and a meeting calendar.

The balancing of demand and supply requires a bit of explanation. Consider two scenarios: What happens if demand is greater than supply? It may call for overtime, outsourcing, late shipments, premium inbound freight, and so on. All of these activities drive up the cost, and likely cause less than desirable customer service. On the other hand, what happens when supply is greater than demand? This may lead to increased inventory, underutilized fixed costs, excess labor and equipment capacity, and so on. Here again, costs go up.

So students and practitioners of S&OP will argue convincingly that the company has its best chance to minimize the cost of doing business when demand and supply are in balance. Also, investment will be leveraged and customer service will be at its best. This is easily said, but difficult to do. Making proactive resource decisions is hard work because it is based on huge amounts of data, requires superb business knowledge, commands a collaborative effort from all functional areas, and takes time and dedication of all process players. But it does work.

STEPS TO S&OP

The two distinct phases of S&OP are process design and process conduct. In the design phase, all of the technical parts are engineered, and in the conduct phase, S&OP is used as a business management process. The following 10 steps describe how to go about these two phases. Steps 1-5 are design and steps 6-10 are conduct.

1. Decide to do it This seems quite obvious, but there are some important nuances to this statement. Someone in top management must decide to get involved in S&OP, and this person must have the authority to commit resources including money and people's time. It does not need to be the entire top management team or even the president at this point. But it must be someone who will champion, learn, resource, and help design it, as well as help teach other top management players. This could be the president, the vice president of operations or sales, the CFO, or another top management person. If it is more than one, all the better. But at least one must be on the team. If S&OP lacks this type of leader, the activity may become optional and suffer from lack of resources such as IT support. But once this person decides to do it, the process will have the traction it needs to move forward. You have heard before that initiatives such as S&OP need top management support, which is true. But unlike a popular belief that all of them must be on board, you only need one key player to get started effectively. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.