Academic journal article The Journal of Business Forecasting

Guideposts, Directions, and Scenarios: Connecting S&OP to Detailed Planning

Academic journal article The Journal of Business Forecasting

Guideposts, Directions, and Scenarios: Connecting S&OP to Detailed Planning

Article excerpt

EXECUTIVE SUMMARY | S&OP processes can sometimes feel disconnected from everyday supply chain planning-in part because the direction provided to supply chain planners from the S&OP process is often incomplete. The prevailing assumption is that an agreed forecast/plan is the primary output of the S&OP process, and the main input into the planning process. However, to effectively execute against an S&OP plan, more information is needed. We refer to this collective information as guideposts. This article explains how guideposts, scenarios, and directions help build the information connection between S&OP and detailed planning.

Have you ever had that moment on a highway where you felt lost or anxious after missing your turnoff, waiting for the next road sign to appear so that you could get your bearings? This has happened to me countless times - even in this GPS age. Road signs are the guideposts for the paths I travel. They help me to know whether I'm on course, or in need of redirection.

By definition, guideposts are a post or sign on the roadside, offering guidance and direction to travelers. In common parlance they are anything serving as a guide or guideline. This article will highlight the expression guidepost as it relates to the S&OP process.

S&OP processes generate an agreed plan. That agreed plan is typically a combination of an approved forecast, a financial plan, and a supply plan. Taken at face value, this would seem to be a great outcome, since many organizations can't even reach agreement on a plan. However, in order to convert these aggregated strategic plans into something executable, a best-practice S&OP process needs to define and provide appropriate and meaningful guideposts, targets, and directions to the planning organizations in addition to the plans. You see, a simple forecast is rarely enough, even if it is capacitated and even if it is dollarized. S&OP plans need more than just a simple set of numbers; they need context, shaping, and texture.

To learned practitioners, S&OP plans are rarely a single set of numbers. Dick Ling, author of Orchestrating Success, the seminal workon S&OP, refers to this belief in a single set of numbers as "the myth of the one number plan." Dick's thoughts just make a ton of sense. If you visualize uncertainty increasing as you look deeper into the future, it is incumbent upon planners to think through all options, combinations, and permutations of potential plans. In Dick's line of thinking, there are upside and downside plans along with the operational S&OP plan. Following this a bit further, given the relative uncertainty of a plan 18-24 months out, the potential range of the upside and downside plans begin to diverge fairly dramatically from the baseline as you look deeper and deeper into the future. S&OP plans need to contain, or at least consider, alternate possibilities or scenarios that consider not just the execution of the baseline plan, but also consider the potential variations in that plan; these scenarios are then understood and resolved in advance as a means to mitigate some of the uncertainty and manage risk. These scenarios and their solutions are an important part of the S&OP plan and should be communicated to supply chain planning.

While it may be my own unique expression, I refer to all of this collective additional information as guideposts. In a recent conversation with one of my peers, I was asked to provide my definition of guideposts as they relate to S&OP. It was much harder than I thought. It requires a complex and layered definition. To help organize my thoughts, I started jotting down all of the non-plan related outputs of an S&OP process. It was immediately apparent that there is not a single or simple definition for an S&OP guidepost. Because of the myriad inputs into the S&OP process, the range of outputs and types of decisions emanating from S&OP are just as diverse. …

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