Academic journal article The Journal of Business Forecasting

The S&OP Tension Convention: Two S&OP Pros Square off on the Issue of Conflict within the Process

Academic journal article The Journal of Business Forecasting

The S&OP Tension Convention: Two S&OP Pros Square off on the Issue of Conflict within the Process

Article excerpt

EXECUTIVE SUMMARY | In the corporate world, organizational tension or conflict is a natural outcome when strategic goals are not fully shared or even misaligned throughout an enterprise. Different departments will pull against each other-placing unrealistic expectations of Sales, Operational, or Financial performance on each other, and consequently on the organization as a whole. Sales and Operations Planning (S&OP) is often positioned as a business process model that holds the promise of aligning goals, which raises the question "Will most tension go away once an S&OP process is implemented and matures?" The authors believe to the contrary: "managed" tension is healthy and a desired outcome of S&OP, as it keeps everyone on their toes and focused while honing a competitive edge.

As long-time Sales/Marketing and Operations practitioners, we find ourselves attending many courses and conferences where S&OP purists and instructors paint a wonderful vision of S&OP meetings filled with happy people all striving to align goals, leverage metrics, and plan months or even years forward. The vision is wonderful, but our experience suggests it's the organizational equivalent of skipping through a field of daisies-a sweet-smelling ideal but without much practical utility.

Achoo! (Sniff)

These wise instructors and learned practitioners often put forth S&OP as the idealized process and ultimate forum for communicating, escalating, and resolving conflicts between Sales and Operations. What's this word "conflict" doing in our field of daisies? Achoo!

In everyday life, people rarely agree on the same approach, analysis, or solution to any given problem. Just look at the current state of the U.S. Congress to see how conflict and tension are the order of the day. The fact is, most people view specific problems through their own experiential lenses or strategic filters, and thus have their own ideas about how best to solve any given issue. The business world is no different. With the convergence of Sales and Operations, S&OP bodes some level of inevitable conflict. And if one digs deeper into the inner workings of the process itself, it would almost seem hardwired to foment organizational tension as an inherent outcome of the demand/ supply balancing and valuation of sub processes.

In fact, S&OP assumes there will be disagreement. The process has a built-in mechanism-the pre-S&OP meeting (also called the integrated reconciliation meeting)-to vet the level and severity of potential disagreements, and then sort out the potential solutions. Of course, the ability of any S&OP process to manage conflict is a function of its maturity, and presumes that all participants behave well and act with an eye toward compromise, in the best interest of the organization.

As we prepared to write this article, we examined our own experiences and agreed there are few areas where organizational tension is greater than between Sales and Marketing (the demand side) and Planning and Operations (the supply side). And while the specific reasons for this conflict vary from company to company, there are any number of potential reasons, ranging from differing and conflicting metrics, to unclear expectations, and a lack of information sharing.

S&OP veterans are all too familiar with the slippery-slope interplay between Sales and Operations that starts something like:

1 cannot understand why we are stocked out on Item X. You never seem to have on hand what the customer orders."

This normally evokes a reply something like:

"lean make whatever you forecast. You just cannot forecast right."

Which escalates to:

'You Operations folks should know that forecasting is never correct. You should plan for uncertainty in the forecast by anticipating a reasonable amount of inventory wwand capacity."

This of course is before the conversation degrades further into finger pointing and other negative behaviors. …

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