[192] Keep S&OP Simple    « Back to Category
Author: LCCMod1, Created on: May 10, 2007 7:29 AM
Keywords: S&OP, supply chain, technology
Categories: Supply Chain & Logistics Periodicals
Language: English
Rating: Not Rated


http://www.intelligententerprise.com/channels/performance/showArticle.jhtml?articleID=196902634

In-Focus: Keep Sales and Operations Planning Simple
Top-performing companies practice sales and operations planning with the same consistency and simplicity, setting long-term goals and meeting each month to review progress and assign action items.

By Colin Snow

Sales and operations planning (S&OP) is drawing attention these days, but analyst firms, consultants and software providers continue to confuse the market by describing it as difficult, using terms like "continuous S&OP" and "real-time S&OP." These terms only complicate what should be a straightforward monthly planning process. In fact, sales and operations planning is a set of planning and decision-making processes that not only balance product supply and demand but also link business goals with operational and financial plans. The objective of S&OP is to enable executive decision-makers to reach consensus on a single operating plan that allocates critical resources to reach corporate performance targets.'
At its heart, S&OP is an aggregated planning process. In a recent research study entitled "Sales and Operations Planning," Ventana Research found that companies reporting the largest gains in revenue, margins, inventory turns and customer satisfaction all plan the same way. In general, they practice S&OP at the strategic level " not as a tactical, day-to-day or week-to-week planning activity. Rather, it is an aggregated planning activity that includes all lines of business or brands and all factories or regional operational facilities, across product lines. The top-performing companies reported that they all follow these steps each month:
1.'New-product-introduction planning
2.'Consensus-demand planning
3.'Supply planning and manufacturing planning
4.'Formal demand, supply and capacity reviews
5.'Financial plan reconciliation
6.'Formal executive S&OP meetings.
The study found the critical success factor for S&OP is the formal executive meeting. In the top-performing companies, executives use these meetings to review demand and supply trade-off scenarios, track the progress of strategic initiatives, review balanced scorecards or other performance indicators, assign action items and set follow-up assessments. The study also found that even simple improvements, such as having plan-versus-actual reports as part of the top-level S&OP reporting package, can improve performance. Only about half of companies (53 percent) currently have plan-versus-actual reports, but 90 percent of those that reported the largest gains in gross margins use them.
Companies that create plans on a monthly basis perform better than those that create plans once a quarter or once a year. Companies that set plan horizons of 18 months or longer achieve larger gains than those with shorter horizons, such as 12 months or six months.
To get to a more mature, effective approach, use S&OP to align operations with long-term corporate strategic objectives. Conduct regular, formal executive review meetings that look at actual-versus-forecast targets and review demand and supply scenarios. Set plans to cover 18 months and include lines of business or brands and all factories or regional operational facilities across product lines. Finally, evaluate the effectiveness of the overall S&OP process itself. Key measurements include meeting preparedness, attendance, action plan follow-up, efficiency of review meetings and S&OP process improvements. Commitment to these steps should put you in the same class as the top performers and increase your likelihood of success.
Colin Snow is a vice president and research director at Ventana Research. Write him at colin.snow@ventanaresearch.com.

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