Despite major technological improvements in business, faultless sales and operations planning is still very difficult to achieve. So how can companies advance the planning process? Alex Leonards explores…
Getting an entire business to march to the same harmonious beat is no easy task. That’s because, in part, the definition of sales and operations planning is ambiguous, and most of the time no one really knows who is responsible for the process. But what is crystal clear, is that engaging people, improving technology and trusting generated data, are critical to a successful process.
At the heart of any plan is people. That’s what Hugh Williams, managing director of Hughenden Consulting would say.
“They’re all talking about the process, but the biggest problem is getting people engaged,” says Williams. “You can have all the technology in the world, but it wont help you.
“If you haven’t got the people side, you haven’t got S&OP.”
One would think that the clue is in its name, but for many businesses, the sales team are nowhere to be seen when it comes to ‘sales’ and operations planning. The process can often be dumped on the other side of the fence (where the supply chain generally picks up the responsibility.)
“There’s nobody coming from a sales or finance background, and this brings problems,” says Williams. “Supply chain people are not naturally people orientated, they are process orientated.”
Williams thinks that this structure is holding back the development of S&OP.
“The problem that people are facing is we’ve told them that it’s not a team game, we’ve told them it’s functional,” he says. Everyone is implementing S&OP, he says, but not everyone is doing it well.
Patrick Lemoine, vice president of product marketing at E2open, has an alternative perspective. “S&OP absolutely has all of the stakeholders involved,” he says. “Everyone gets together, including finance, production, supply management, and sales.”
To achieve a universal aim across a business, it is vital that everyone understands, and sticks to, the company plan.
“Everyone has to have their own views of the data – but these views need to be synchronised,” says Henry Canitz, director product marketing at Logility. “That’s where this whole idea around coming up with a consensus plan to begin with, that everyone can work with, is so very important.”
If the team doesn’t feel it has had any input in a plan, they may simple ignore it.
“Getting people to agree, you have to have alignment from the top of the organisation,” says Canitz.
Scott Moon, principle at Tompkins International, says that planning efforts fail when they are not driven by senior management. “The CEO must make the process an organisational requirement or the process will fail,” he says.
There has to be a certain level of trust within the business to truly identify and tackle issues within the operation. “Because the business requires the team to “be real with each other”, only the CEO can set the tone and ensure there are no negative impacts from exposing true underlying business issues,” adds Moon.
Technology & tools
“Some would say it’s all about process and people – and to a point it may be true,” says Canitz. “But eventually if you want to get better, you will need a technology specifically for your S&OP process – it’s a killer if you try to do it manually.”
Technological advances are something we are all accustomed to, and yet, when it comes to S&OP, Microsoft Excel is the most popular “strategy”. Instead of preserving past techniques, softwares and technologies, businesses need to be looking at ways to mature the markets they specialise in. “S&OP has been around for 30 years – but it keeps stopping and starting,” says Canitz. “The process is hard to manage with tools like excel.”
Hans-Georg Kaltenbrunner, JDA’s vice president of industry strategy for manufacturing (EMEA), says that a recent study shows that many companies are still using simplistic ad-hoc methods and classic reporting tools to review year to date achievements.
“For organisations stuck at lower level of maturity, S&OP simply means forecast consensus and revenue management,” says Kaltenbrunner. “Leading industry sectors have moved on and are now far beyond this elementary stage of S&OP.”
Developing different scenarios to help with forecasting is not something you can achieve with basic spreadsheet software. “Better tools are reshaping the process – it’s fundamental to be able to have tools to run scenarios holistically and quickly,” says E2open’s Lemoine.
The planning process must be forward-looking, active and reactive.
“Better analytics are needed to better sense what’s happening in the demand picture,” adds Lemoine.
One example Lemoine gives is the consumer market, where companies like L’Oréal are coming up with innovative promotions. Without helpful forecasting tools, this wouldn’t be possible
“They [L’Oréal] renew a third of their products every year,” he says. “It needs demand sensing technologies to see what’s happening, which one is working – to fill in the gaps where traditional forecasting has gaps.”
The base of change may not be particularly fast, but businesses are slowly moving away from simple spreadsheets to more complex solutions that could open the gate to richer pastures.
According to Kaltenbrunner, many leading manufacturing companies have in recent years made the effort to evolve the S&OP process beyond standard demand and supply balancing.
“Manufacturers have included new process enhancements and functions such as product management tools and increased the finance team’s visibility to improve the financial review process,” says Kaltenbrunner.
Martin Woodward, managing director of ToolsGroup, identifies process automation as the most effective tool.
“The biggest contribution comes with automating the process,” says Woodward. “Reduction in cycle time is one element [of automation], if you automate more you can bring in more information between different parts, for example human resources.”
Companies are branching out and beginning to move away from traditional S&OP strategy towards Integrated Business Planning (IBP). This is essentially an extension of S&OP throughout the supply chain – bringing in factors from different departments.
“I see companies starting to reconfigure processes under IBP – sometimes it’s just doing S&OP and calling it something else, other times it’s trying to incorporate more economics,” says Canitz.
Les Brookes, managing director of Oliver White, agrees that there is more to the process than simply balancing out supply and demand.
“That’s not to say that they don’t want to balance supply and demand,” he says. “But it’s about the short term executional process – more and more people are acutely aware that no matter how good they are at aligning, the bigger issues are to do with whether the long term plans are set out in a way which will be able to be executed in the short term.”
Businesses need S&OP, but equally importantly they need solid, trustworthy predictability.
“It has become more complex,” says Brookes. “It’s essential to move towards an integrated business plan, and away from a sales plan.”
Brookes questions the logic behind a plan that sees an organisation’s processes reviewed quarterly. He wonders why, if something changes, a company wouldn’t want to find out the impact of it straight away.
“Business doesn’t happen in quarters,” he says.
Lemoine agrees that with the pace of business accelerating, a static S&OP process which runs say, every month, just doesn’t do the speed at which companies have to react justice.
“Yes you may want to keep the monthly because the financial department needs to know if it will hit revenues that month, but the S&OP needs to merge and be fluid with ad hoc processes. Move from something sequential and something more compact.”
Data is the lifeblood of modern organisations, says ToolsGroup’s Martin Woodward. And this is certainly true of planning and forecasting. But he thinks that there is a digital divide within S&OP.
“Those that attract the digital generation are the ones who will survive,” he says. “It’s less about getting hold of data, it’s more about the process of improving the data”
Les Brookes thinks that companies need to be passionate about the data they are keeping, especially in terms of accuracy. “Once you’ve got to the point where its accurate there are tools out there, take out things that are non-causal to leave you a good basis,” he says.
Scott Moon, from Tompkins International, says that S&OP teams need to ‘unlock’ the power of data in order make sure strategic decisions are led by fact rather than a gut feeling.
“Fundamental questions should be reviewed to help define the true required stocking levels to maximise the business and minimize the inventory cost,” he says.
One of the most important things is making sure the team trust and follow the data with no question.
“If people don’t believe in the data the process falls apart,” says Logility’s Henry Canitz. “You need to build on a firm foundation.”