SALES & OPERATIONS PLANNING
S&OP—Business Management
in Near Real Time?
W
The sales and operations planning process has evolved from
manufacturing conflict resolution in the late 1980s to data-and visibility-enhanced strategic demand and supply balancing for retail executives
today. This is a remarkable
evolution for a concept. As visibility continues to increase,
could S&OP become the primary tool for managing supply chains or, for some, complete businesses?
—Ralph Cox, principal, Tompkins
Associates
ith increasing visibility and collaboration through
demand-driven views—extending from customers’ cus-
tomers to suppliers’ suppliers—S&OP has the potential
to reshape supply chain management fundamentally.
The best S&OP processes vary in the details due to the nature and needs of
the businesses. However, the fundamentals are the same: Frequently rebalance
supply and demand, to the needed extent, through structured operational-,
managerial- and executive-level collaborative decision processes that reflect
corporate objectives. The potential for increased competitive advantage and
profit improvement is significant, especially in large firms that have disconnected demand planning and supply management organizations, as well as
weak supplier relationship management programs.
There are a number of crucial keys to success and a significant potential for
failure. In 2009, Gartner defined a solid four-stage view of the maturity of S&OP
processes—reacting, anticipating, collaborating, orchestrating. At the same
time, Gartner recognized that the majority of initiatives did not progress beyond
the first or second stage.
There may be data challenges, especially for firms that have exceptionally
disconnected demand planning and supply management. However, the larger
challenges are managerial and cultural, particularly for firms that have limited
collaboration experience. And, while suppliers do not have to be included,
benefits can be maximized when key suppliers are involved. This is an especially difficult challenge when the foundation for supply chain collaboration
has not been established and strengthened over time.
The S&OP process plays a major role in breaking down the walls of organizational silos. The process is explicitly designed to bridge from customer
demand planning to supply management (i.e., manufacturing or purchasing)
almost inevitably spanning white space on the organization chart. Reflecting
this reality, Gartner accurately characterizes the effort as 60 percent change
management, 30 percent process, and 10 percent technology.
On the other hand, the S&OP process can drive the desired collaboration,
which has been more of an objective than a reality in the past. Or will it become
the primary general management tool for businesses that have supply chains as
their core competency?
The Outlook
Manufacturers without an institutionalized process are far behind the leading-edge
firms. And although distributors and retailers may be behind manufacturing companies, 2012 is a good time to begin utilizing S&OP. No one wants to be last.
