Are your Sales and Operation Planning Practices up to Scratch?

Online SalesWhen Sales and Operations Planning (S&OP) is implemented and maintained properly, it forms the basis of the complete supply chain process. It’s not a new methodology by any stretch of the imagination. It’s been around for 35 years or so, since it was first conceived by Richard Ling back in 1980s. But the fact of the matter is that in a recent survey, only 2 out of every 5 companies that utilized S&OP methodology said that the S&OP process was fully effective.

A Fully Integrated Supply Chain Management Tool

The full System and Operations Planning process is a fully integrated management tool, that when utilized to its fullest extent, results in producing a complete suite of plans that allow a business to fully focus and achieve a completely aligned and synchronized strategy across all business disciplines.

Once correctly implemented, Sales and Operations Planning software will regularly review current client demand, comparing it to the resources currently within the supply chain, and re-plan events to achieve a balanced outcome. This re-planning process zeroes in on former agreed sales/production plans with a view to helping supply chain managers to equate with, how the company achieved its current results, while also looking ahead to focus on projected actions, and their forecast results.

Driving Sales and Operation Planning Success

Success with Sales and Operation Planning software is best achieved when the program is headed up by a profit center manager. But to achieve ultimate success, this profit center manager should be au-fait not only with the commercial drivers, but with the constraints that the supply chain is subject to as well.

While many SMEs run single Sales and Operation Planning programs, many larger corporates (typically with a spend of more than $5 billion per annum) often operate up to as many as 4 or 5 distinctly separate programs. This compounds the problem of under performing S&OP programs, making it even more difficult to analyze why they short deliver.

One of the best ways of bringing improvement about is to tackle any unresolved change management concerns.  There are 5 key issues to be addressed.

Misaligned Metrics

The larger the company, and the more complex the relationships between the various internal disciplines, the easier it is for policies and targets to become misaligned. With the various functions all pulling in their own direction, corporate targets and incentives conflict and fight against one another. One of the first issues with addressing Sales and Operation Planning protocol must therefore be the realignment of these incentives in order to achieve cross-functional accord.

Misunderstanding of Initiatives across Supply Chain Operation

All too often, people outside the supply chain management function do not fully understand the basics of supply chain management. This means that non-supply chain executive teams don’t appreciate the relationship of non-linear supply chain measurements. This results in initiatives struggling to survive as day to day priorities shift within the supply chain.

To bring about the improvement that companies seek in Sales and Operation Planning operations, common initiatives must be recognized and shared, and must be built in to the overall operating strategy.

The Gulf between Sales and Operational Staff

One of the most common departmental gulfs is that between sales teams and operational teams. It’s also one of the most common causes of Sales and Operation Planning program failure. It’s something which must be fixed if improved S&OP performance is to be realized.

One way of bringing the two factions together by getting finance to force alignment by showing the effect of product mix changes, and get-to-market strategies, on costs and stock.

Realigning Sales and Operation Planning Processes

In a recent survey that was carried out, only 22% of those taking part felt that Sales and Operational Planning processes were correctly aligned between the requirements of commercial teams and the requirements of operational teams. This is a key issue, because when these processes are balanced, companies are able to reduce their operating costs and work with less stock. This balance is however a tricky one, and it requires good communications in order to ensure that operating strategies and realigned metrics are clearly broadcast throughout the organization.

The Execution of Sales and Operation Planning Initiatives

All too often planning initiatives get left at the starting gate. In order for them to be effective, they must of course be executed correctly. But in the survey recently carried out, only 11% of respondents said that they felt that Sales and Operations Planning initiatives reached fruition. It is therefore key to ensure that planning is intrinsically connected to execution.

Harmonizing Cross-Functional Goals

If Sales and Operation Planning is to continue the Renaissance that it is currently experiencing, the above mentioned five issues have to be addressed in order to achieve the maximum benefits that can be bought about through S&OP implementation. It can be an extremely invaluable supply chain management tool, but only when it is broadly understood, and accepted, and when cross-functional goals have been harmonized.

How do you rate Sales and Operation Planning methodology as a supply chain management tool, and what advantages in your opinion could or does it bring to your organization? Have your say at the feedback section below.

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