Executive Briefings

How to Implement an S&OP 'Rudder'

Larry Lapide, research affiliate at MIT's Center for Transportation and Logistics, employs a maritime metaphor to dramatize the pressing need for companies to implement an effective sales and operations planning (S&OP) process.

Over the past 10 years, Lapide has seen a resurgence of interest in formal sales and operations planning.  He estimates that between 75 and 80 percent of companies have an S&OP process in place today, versus 20 percent two decades ago. Lapide used to describe S&OP as the "steering wheel of a car," but in the wake of the Great Recession he now prefers the metaphor of a "rudder." Planning has become more difficult and plagued by uncertainty, he says. Today's processes can help companies to survive a "perfect storm" of adversity, caused by an uncertain economic environment.

The lengthening of supply chains, a result of the outsourcing and offshoring of manufacturing, is another factor that has complicated modern-day planning efforts. Companies today are overseeing more complex supply chains, with sourcing in multiple countries. At the same time, they're coping with a rise in consumerism, which in turn has led to more product segmentation. Even the ordering of a cup of coffee can be a complicated task today, Lapide says. Finally, there has been a spike in mergers and acquisitions, presenting companies with the challenge of merging disparate planning processes and information systems. All of these factors have contributed to the rise of interest in S&OP, especially among the biggest companies. Procter & Gamble, for one, has more than 90 S&OP processes under way.

Corporate silos lead to segmented planning efforts, a major target of S&OP processes. The idea, says Lapide, is to gather individuals from various functions to achieve agreement over incentives, goals and plans. "You have to bring together demand, supply and the financial side to see whether it's all making sense," he says.

Lapide offers a number of tips for implementing an effective S&OP process. First among them is to start small. Companies shouldn't worry at the outset about sophisticated technology, he says. The emphasis should be on regular meetings to achieve internal collaboration and consensus.

To view video in its entirety, click here


Keywords: supply chain, supply chain management, S&OP, sales and operations planning, supply management, inventory management, supply chain planning, retail supply chain

Over the past 10 years, Lapide has seen a resurgence of interest in formal sales and operations planning.  He estimates that between 75 and 80 percent of companies have an S&OP process in place today, versus 20 percent two decades ago. Lapide used to describe S&OP as the "steering wheel of a car," but in the wake of the Great Recession he now prefers the metaphor of a "rudder." Planning has become more difficult and plagued by uncertainty, he says. Today's processes can help companies to survive a "perfect storm" of adversity, caused by an uncertain economic environment.

The lengthening of supply chains, a result of the outsourcing and offshoring of manufacturing, is another factor that has complicated modern-day planning efforts. Companies today are overseeing more complex supply chains, with sourcing in multiple countries. At the same time, they're coping with a rise in consumerism, which in turn has led to more product segmentation. Even the ordering of a cup of coffee can be a complicated task today, Lapide says. Finally, there has been a spike in mergers and acquisitions, presenting companies with the challenge of merging disparate planning processes and information systems. All of these factors have contributed to the rise of interest in S&OP, especially among the biggest companies. Procter & Gamble, for one, has more than 90 S&OP processes under way.

Corporate silos lead to segmented planning efforts, a major target of S&OP processes. The idea, says Lapide, is to gather individuals from various functions to achieve agreement over incentives, goals and plans. "You have to bring together demand, supply and the financial side to see whether it's all making sense," he says.

Lapide offers a number of tips for implementing an effective S&OP process. First among them is to start small. Companies shouldn't worry at the outset about sophisticated technology, he says. The emphasis should be on regular meetings to achieve internal collaboration and consensus.

To view video in its entirety, click here


Keywords: supply chain, supply chain management, S&OP, sales and operations planning, supply management, inventory management, supply chain planning, retail supply chain