Executive Briefings

Managing S&OP in a 'V'-Shaped Business Cycle

A "V"-shaped business cycle is one that is characterized by a large market contraction, followed by a sharp and equally large expansion. Indeed, some companies during the Great Recession saw double-digit sales declines followed by commensurate increases. "It almost feels like you're on a roller coaster," says Marianne K. Gatten, director of strategic planning and business development with Emerson. "You're taking that first hill, scared of what's going to happen next." Managing the sales and operations planning (S&OP) process in such an environment can be extremely difficult.

When the forecast becomes fraught with errors, individuals within the organization begin to question the need for a laborious S&OP effort. As an alternative, they might recommend going with a "gut feel" for developing a forecast. According to Gatten, however, "this is exactly the time you need rigorous data analysis and open, cross-functional communication. You need to stay on track with S&OP."

For an S&OP manager, extensive communication among principals is the key to maintaining a hold on the process. "Make sure you have the pulse on what's going on in the marketplace," Gatten says. "Talk to operations leadership about issues like excessive inventory." At all times, communication should be "open and honest."

It's important to reach beyond the company's walls to external supply-chain partners in order to obtain a better demand signal. In difficult times, says Gatten, "people tend to hunker down and stop communicating." The opposite should be occurring. One technique that Emerson deployed was to move the executive S&OP meeting in front of the functional one. The change allowed executives to be better informed about what was going on, and helped planners to gain approval for the forecast more quickly.

Another tip, says Gatten, is to look at the statistical forecast model and re-weight planners' emphasis on history. Emerson placed more emphasis on the nearest three months of actual data, so that the forecasting tool could better detect changing trends in volatile times.

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Keywords: Sales & Operations Planning, Business Intelligence & Analytics, Business Process Management, Collaboration & Integration, Customer Relationship Mgmt., Event Management, Forecasting & Demand Planning , SC Finance & Revenue Mgmt., SC Planning & Optimization, Supply Chain Visibility, Global Supply Chain Management, Supply Chain Analysis & Consulting, Supply Chain Security & Risk Mgmt, Business Strategy Alignment, Forecast Modeling, What-If Scenarios for Forecasting

When the forecast becomes fraught with errors, individuals within the organization begin to question the need for a laborious S&OP effort. As an alternative, they might recommend going with a "gut feel" for developing a forecast. According to Gatten, however, "this is exactly the time you need rigorous data analysis and open, cross-functional communication. You need to stay on track with S&OP."

For an S&OP manager, extensive communication among principals is the key to maintaining a hold on the process. "Make sure you have the pulse on what's going on in the marketplace," Gatten says. "Talk to operations leadership about issues like excessive inventory." At all times, communication should be "open and honest."

It's important to reach beyond the company's walls to external supply-chain partners in order to obtain a better demand signal. In difficult times, says Gatten, "people tend to hunker down and stop communicating." The opposite should be occurring. One technique that Emerson deployed was to move the executive S&OP meeting in front of the functional one. The change allowed executives to be better informed about what was going on, and helped planners to gain approval for the forecast more quickly.

Another tip, says Gatten, is to look at the statistical forecast model and re-weight planners' emphasis on history. Emerson placed more emphasis on the nearest three months of actual data, so that the forecasting tool could better detect changing trends in volatile times.

To view video in its entirety, click here


Keywords: Sales & Operations Planning, Business Intelligence & Analytics, Business Process Management, Collaboration & Integration, Customer Relationship Mgmt., Event Management, Forecasting & Demand Planning , SC Finance & Revenue Mgmt., SC Planning & Optimization, Supply Chain Visibility, Global Supply Chain Management, Supply Chain Analysis & Consulting, Supply Chain Security & Risk Mgmt, Business Strategy Alignment, Forecast Modeling, What-If Scenarios for Forecasting