Executive Briefings

Sales & Operations Planning: Jump-Start the Upturn by Jumping the Hurdles to S&OP

Analyst Insight: Not sensing the upturn in the economy is almost as bad as being hit with the downturn. Value chains have slashed inventories in their effort to remain cash-positive. Some are already scrambling as their sales pick up but their inventory coffers are empty. It's not surprising that sales and operations planning initiatives have grown in importance.

The value of sales and operations planning (S&OP) is clear. It is on the supply chain agenda of 80 percent of manufacturers. A recent study highlighted the benefits: revenue growth, forecast accuracy, and improving new product introductions.

In 2009, S&OP gained steam. Companies are increasing their focus on S&OP. Yet with all this effort, not much has changed, and from our research we find many companies have stagnated or even gone backwards. Why is this?

S&OP is hard, and contrary to traditional thinking, it is about so much more than just balancing demand with supply.  It is hard because it is all about change management, and change management is difficult. Human nature is inherently afraid of change, and those with power and influence do not want to change the status quo.

So, for the S&OP process to gain traction and deliver the benefits it is capable of, people need to change. To do this, they need a vision - they need to understand the goal of S&OP and why it is important and what it will do for them, and for the company and the customer. Here are five hurdles that need to be overcome to maximize the value of S&OP:

• Goal alignment: clarity of strategy is required to align people, and this works best when tied to a compelling vision or event
• Metrics alignment: build a scorecard of end-to-end metrics with shared accountability
• Take charge: understand your sources of demand and your supply chains, and then design and modify the supply response
• Take the plan to action: decisions made in the S&OP process are worthless unless they are communicated down to the operational level
• Answer the question of global: S&OP works best when aligned with profit centers that span shared resources

The Outlook

As we close on the recession, those better able to sense the upturn will be reaching downstream to sense customer buying patterns and pulling these insights into their demand plan along with economic indicators and other market intelligence. S&OP is the process that will translate demand sensing into profitable plans for source, make and deliver, with connection to execution.

The value of sales and operations planning (S&OP) is clear. It is on the supply chain agenda of 80 percent of manufacturers. A recent study highlighted the benefits: revenue growth, forecast accuracy, and improving new product introductions.

In 2009, S&OP gained steam. Companies are increasing their focus on S&OP. Yet with all this effort, not much has changed, and from our research we find many companies have stagnated or even gone backwards. Why is this?

S&OP is hard, and contrary to traditional thinking, it is about so much more than just balancing demand with supply.  It is hard because it is all about change management, and change management is difficult. Human nature is inherently afraid of change, and those with power and influence do not want to change the status quo.

So, for the S&OP process to gain traction and deliver the benefits it is capable of, people need to change. To do this, they need a vision - they need to understand the goal of S&OP and why it is important and what it will do for them, and for the company and the customer. Here are five hurdles that need to be overcome to maximize the value of S&OP:

• Goal alignment: clarity of strategy is required to align people, and this works best when tied to a compelling vision or event
• Metrics alignment: build a scorecard of end-to-end metrics with shared accountability
• Take charge: understand your sources of demand and your supply chains, and then design and modify the supply response
• Take the plan to action: decisions made in the S&OP process are worthless unless they are communicated down to the operational level
• Answer the question of global: S&OP works best when aligned with profit centers that span shared resources

The Outlook

As we close on the recession, those better able to sense the upturn will be reaching downstream to sense customer buying patterns and pulling these insights into their demand plan along with economic indicators and other market intelligence. S&OP is the process that will translate demand sensing into profitable plans for source, make and deliver, with connection to execution.