Visit Our Sponsors
Sales and operations planning (SOP) is one of the more critical functions an organization must undertake, as its effects span across various departments, and have the potential to directly influence the organization's profits. A successful SOP department harmonizes the different beats of each division into an agreeable melody. It is definitely a challenge to find an effective tool that can merge the data from different systems to create a coherent picture of the organization.
An SOP system is used by the most important departments of an organization: finance, sales, marketing, and operations. This is why a powerful SOP system can make the difference between the success and failure of an SOP cycle. SOP systems are very useful to senior management, as they allow a "bird's eye view" (an overall view) of the health of the whole organization. With its graphical representations and dashboards, an SOP system is an indispensable tool for any organization.
The software market is becoming increasingly competitive, which is having a positive effect on the SOP products available. Today, SOP systems have many advanced features, such as real-time dataflow and intuitive user interfaces. A couple of years back, many features like these were considered "nice to have," but today they are essential. Also, vendors have streamlined their products so that implementation times are more manageable, making the return on implementing an SOP system more attractive. Today, a typical SOP implementation--assuming that the organization is already running an enterprise resource planning (ERP), supply chain management (SCM), and business intelligence (BI) system--should take around three months worth of labor hours.
Standard key performance indicators (KPIs) and metrics already built into an SOP system is a particularly useful feature that offers many benefits to an organization. Standard KPIs and metrics could be based on popular models, such as the supply chain operations reference (SCOR) model, and they can drastically reduce the implementation time of an SOP system. Most SOP system implementations take a long time to develop reports based on SCOR-based KPIs, so this capability should be a fundamental feature of any SOP system. If this capability is not supported by the SOP system, then a considerable amount of time will go to identifying KPIs and then building reports for them, be they financial or operational.
If the KPIs on budget, inventory norms, sales forecasting error, etc. are built in, then they do not need to be configured from scratch. Furthermore, a visual representation of KPIs in graphs and dashboards helps top management to keep tabs on various "numbers."
An SOP system should be able to integrate with different systems. Most organizations have a transactional system, which is usually an ERP system. Such systems are rich with data that organizations could use to their benefit. An SOP system should be able to draw data from these systems to show a realistic value of the KPIs and metrics through internal benchmarking of their historical data.
An SOP system should also be able to integrate with the SCM system. Integration of these two systems gives organizations the flexibility to modify data in the SOP system if certain organizational objectives are not being met. For example, a sales manager might need to change the sales forecast figure of a certain product in order to meet organizational objectives for that product. With the two systems integrated, instead of logging into the SCM system to make this change, it can be made directly in the SOP system, and the information will be updated in the SCM system as well.
An SOP system should be able to extract data from the BI system, such as historical data and calculated metrics. To do this, the SOP system should be sitting "on top" of the ERP, BI, and SCM systems. It is preferable that the dataflow from these systems is bi-directional, but still today, in some cases, technological limitations severely restrict bi-directional flow. For example, data changed in the SOP system may not be automatically updated in the BI system. For an SOP system to have this capability, it should be built on a platform that can integrate with heterogeneous systems seamlessly. This should be a fundamental feature of an SOP system.
In the case of a stand-alone SOP system, the system should be able to load data from files directly so that transactional and historical data can be loaded into the SOP system directly. The system should also be able to download the data into files, and then upload them back into the ERP, BI, SCM, and other systems.
The drill down feature of an SOP system is one of its most important, as upper management can view KPIs at various levels, and take prompt action if required. The manager, for example, can look at inventory turns at the national, regional, or branch level. The manager can also look at the metric at a product level or at a product group level. If proper hierarchies are maintained, then a drill down feature, which is similar to BI reports, can help senior management make appropriate business decisions. The drill down feature greatly increases the efficacy of an SOP system.
Building up a hierarchy across dimensions can enhance the power of the SOP system. Hierarchies can be built directly into an SOP system, or they can be imported from other systems, such as the ERP or SCM system. If a hierarchy is built directly into the SOP system, then it should be possible to map the SOP's hierarchy with that of the SCM or ERP hierarchy.
The number of dimensions over which a hierarchy can be built in today's SOP systems is limited. The dimensions most used across industries are the product, customer, and geographical dimensions. The ability to modify these hierarchies is important, as they can change as the business grows or if the nature of business changes. In today's competitive environment, changes like these can be frequent, and any restrictions in the SOP system on this front will be viewed negatively by the user company.
The features discussed above help the SOP team perform simulations using different figures (i.e., revenue objectives). These features also help to monitor KPIs in different business scenarios. Thus, the SOP team can simulate various scenarios, and agree on a figure. These figures can be arrived at after a consensus on a planning cycle is reached among various departments, and can be published for top management. Also, if a drill down feature is available in the SOP system, the KPIs can be built either top down or bottom up. For example, after the KPI values are fixed at the top management level, they can be broken down to the other levels using the hierarchy that has been built into the SOP system. The reverse can also be followed, where the KPIs can be rolled up after the values from the field are taken and finalized. This feature is important because it helps top management test various scenarios.
The more advanced SOP systems have built-in task management modules. These modules can have built-in workflows that are integrated with a worker's tasks. Hence, the system can send a mailer to the next person in the workflow once a particular task has been completed. It can also monitor the status of a task by showing what percentage of it has been completed, which gives a visual representation of the amount of work that remains to be done. Tasks can be built into a hierarchy, which can thus help to define tasks at various levels. These levels can be mapped to the levels in the organization hierarchy. A hierarchy of tasks also helps to coordinate the various tasks in the SOP planning cycle as a whole.
SOP helps organizations build upon their tactical plan after strategic planning has been done. A broad SOP system can streamline the planning cycle and the flow of information between different entities within the organization. SOP systems are slowly evolving into complex systems, as new features are constantly being added to them. SOP systems today are an integral part of any organization. In some cases, the basic functionalities of an SOP system come bundled with a transactional system (ERP) or an SCM system. These functionalities cover the basic requirements of an organization, but they lag far behind a full-fledged SOP system.
Organizations should carefully evaluate different parameters when selecting an SOP system. They need not add complexity to the SOP system if their business requirements are relatively simple.
About the Author: Anand Chatterjee is a supply chain management consultant for SAP India. He has worked for PricewaterhouseCoopers, General Electric Capital International Services (GECIS), and Tata Research Development and Design Centre (TRDDC). Chatterjee's articles have been published in The Economic Times, Business World, Express Computer, Network Computing, and ICFAI Reader. He has been a speaker at conferences and premier educational institutes, such as the Indian Institute of Management and the Indian Institute of Technology. Chatterjee has a postgraduate degree in management from the Indian Institute of Management (Calcutta) and a BEng from the Regional Engineering College (Nagpur, India). He can be reached at email@example.com.
Enjoy curated articles directly to your inbox.