Companies run different flavors of S&OP processes, although we tend to lump them into one of three categories based on maturity: basic, integrated or collaborative. Progressing through the maturity levels to a collaborative S&OP process will drive larger benefits.
Basic S&OP process tends to be informal, will maintain a functional perspective and will likely not have broad business representation. It is not unusual to see just Sales, Marketing and Finance involved, with multiple plans in place. Frequency will be quarterly, perhaps monthly. Basic S&OP also tends to be more rear-mirror-driven rather than proactive. Companies at this stage may not have a centralized scorecard with joint KPI review.
An integrated S&OP tends to be a more established, formal process with a cross-functional consensus focus to get to one plan. Functional representation will expand to include Supply Chain and perhaps R&D. Frequency will be monthly, perhaps even weekly, although the process does tend to still look backwards.
A collaborative S&OP is an established process, often with software tool facilitation. Full cross-functional consensus creates one play-book for the entire business. S&OP frequency is weekly (sometimes less than that if gap-closing measures are required), yet the process does not lose sight of longer-term planning horizons. What sets the collaborative S&OP apart most distinctly from its less mature stages, is the ability to look forward as well as back, and to perform both what-if evaluations for business trade-offs and risk-reward analysis to achieve business objectives.
The last 18 months have put enormous pressure on manufacturing companies. The product mix effect has created high levels of margin volatility and a renewed focus on cost efficiency. In this context, S&OP is critical. In a recent IDC survey, manufacturing respondents ranked the applications in which they most expected to invest in 2010. Unsurprisingly, S&OP was in the top 3 with over 45 percent expecting to invest in S&OP tools.
Implementing a S&OP process -- or improving an existing process through better integration or the use of an application from a reputable software vendor - will improve the business's ability to get to a single consensus plan.
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