Imagine that you are in a rowing boat along with a few colleagues from the other departments of your organisation. You yourself come from Operations, another colleague is from Sales, and yet another from Finance. You all know what the ultimate goal is: the vision and mission of the company. It is possible to reach these in several ways, however. You have to imagine that there is no standard working agreement in your rowing boat that indicates the moment at which we have to row, and adjust this where necessary. Without agreement on how to row, the rowing boat is sure to leave its course. A lot of time and energy will be necessary to correct this and to head for the target once again. We build up a backlog with respect to other competing rowing boats, and see our chance of standing on the podium decreasing. No medal, no bonus, etc.
Do you recognise the above situation in your company?
It is an illustration of how a company without a - strongly - developed Sales & Operations Planning (S&OP) seeks in vain to translate its business strategy into a tactical & operational plan. Time after time, it’s a real struggle to fit the different pieces of the puzzle together. We see different perspectives on reality from purchase, marketing, finance, sales & operations. We find ourselves in a spiral of continually putting out fires, because there was no unambiguous process telling us how we should deal with these different objectives. As a management team, how do we deal with a sudden increase in market demand? Do we immediately know which buttons to press in order to handle these extra volumes in our process? What are our back-up scenarios? How do we deal with a scheduled shutdown at the end of the year? Is planning aware of this, so that they can buffer it? Are we all working with the same data, in order to ensure that informed decisions can be made?
What do the rowers tell us?
Every organisation with a clearly defined business strategy needs a frame of reference, a recognizable point to fall back on when complex problems have to be solved. A frame of reference that is based on agreements made at the time, for and by everyone. Sales & Operations Planning offers us standard work agreements, from which we can evolve to a better standard. S&OP can thereby also be summarised as standard work (i.e. one of the many tools from Lean Manufacturing) to enable us to efficiently & effectively deal with variations as an organisation. Variations from both the market and from within our internal organisation. No improvement is possible without standards. Without S&OP, no step forward towards Supply Chain Excellence is possible.
Why is having an S&OP all the more critical?
Today, we see that the market is changing all the time, and that this change is accelerated by digitisation We are now seeing Digital transformations in all industries. The market is typified as VUCA (Volatile, Uncertain, Complex & Ambiguous). And it is precisely this context that increases the importance of a strongly developed S&OP. We want to see variation in operations, in customer demand, and so on quickly, but, above all, we want to be able to tackle them in a very structured way. Standard work and visual management help us to control this increased complexity in the market.
Many companies have already started using S&OP over the years, but research has shown that a large part of these companies fail to further refine & develop this process. A standard S&OP process is not like a law, or one of the 10 commandments. It is something a company should always aspire to keep improving. Striving for Supply Chain Excellence means constantly questioning the current S&OP standard in order to make improvements.
What can we expect as a minimum from S&OP?
A rowing boat with rowers who have made clear agreements about who does what and when will pick up that gold medal. From experience, we see that a company with a continuously evolving S&OP process can optimise its stock levels, achieve an increased OTIF (on-time and in-full), has its working capital under control, and, above all, that a rest cycle brings regularity into an organisation. In short, S&OP enables you to strive for end-to-end supply chain excellence.
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Jeroen Van den Hove
