Many companies seek to start S&OP by selecting a software tool. However if a company is yet to start an integral process like S&OP, it needs to tear down the walls between teams and functions and stimulate cross functional cooperation. This is often underestimated in making a successful change for S&OP.
Furthermore, with IT departments already charged with other projects, there is an appetite to be able to launch S&OP processes with existing IT systems and -tools. This article presents 5 lessons learnt in starting and implementing S&OP. Apply these lessons and you will be far better positioned for defining and selecting S&OP software tools!
Vision S&OP as a play in baseball or American football. A pre agreed plan for the offense will be executed by all type of players in the team. All players’ performance is needed to make the touchdown. However, in many companies people like to stay in the comfort zone of their silo/function. Honestly, they have learned to behave so in the organization but at the same time are capable of playing in such football team as well. A change is needed, and feasible, in changing towards cooperating across functions for the sake of the total. Once the S&OP organization and - process is installed, it is helpful to arrange non-biased coaching in running the first S&OP cycles. To ensure the behavior change is sustained, it needs to be reconfirmed meaning also the KPI sets and appraisal systems criteria should be upgraded. These should include cross-functional S&OP criteria demonstrating integral behavior is the most appreciated.
S&OP is an integral process that seeks the best output for the company as a whole. The S&OP also seeks to improve the performance of the company by review of demand forecast accuracy, supply plan execution per each cycle of S&OP. Management levels should choose to stick to the plan as agreed in S&OP even though their teams tell them that such execution is not creating the best output for their silo. This implies the management trust the S&OP plan cycle, and reward behavior in their teams for S&OP adherence. This is best achieved by positive recognition of such behavior in team meeting, and face to face moments.
Many companies have their data vested in different IT systems. To ensure transactions and products are recognized as the same, such data need to be harmonized before entered into S&OP cycle. There are multiple routes to achieve that:
Clean up the data in the base systems to the same name, dimensions, etc.
Install centralized master-data management process
Clean up the data in a separate database, where all deviating data are recorded and data checked and enriched before entered into S&OP process.
The approach differs from the one company (or even between divisions within a company) to the other. Either way it pays off to avoid intense manual labor to clean data, and/or recognize and repair omissions before entering analysis and planning phases in S&OP.
Demand forecasting is often based on desire and ambition, rather than on data provided by customer(-groups). Even if demand forecast analysis is done with a simple excel based demand forecast cascade-chart it supports to start asking why and how. This builds understanding of the route to higher forecast accuracy. Sales will be challenged and helped to provide more solid information in the internal demand review. Once the conclusion is drawn “we don’t have better information available within the company” it will help identify what information is required from outside databases or other approaches in improving demand information.
After defining S&OP process and organization start a pilot in one product-group and potentially in a certain geographic area. First aim to balance demand and supply (and inventory). Depending on the markets the company operates, this will typically vary between 12 to 24 months horizon. A first step is to identify a product group and geographical area for a pilot phase. During the pilot, tune and tweak the process, tools, and the granularity in the S&OP process (SKU vs product group). Then move to the roll-out phase to include the other products and markets. Thereafter add new products, and the end-of-life products. Once all demand, supply, NPI and EOL is included the financial dimension (margin) can follow. This allows to find and execute the most profitable plan for the company as a total.
BCI Global has developed a proven S&OP maturity assessment tool. With the tool the gaps and the S&OP improvement plan and path forward can be identified in a short timeframe.