What is the state of S&OP today?
Interacting with supply chain professionals in conferences and consulting assignments across different industry verticals, I see broadly four different classes of companies when it comes to the State of S&OP, may be five:
1. Companies that are Supply heavy – Supply chain function is heavily and actively involved in the S&OP process but lack an active involvement of Sales and Marketing. Management is still trying to figure out how to get Sales and Marketing excited about S&OP.
2. Companies focused on Demand – Demand Planning together with Marketing and Sales run the monthly process but use the process more to signal to the factory.
3. The Starters – Companies that understand and appreciate the value of S&OP. They have been to conferences and training workshops but have not taken the journey yet. They honestly admit that they are not ready to implement an S&OP process yet.
4. The Pretenders – Businesses that continue to run their current monthly process but fashionably renamed the process to S&OP with the appropriate meetings slotted into the calendar.
For a number of years, S&OP as a process was the domain of some one in the supply chain. Supply Chain produced its own numbers, the forecasts, an inventory plan and a Rough Cut plan and invited the Sales teams and the marketers to come in and comment on what they have done.
The good guys in Sales and Marketing graciously agreed to participate and review the colorful charts and nod in agreement. But most did not bother – they either did not have the time or did not understand the importance of this process.
Thanks to all the emphasis and evangelism, C-level management has taken an interest in S&OP and has started pushing the commercial teams to participate. Although the Supply-heavy S&OPs are a lot less these days, they still exist.
In the case of Group 1 – supply heavy S&OPs, I see the following:
1. Brand Managers and Product Managers have joined the Supply Chainers in their S&OP quest but the real challenge is to get Sales teams interested in this and actively participate in this.
2. Invariably in these companies I also see that intelligence from Sales (Sales Plans and Sales forecasts) are not integrated into Demand Planning – either process is not developed or Demand Planners simply ignore Sales Forecasts as biased.
In the case of Group 2 – Demand heavy S&OPs, commercial teams actively participate in the S&OP process. In most cases, the S&OP process is led by either the Director or Manager of Deamnd Planning. Also these processes are tightly integrated into the corporate planning process that feeds Senior Management. Although Supply chainers participate in this process, they look to the S&OP as a source of the latest demand information. Senior Management thinks of the S&OP as a final forecast that they can use to signal to the supply chain.
The biggest benefit of the omni-present S&OP jingle in the supply chain press has been to motivate even small companies to start thinking about S&OP. There are a number of companies trying to investigate if S&OP is for them.
Finally the Pretenders – I recall the reaction from one Division President I talked to recently. “Yes S&OP does exist – But I don’t think people have a clue on what they are doing and how it really benefits them – we just go through a series of meetings that were developed by a Consultant a few years ago…….”
It may be time to take stock of your S&OP Process. How is it doing compared to what it should be doing? There is no point in doing it because every body else claims they are doing it too. Perhaps an S&OP audit may add a lot of value.
Processes change over time as Organizations evolve and the Players change. But it is important to evaluate if the process delivers the the fundamental objective of S&OP – Balancing Demand and Supply.
That leaves the one group I did not talk about – companies that strive to balance demand and supply over the long horizon; companies that have a long-term vision; companies that truly understand that demand and supply will never balance and have an S&OP that is mature enough to recognize the challenges and opportunities in this imbalance!
An inexpensive method to benchmark your S&OP may be to attend our 2-day workshop in September on the subject in Boston, MA.