S&OP: The Future of Supply Chain Excellence

Pam Davis, Vice President of Supply Chain, Pace Industries

Pam Davis, Vice President of Supply Chain, Pace Industries

A common question has been asked many times over the last few months as many US based companies have been working diligently to recover from global supply chain challenges amidst the 2020 COVID-19 global pandemic. The question is simple, “How do we prepare if this happens again or avoid it all together in the future?”

I would like to pose a different question instead; is Sales and Operations Planning (S&OP) the future of supply chain excellence? Is S&OP the differentiator that allows companies to recover quickly from pandemics, natural disasters, and economic impacts that cause varying changes in demand?

Over the last 9 – 12 months many organizations have been eager to recruit supply chain talent with an emphasis on the S&OP skillset to help prepare for an uncertain future. Are these companies moving in the right direction or simply grasping at metaphoric supply chain straws to solve an unsolvable problem?

The short answer is yes. Absolutely. S&OP is indeed a solution to solving some of the world’s most catastrophic supply chain challenges. It is not only the future, but it is the past and present as well and has been practiced by Fortune 500 companies where I have worked, for more than three decades.

However, what many consultants or “experts” neglect to tell you is that it only works when deployed and practiced correctly. Leaders tend to act as if S&OP is a magic pill that once taken fixes all things supply chain, reduces inventory, and increases cash flow overnight. As a practitioner, I have indeed witnessed both the efficiency gains and financial impact of a successfully deployed sales and operations planning strategy. However, what tends to be over dramatized is the idea that it is “supply chain magic”. This is far from true and to see the true benefits of S&OP implementation companies should focus on four things.

“The 4T’s are talent, time, teamwork, and tools. If you neglect any of these elements, your results will vary, and you may never see the true benefits desired from attempting such a lofty goals”

In the remainder of this article. I will highlight, what I have personally coined as the 4T’s of successful S&OP implementation. I am sure that these principles can be applied to other areas of operations, manufacturing, and supply chain management, but I know without a shadow of a doubt that it is critical for successfully implementing S&OP to see the ultimate value that makes deployment feel like magic.

The 4T’s are talent, time, teamwork, and tools. If you neglect any of these elements, your results will vary, and you may never see the true benefits desired from attempting such a lofty goal. If you experience some luck by focusing on 3 out of the 4, you still lose, because your ability to deliver consistent, repeatable, and sustainable results will suffer.

Let’s start with 1T: TALENT. Simply put you must find the right talent for the S&OP implementation team and this is no easy task. Many boasts of their knowledge of sales and operations planning after participating in a few demand consensus meetings, witnessing the process as a mere spectator. But this is NO spectator sport. You need practitioners with proven results that have positively impacted real KPIs.

For example, demand planners need to know statistics, understand bias, know how to leverage market intelligence, be detailed orientated and have experience using demand planning software. They need to see trends in data, understand inputs and outputs and know how to add and remove bias from the final demand plan based on forecast accuracy results. They must know how to marry the art and science of demand planning to create a final unit-based forecast that aligns to the annual operating plan (AOP) or budget. And this is just one role in the process!

When searching for key members of the S&OP department, take the time to source the right talent. Cast a wide net and challenge their knowledge during the interview process. Do not hire the first person that drops the latest buzz words. S&OP. SOIP. SIOP. IBP. Look for practitioners not amateurs or posers. After all each of those acronyms describe the same process.

T2 is TIME. Everyone in leadership wants everything yesterday. Think of T2 like fitness. Yes, we all want to lose 20 pounds in 20 days, but even if this is accomplished, it is mostly like not healthy or sustainable. The same principles apply to S&OP implementation. You can get it done “quickly”, but without giving the process time, consistent results are typically unattainable.

T3 is TEAMWORK. I will keep this simple. Everyone must have skin in the game and the mandate for implementation needs to be driven from the C-Suite. The end.

Finally, T4 is TOOLS. Again, let’s keep it simple. It’s 2021. We have Google, Facebook, and soon self-driving vehicles. Stop trying to run your ERP thru Excel and don’t implement S&OP if you can’t invest in software. Can it be done? Yes. Should it be done? Not at all. When done correctly, S&OP pays for itself 10 to 20x times over. Buy the software.