Change is a challenge. Implementing sales and operations planning (S&OP) can be a massive challenge. Supply chain executives put recurring processes in place with meetings scheduled months in advance. They gather vast amounts of data and force it into predefined buckets. And they expect diverse functional groups to talk with one another and arrive at a consensus plan. But despite the most diligent efforts, every practitioner of
S&OP—even those who are best in class—encounters obstacles to true collaboration.
The culprit blocking collaboration is often that each functional group may respond to the planning process differently. If you’d like to test the theory in your own company, ask each group the following questions in relation to their priorities:
- Are we planning in units or dollars?
- What’s our planning horizon?
- What level of detail is needed?
The table below demonstrates how goals differ between functional groups. Sales wants to maximize revenue, thinks in dollars and is focused on the near term. The Operations group wants to know what to manufacture, when it’s needed and where it needs to go. Operations is focused on minimizing operating costs, thinks in units and is looking at the medium term. Meanwhile, Finance is trying to maximize profit, manage cash flow, thinks in both units and dollars and is focused on a much longer horizon.
Combining these cross-functional views into a consolidated plan that respects the dependencies across them is one of the key outputs of S&OP. But, when it comes to Sales, supply chain executives need to understand exactly what they’re asking. What’s needed for S&OP will look like a huge, unwieldy obligation to salespeople. Changing how they perceive S&OP can help you improve the “ask” and get them on board.
Here’s what you’re asking from Sales:
- Provide your forecast much further into future
- Tell us what specific products you will sell
- Tell us the number of units of each specific product
- For each product-specific unit projection, tell us into which months they will fall
- And, by the way, if you don’t sell to meet your forecast, we’ll have a conversation about that, too
When confronted with an “ask” of this magnitude with such a different approach than is their norm, the first response from salespeople is to resist. They’ll tell you they need to be out in the field with customers, that they need to be selling to achieve their objectives and that they don’t have time to provide this type of detailed forecast.
As an organization that sees the value of sales and operations planning, you must present your “ask” in a way that overcomes their resistance response. Mandating sales participation may be necessary, but that’s not enough. The organization needs to allow salespeople to do what they do best—sell. This means it’s up to you to make S&OP easy and helpful to Sales. You need to make sure you answer the all-important “What’s in it for me?” question for Sales.
Five Tips for Bringing Sales into the S&OP Partnership
- Provide a starting point. Salespeople are much better adjusting a forecast than creating one from scratch. The starting point can be a statistical forecast based upon historical demand.
- Make it easy to enter forecasts. Allow salespeople to enter their forecasts in a user-friendly tool. The tool should allow users to view actuals and forecasts at the desired level of aggregation. This means to allow roll up of values by customer, by region, by product family or other levels as defined by planning hierarchies. Then spread the aggregate forecasts across the all other levels using sound business logic. The planning tool does the heavy lifting, not your salespeople.
- Share the value of a better S&OP plan. A more accurate consensus plan will translate into better customer service levels and improved customer satisfaction. Yes, it really works, and increased satisfaction usually bodes well for increased sales. Help salespeople to see the value translated to outcomes that help them do their jobs better.
- Set realistic and achievable sales targets. S&OP requires one plan that the organization agrees to execute against. Sales should use the same approach to set sales targets. Stretch goals are fine, provided it’s clear that these go above and beyond the S&OP plan.
- Put the thumbscrews away. Measuring forecast accuracy is a great way to learn from the past and make improvements. It should not be the means by which to call out underachievers. If a salesperson’s actual sales are significantly and consistently under or over forecast, look into what may be driving that behavior. Does the company demand stretch goals and set commission plans at levels that are unlikely to be achieved? Is the salesperson reluctant to share leads for fear of being held accountable if the deal doesn’t close?
Sales participation is critical for S&OP success. Make it easy and non-threatening, and show salespeople how a consensus plan can actually help to make their lives easier. In this way, the challenge to reap the payoffs of S&OP maturity may become less massive.