Decades of experience with planning systems has shown that detailed planning and execution systems do not work to to their full capability without integrated monthly sales and operations planning process and solution.  S&OP systems such as the Steelwedge S&OP solution ensure that demand and supply plans are balanced at the family level, volume level, dollar goal point, and that detailed item and mix levels can be properly managed on a day-to-day and week-to-week basis.

An S&OP solution does this by directly connecting to ERP,  CRM, MRP and RCCP processes and using this feedback to guide other detail level execution processes.

Without this connection to detailed resource planning tools, the objectives and plans established by exeuctives in the S&OP process cannot be consistently achieved.  Some best practices to consider include:

1. Sales forecasts developed for each product line in each business segment based on collaborative input from the field, from Sales Opportunity information contained in CRM systems, on history,  from distributor POS data, and from exection sales and marketing management.

2.  Forecasts include backlog, individual item forecasts, a family planning bill or product mix (sBOM) view.

3. A weekly production schedule by item up to eight weeks out (depends on lead time) as well as weekly shcedules for up to 26 weeks out.

4. An 18 month forecasts and production plan including materials and resource requirements.

5.  A clear Executive S&OP process involving top management to review  and approve S&OP plans and goals which enables  tactical decisions to be managed by operational managers.

6.  A clear six-step S&OP process is in place that involves and engages all relevant parties.  This process is adhered to and the results are measured.

Real-time visibility and communication—the cornerstones to navigating through an economic downturn.

A recent McKinsey Quarterly study identified optimized performance management as a potential opportunity to realize short-term revenue and efficiency gains in a slowing economy.    The study cites the case of a telco that increased margins by 15 to 20 percent by integrating siloed data and using analysis, scorecards and dashboards to manage performance—all of this was achieved during an economic downturn. (James M. Kaplan, The McKinsey Quarterly, Fall 2008.)

Executive S&OP leverages integrated data from disparate data sources and functional users, dashboards that contain vital KPIs, and what-if scenario planning.  The challenge is often how to expedite this process, in order to more quickly gain visibility into front-line intelligence from sales, business drivers and operations.  Better, faster visibility and communication not only further organizational efficiencies.  They also bring additional benefits to executives: improved strategic, what-if scenario planning and ultimately, organizational direction-setting.  In turbulent economic times, the ability to arrive at well-informed and timely, mission-critical decisions requires software that enables the Executive S&OP process—all of which are key to efficiently managing company performance and maximizing the bottom line.

Why can’t my financial planning system be used for Sales & Operations Planning (S&OP)?  This is a question I am asked regularly…

It is also the reason why various providers of financial planning solutions have recently partnered  with Steelwedge.

The easiest answer is to speak with an organization that has tried to solve S&OP with a financial planning tool.  In a  few words, it doesn’t work!

But why?  The fundamental answer to this question lies in the architectual foundation of an application such as Steelwedge.   The functional answer is manifest in the out-of-the-box standard functionality offered by executive S&OP applications but not offered in financial planning  applications.   Highlighted below are three key  of the elements to an S&OP system that don’t exist in budgeting, financial, business planning and consolidation applications:

1. High Performance Architecture – S&OP applications must have the capability to handle bottoms-up,  top-down aggregation on-the-fly as part of the native planning process – this often translates into the need to perform complex calculations involving attribute and hierarchy-specific revenue to unit translations at a very detailed level and then rolling up the answer – the net result is the need for a performance-focused database architecture that can perform millions of details and billions of calculations in a matters of seconds.

Simply put, this is not something that high-level, dollar-based financial planning applications- even when supercharged – were ever designed to handle.

2. Support for complex algorithms to handle statistical forecasting, product mix management, attach-rate forecasting, independent-dependent demand management, and bill of materials (BOM) translation.

No financial planning system incorporates the kind of deep operational expertise required to support this requirement.   While any application – with enough man-years of effort – can be programmed to do just about anything – it is simply not practical to replicate the…

If  Sales and Operations Planning (S&OP) activities are not aligned and integrated, small problems quickly escalate into major challenges, which adversely impact corporate performance.   As each part of an organization jockey’s to satisfy it’s own priorities, valuable time and resources are wasted, ultimately leading to poor customer service.

The consequences of poor sales & operations planning are substantial: excess inventory, short orders, overtime, inter-plant transfers, expediting, reduced order fulfillment, poor resource utilization.   These issues impact the bottom-line, while fostering a reactive culture of undisciplined business processes.

Creating the proper alignment and balance between demand and supply is not easy.   It requires a clear, focused process, based on industry best practices, that manages sales/marketing and operational issues in a thorough and efficient manner.   Bringing together sales/marketing, operations, finance, and product management to facilitate joint objectives of the overall enterprise is what makes effective S&OP work.

This is why S&OP has become more important than ever!