As part of our commitment to drive engaging dialogue in the industry around the best and ‘next’ practices, Steelwedge recently teamed up with Sales & Operations Planning expert Tom Wallace to host a webinar. ‘Taking S&OP to the Next Level’ is based on the new book, Sales and Operations Planning: Beyond the Basics. You can watch a recording of the webinar here if you missed the live event. Given that S&OP is a top priority for companies to tackle volatility, the Steelwedge webinar drew a huge attendance and just as many questions! Due to time constraints, our experts couldn’t answer all of them.

In this blog post, Tom Wallace answers some key questions from his perspective.

Q. Is S&OP ideal for large organizations which have their own manufacturing, inventory & products? Is S&OP applicable to a service company?

Yes to both. Some of the most successful users of S&OP are large organizations with manufacturing, inventory and product: BASF, the largest chemical company in the world; Procter & Gamble, the largest consumer packaged goods company; and Staples, a very large on-line retailer. S&OP has been shown to work well in organizations that don’t make physical products as well: banks, central engineering staffs, IT departments and the like.

Q. Should the same forecast drive both manufacturing and profit and loss?

Absolutely. The forecast, once authorized, becomes the one and only one statement of future demand. Only with this can you achieve a “one-number process,” which means running the business internally with one set of numbers.

Q. How do you balance continuous improvement to the S&OP process against over-engineering the process?

Listen to the people actually using the process, including senior management. The best way I know to drive continuous improvement is, at the end of each…

Sales and Operations Planning (S&OP) is a function that corporate executives often fail to recognize as a key contributor to success.   From a revenue perspective, an accurate S&OP plan allows for high levels of customer service.  When demand is predicted accurately, it can be shaped and met in a timely and efficient manner.  Of course, accurate forecasts help organizations avoid stock outs and lost sales.  The impact of an inaccurate S&OP plan on profit margins is also profound.  Raw materials and components are more cost-effectively acquired on the basis of advance planning instead of last minute, rush orders.

The impact of excellence in S&OP is profound.  In a number of cases, clients working in tandem with the Steelwedge team to develop, improve or automate their S&OP processes have seen increases in product margins of upwards of five percent and reductions in inventory levels of over fifteen percent.   In spite of such tangible benefits, many companies fail to prioritize this critical executive process.  Although no management function can be reduced to seven items or even seventeen items, there are certain basic S&OP improvement lessons learned that can be generalized across clients and industries.

Each of these steps is summarized below:

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Paul Intrieri, Director of Business Development, represented us at the APICS/IBF Best of the Best Conference in Chicago last week…

“I’m happy to report that there seems to be no end in sight to the swell of large enterprise interest directed at both raising corporate competency around Sales & Operations Planning, and accepting how mission critical cross-company collaborative planning is to enterprise competitiveness.

We had the opportunity to speak to leaders in most every major industry vertical including Pharma, CPG, Chemical, Communications and Technology, Raw Materials, Healthcare and more - from as far away as northern Europe. Many innovative tweaks to the classic 5-step process were discussed and a common theme became evident. As much as there is no one textbook practice that can fit all companies or business units in a company, clearly S&OP is being embraced as the process “to run your business by”. That said, with the speed, complexity and high variability of today’s global markets, it was also clear that planning off spreadsheets is just neither dynamic nor robust enough to enable enterprise class S&OP or the informed exception-based proactive executive decision making it is intended drive. From our standpoint it’s nice to be in a place where we can say yes to virtually every request we fielded. Scenario modeling, financial integration and reconciliation, new product launch tools, item through aggregate level transparency and reporting are all things we provide standard and that were part of every conversation I had.

I would say that  if you’re like the many companies we encountered in Chicago and need to get away from planning off spreadsheets we’re a perfect solution to consider.”

S&OP presents many challenges to business enterprises to implement and sustain a world-class S&OP process. One common thread is the need for effective collaboration. What sounds simple, in general terms, is often difficult when the details come into play. Details may include different goals and incentives for disparate functional groups and individuals and inadequate tools to facilitate meaningful collaboration.

Functional groups have unique goals and performance indicators. Sales may be driven to achieve high revenue targets while the Operations group may focus on minimizing labor costs and inventory levels. Finance seeks to manage cash flow, minimize costs and maximize profit. Units of measure may differ from one functional group to the next. Some plan in units, others in dollars. Forecast horizons can vary from current quarter to planning horizon to fiscal multiple year projections.

The key point here is NOT that all groups and individuals should share the same focus and effort. To the contrary, best practice enterprises heavily leverage the unique talents of their employees. Sales sells and Operations drives the supply chain. That said, it is critical that the enterprise has a single, consensus plan that is feasible and all parties agree to execute against that plan. Companies that fail to achieve one agreed plan, are prone to falling well short of optimal inventory levels, customer service targets, availability of desired inventory and company financial goals. A less tangible, but very important by-product of a missing consensus plan is a culture that pits individuals and groups against one another rather than acting as a cohesive team.

From my work at Steelwedge with several clients, it’s been very pleasing to see how the Steelwedge tool promotes cross-functional interaction. Users exchange quantitative and qualitative inputs in an environment that pulls together information in a way that had not previously been…