Steelwedge recently hosted a webinar featuring sales and operations planning (S&OP) expert Tom Wallace entitled “What Great S&OP Feels Like!” We received a record number of questions before, during and after this webinar. Tom was gracious enough to take the time to answer some of those questions here.
Q. In your view, what specifically are the most important things to measure that drive organizational impact and bottom-line profits?
A. To some extent, this is a function of the company’s operating environment and strategy, so one list will probably not support all companies. That said, here goes:
- Customer service measures such as order fill, customer lead times, % perfect orders and the like.
- Operational efficiencies: performance at the plants, suppliers, DCs, and so forth.
- Flexibility and agility: short lead times, ability to service high mix effectively, reaction time to demand spikes and supply crashes.
- Cost containment and reduction.
- Effective asset management: inventories, receivables, order-to-cash cycle, etc.
Q. I just took over supply chain at my company, and I am in the process of implementing S&OP with four meetings held every fortnight (projects, demand, supply chain, pre-S&OP) and one monthly executive S&OP meeting. Do you think this is too much? Coworkers are enthused.
A: This strikes me as perhaps a bit much; even with the co-workers’ current enthusiasm, you may be running a risk of burn out. And I wonder if it’s necessary. For example, one pre-S&OP meeting per month is what most successful users do. Further there’s one set of activities in the demand planning phase. For example, once the consensus forecast is set, it’s put to bed unless something major happens that affects the forecast significantly. Ditto for supply planning.
Q. What have you seen as the most significant issues that cause S&OP initiatives to wane over time?
A: The most significant issue is when there’s a change in the leader of the business. The new leader arrives, knows nothing about sales and operations planning, doesn’t want to learn, and proceeds to dismantle a smoothly running process. Other potentially difficult issues include, for divisionalized companies, a change in a high-level position at corporate: CEO, COO, CFO.
Also a threat is allowing the S&OP process to gradually degrade over time. After a while, it may become fairly dysfunctional and people lose interest. The solution: measure its performance routinely and fix things that start to slip.
Q. Should large corporations initiate the S&OP process by allowing each division or product to produce its own internal data and establish internal organizational structures to properly support the resource planning side? Or should a fully integrated information technology system be implemented to allow for standardization of data and processes aid in resource development?
A: I’m seeing more and more examples of larger companies directing their business units to follow a standard set of actions for sales and operations planning. This doesn’t mean identical steps, but to do each of the major pieces (demand planning, supply planning, etc.) using similar processes. Your point about a “fully integrated information technology system…to allow for standardization of data and processes aid in resource development” is possibly a good choice, but I wouldn’t slow down the implementation of the basic S&OP processes. If it will slow things down, do it later. If it won’t slow things down, you might want to go for it—keeping in mind to implement at the business unit level, using a pilot approach.