4 Steps You Need to Develop Effective Sales and Operations Planning
Sales and Operations Planning (S&OP) is a vital process that ensures that your company’s Operations Plan aligns with its vision and strategy — not just the supply chain strategy, but with finance, manufacturing, operations, and sales. The problem? Prominent industry analysts and consulting firms found that a majority, up to even 67% of companies, don’t get past stage 2 in the 4-stage S&OP maturity process. At stage 2, companies focus on supply and demand rather than using data and metrics to optimize that balance. At stage 2, this means companies use a volume-based approach, not a data-driven analytical approach.
Yet rising to higher maturity levels allows companies to increase their revenues while decreasing inventory. When launching a new product, companies at higher S&OP maturity levels can see higher success levels.
The overarching goal is to create a unified operations plan to achieve the company goals and identify the resources necessary to do that. The plan must include cross-functional stakeholders who work together to analyze the issues and make decisions. So what does it take to develop more effective S&OP processes? Follow these four steps.
Step 1: Aligning the cross-functional leadership during the project’s design stage starts with trust-building. That includes ensuring trust between individuals representing different functions, so those participating will listen to each other and better understand their points of view. The process should represent not just the supply chain but also manufacturing, operations, finance, and sales/marketing. The final Operating Plan relies on this alignment, so leadership must build that trust foundation as they begin the S&OP process.
Step 2: Align decision-making with the individuals involved in the S&OP process. The critical element to get right in this process is the final product, the Operating Plan. Unfortunately, most S&OP transformations led by technology fail in this aspect, resulting in unsatisfactory outcomes. The typical distribution of effort and resources in S&OP planning is 60% in technology, 20% in organization and decision rights, and 20% in the process. Instead, reverse that, with 50% of the effort and resources spent on organization and decision rights, 30% in the process, and 20% in technology. There is much to be said for the human element in the S&OP process and giving the decision-making power to the involved stakeholders.
Step 3: Technology does have an essential role in the S&OP process, however. Technology is vital for its analytical capabilities, allowing the people involved to leverage and share data and insights that assist in the decision-making. These insights and data help with trust-building, removing subjective biases, and helping to build the business cases needed to support recommendations. The data should be used in planning and decision-making. It’s easy to get distracted when sharing data, veering off into other conversations that don’t meet the ultimate goal: developing the Operating Plan.
Step 4: Use a neutral team to run the S&OP process. By not appointing leaders from one role to spearhead the effort, an unbiased team can better build consensus and corral the cross-functional members to collaborate more effectively. A neutral team understands that the S&OP process requires multiple roles representing different and sometimes competing functions at the company. The process must be integrated, and a leadership team that doesn’t represent a specific role will gain that trust.
The S&OP process should be one of the essential processes for organizations, as it sets the path for how the company will achieve its strategic and financial goals. Each role in the company has ideas for what it wants and how to get there. These ideas are all important, but they may clash with other department goals. Bringing together the cross-functional team, building trust, sharing analytics and insights, and making decisions together will ensure buy-in and build a more robust Operations Plan. And that benefits everyone.