IBP/S&OP

Frequently Asked Questions

Companies that are considering using a Sales & Operations Planning solution often have questions. At the end of the Demand Solutions webinar, "Aligning Objectives and Output with Sales & Operations Planning," featuring S&OP pioneer Dick Ling and Demand Management President Bill Harrison, we received many good questions from the audience. We sat down with Ling to get the answers.


Can you give me some advice about initiating a sales and operations planning process?

Ling gets questions all the time about pieces of the S&OP process rather than the whole. This is understandable because people tend to focus on where the pain is (within the forecast or oversupply). Adopting a robust S&OP method within your company will alleviate the pain, but S&OP software alone will not fix supply or demand problems. It is essential that you have a good understanding of the process and its components before you begin.


Can you recommend any books for learning more about S&OP?

Here are some good articles and books that offer valuable insights into getting started with S&OP:

  • Orchestrating Success: Improve Control of the Business with Sales & Operations Planning by Dick Ling
  • Sales & Operations Planning: The Executive's Guide by Tom Wallace and Bob Stahl
  • Sales & Operations Planning: The How-To Handbook, 2nd Edition by Tom Wallace
  • Sales & Operations Planning: The Self-Audit Workbook by Tom Wallace and Bob Stahl
  • Sales & Operations Planning Best Practices by John Dougherty and Chris Gray
  • Sales & Operations Planning Starter Kit by Dave Garwood
  • Bills of Material by Dave Garwood
  • Enterprise Sales and Operations Planning by George E. Palmatier with Colleen Crum

Will an S&OP process and tool eliminate surprises in my company?

In many industries, no matter how much planning you perform, there will always be surprises such as unexpected promotions, increased orders or production delays. In the automotive industry, for example, although companies plan to use basic forecasts established by the large auto manufacturers, they still have to respond when the manufacturers make demand changes to support their schedule changes.

Even with a solid S&OP process in place, emergencies can happen. The difference is that with S&OP, only the true exceptions need to be dealt with as emergencies. Companies with S&OP deal with exceptions in a systematic way rather than experiencing widespread chaos. Many people asked about a standard method to combat the unexpected, but one does not exist because it's impossible. The lesson is that if you have 90 percent of your supply and demand coordinated with S&OP, you will be better able to deal with exceptions.


What can I do to mitigate damage when a surprise does occur?

"Often I suggest a mini-S&OP meeting when a major change occurs," says Ling. "But for the most part, establishing regular, methodical S&OP meetings within the company prevents the crises before they happen."


How should I measure S&OP success?

Most people measure inventory turns, customer-service levels and overall profit. The main benefits companies experience from doing S&OP, however, are often immeasurable. They include instilling a constant flow of communication within a business, making better and more informed decisions, and understanding the demand and supply streams from a strategic point of view.

(Ling points out that communication doesn't only mean numeric data entered into the system. It can also include, for example, information from a conversation with a supplier. "I'd rather have inaccurate information early than accurate information late," he says.)


From your experience, who usually wants an S&OP tool?

The people who want their companies to implement an S&OP tool are usually the ones in the trenches who are responding to poor communication. Ling says successful S&OP comes from the executive level. The process needs to be adopted from the top down to instill a common methodology for strategic planning.


Do you have any advice on customer-provided forecasts?

The concept of this kind of forecast is great, but it does not necessarily guarantee greater accuracy. Ling recommends testing customer-provided forecasts against the ones you're using, and deciding based on that comparison whether to incorporate them — but he warns against averaging the two forecasts.


Why do I need a standalone S&OP tool if I already have an ERP database?

Many companies don't understand that S&OP can't run off an ERP database. ERP is a transaction-based system; it doesn't store aggregate or family-level data. That's why you need an automated S&OP tool that's integrated with your ERP package. The purpose of S&OP is to give a broad view and direction of a business, not to manage every SKU.


What are the main credentials I should look for in an S&OP solution?

1. Ability to simplify data gathering

The first step in the S&OP process is to collect all a company's data. Considering the various internal departments and external partners found in even the smallest organizations, this step is not easy. That's why it's essential for a standalone S&OP tool to have a smooth process of consolidating the numerous plans.

Demand Solutions S&OP supports this process by directly integrating with the other modules in either the Demand Solutions suite or any other tool. Through an Import/Export utility, which accepts data from Demand Solutions and other systems, multiple departments can easily share valuable information.

2. Ability to validate data

Everyone has heard the term "dueling spreadsheets." A good S&OP tool should eradicate planning controversies by providing a transparent forecasting process. To validate the data further, an S&OP tool should then incorporate collaboration with sales and customers to verify the forecast numbers are as realistic as possible and incorporate promotions.

Demand Solutions Sales & Operations Planning eliminates all of the "pre-S&OP" meetings by validating the data. The pre-S&OP meetings are designed to fix any problems in the data before the monthly S&OP meetings. Demand Solutions shows everyone involved where there are issues in the organization and allows them to fix inconsistencies before meeting with C-level executives.

3.) Flexibility to the needs of all departments involved in S&OP

A complete S&OP process involves every department. The operations department likely wants to see different information than the marketing department. That's why a dedicated S&OP must provide flexible views of the company.

Demand Solutions allows users to customize the data content and the layout of their S&OP sheets. The Summary Views feature allows users to create multiple views of the data to support each of the steps in a pre-S&OP meeting process. Source Record Views provide even more depth into each family. This function allows users to enter spreadsheet formulas to create customized calculations for analysis. The customer can add additional metrics or KPIs that are important to their business.

4.) Integration

The final and most important requirement for a good S&OP tool is that it should support the S&OP process at all levels of a business through integration. Only an integrated solution will allow visibility into the families that have problems.

Demand Solutions' functionality makes the S&OP process simple every step of the way. Through Performance Evaluation and Filtering in Demand Solutions Forecast Management, Action Messages and Exception Filtering in Demand Solutions Requirements Planning, and Business Plan Deviation Filters in Demand Solutions Sales & Operations Planning, a company can develop a strategic and realistic business plan.

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