Got questions about sales and operations planning (S&OP)? We’ve got answers. And at the end of a recent webinar, we picked the brain of the “Father of S&OP,” Dick Ling.
Here are some of the questions we got from the audience—and our answers.
Who usually wants S&OP software?
The people who want their companies to implement S&OP software are usually the ones in the trenches who have become frustrated by poor communication. According to Ling, successful S&OP comes from the executive level. The process needs to be adopted from the top down so that everyone can embrace a common methodology for strategic planning.
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. Since 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.
Will an S&OP process and tool eliminate surprises in my company?
In some industries, no matter how much planning you perform, there will always be surprises such as unexpected promotions, increased orders, or production delays. Take the automotive industry, for example. Companies may plan to use basic forecasts established by the large auto manufacturers, but they’ll still have to respond when those 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, you’ll only need to deal with the true exceptions as emergencies. Companies with S&OP deal with exceptions in a systematic way rather than experiencing widespread chaos.
Are you looking for a standard method to combat the unexpected? Unfortunately, no such method can ever exist! But if you have 90 percent of your supply and demand coordinated with S&OP, you’ll be better able to deal with exceptions.
What can I do to mitigate damage when a surprise does occur?
Dick Ling responds: "Often I suggest a mini-S&OP meeting when a major change occurs. 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?
You can’t go wrong by measuring inventory turns, customer service levels, and overall profit. But the main benefits companies experience from S&OP are often immeasurable. They include:
- Instilling a constant flow of communication within a business.
- Making better and more informed decisions.
- Understanding the demand and supply streams from a strategic point of view.
Keep in mind that communication doesn't just refer to numeric data entered into the system. It might also include less structured information, such as notes from a conversation with a supplier.
What’s the value of customer-provided forecasts?
The concept of customer forecasts is great, but they don’t necessarily guarantee greater accuracy. Dick Ling recommends testing customer-provided forecasts against the ones you're using, and deciding based on that comparison whether to incorporate them. But beware: he advises against averaging the two forecasts.
What are the main features I should look for in an S&OP solution?
- Ability to simplify data gathering. The first step in the S&OP process is to collect all of a company's data. Considering the various internal departments and external partners found in even the smallest organizations, this step isn’t easy. That's why it's essential for a standalone S&OP tool to have a smooth process of consolidating the numerous plans.
- 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 the sales team and customers to verify that the forecast numbers are as realistic as possible and incorporate promotions.
- 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 solution must provide flexible views of the company.
- 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.
What are the best resources for learning more about S&OP?
Here are some good articles and books:
- 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