If You Can't Measure It, You Can't Manage it!

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Is your S&OP process working? In this article, I will cover three basic measurements that will answer this question: Bookings Performance, Shipment Performance and Supply Performance. I refer to them as the three S&OP Effectiveness Measurements.

As each month is closed, you get a chance to compare the actual performance during that month to the plan that was created in the previous month. If the actual was within the tolerance bandwidth of the plan it was a good month. If it was outside the bandwidth then it was not a good month.

The chart below is an example of a summary presentation of S&OP effectiveness. If a cell is green, the actual results were within tolerance for that month and a red cell means they were not. For example, the bookings for Family 1 were outside of the tolerance range in January, February, March, June and August. They were within tolerance the other seven months. Family 2 was not reported until March and Family 3 was not reported until April.

This chart gives a summarized visual overview of how well the S&OP process is running. It should be covered at the beginning of every Executive S&OP Meeting.

There is also a story to be found by tracking the trend of a specific measurement within a family. In the following graph, you can see the booking results for a family. The grey area on the left half of the chart is history and the white area to the right is the future plan. The red lines represent the previous month plan plus and minus the tolerance, which in this case, is 20%. The blue line represents the actual results in the grey section and represents the new plan in the white section.

When the blue line goes outside of the red lines, the process is out of tolerance. You can see that the results were out of tolerance in March, June and November (these results will show as red cells on the summary chart). You can also see that the future plan is going out of tolerance in June. Notice that the tolerance bandwidth opens up in the future, as this family has more planning flexibility beyond the first two future months.

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