- Doug Dedman
5 Outcomes from S&OP: an Executive's View
Updated: Nov 17, 2022
View this article as a PDF here.
Why do I need a Sales and Operations Planning process? We can get caught in the trap of thinking about S&OP as an organizational exercise. While this is true to some degree, ultimately the companies that derive the most benefit from an effective S&OP process have one thing in common:
Leadership has asked and answered this “why” question.
I’m not saying that every successful S&OP implementation starts here, but for the process to really work and stick within the culture of an organization, at some point the leader must come to a clear understanding of the outcomes and benefits of Sales and Operation Planning.
I use the terms outcomes and benefits on purpose. Many S&OP implementations start with a focus on the hard benefits of the process. This makes sense; if you are going to invest in a new process, it’s important to know what the return will be. Typically, these include service level improvements (RDSL, PDSL, OTIF, etc.), inventory right sizing (trade working capital improvements), improved efficiency, and reduced expedited freight among others.
Interestingly, nearly all the executives I’ve asked over the past 20 years answer the “why is S&OP important” question not with hard benefits, but with what the process gave them in terms of leading their business. These are the outcomes.
So as an executive, what should you expect from an effective S&OP process? Here are my top five.
1. A clear link between strategy and execution.
The process needs to cover the short (execution), medium (planning), and longer (strategic) horizon. Accountability for execution is the feedback required to adjust execution and planning. The clarity of the S&OP plan is important to ensure that everyone understands and is aligned around the strategy. This is particularly important when managing growth/significant business volume changes whether planned or unplanned.
2. A place to set the flow rate for the business.
Flow rate applies to all businesses. It’s the