Effective S&OP - Series
Updated: Nov 20
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Many organizations say they have an S&OP process, but the critical question to ask is whether it is effective. With the work and time invested into S&OP, you need to see results.
A good and effective Executive S&OP process is one where the person who is managing the business (Senior Executive, CEO, President etc.) is also leading the S&OP process. If this isn’t happening, the business needs to figure out why and change.
The very definition of S&OP is based on this principle:
S&OP is a management decision making process that provides management the ability to strategically direct their business to achieve a competitive advantage on a continuous basis.
Without executive engagement you are not unlocking the full potential for Executive S&OP as a decision-making management process. The following questions are a quick litmus test for Effective Executive S&OP:
Is your Senior Executive engaged? Do they require the monthly Executive S&OP meeting?
Does your team make decisions in the S&OP meeting (It’s not a report out)?
Does your S&OP presentation cover the entire business in 1 hour to 1.5 hours?
Does everyone walk out of the meeting on the same page and know what they need to do to execute the plan?
If you answer “yes” to the questions above, it is very likely you have an effective S&OP process. If the answers were “no,” what are the potential stumbling blocks to getting there.
In this article, we will briefly identify the key characteristics that enable executive engagement so that you can have a truly effective S&OP process. Over the next several weeks we will dig into each of these areas in more detail.
Best Practices for Effective Executive S&OP
What this looks like: The business is segmented into the right elements to support decision making. All the decisions (flow rate, buffers, accountability) are set by family.
Key points: Families are segmented by constraint. The families are consistent across sales and operations. Families are discussed in the same units of measure throughout the S&OP presentation.
What this looks like: The monthly process is regular and purposeful: a plan is created, then executed, results are assessed, then next month, the plan is redone or adjusted. The monthly cadence supports accountability and forward planning across the planning horizon.
Key Points: The planning process should move from unconstrained demand, to supply, to constrained demand, and end with the Executive meeting. The plan should be well documented and understood by the team.
What this looks like: As the culmination of the monthly process, the Executive Presentation – where the decisions are being made – is where the executive intersects with the process (prior to this being run by other resources). The structure and format must provide a clear “story” for the business (by family) in the past, present and future with supporting data.
Key points: The presentation follows a standard format that covers the S&OP plans family by family for Sales and Operations.
What this looks like: Since S&OP is a forward-looking process, it needs to support planning far enough out in the future to support both execution and strategy.
Key points: This should be at least 12-months rolling and cover the cumulative supply chain lead time (CSCLT). The team needs to understand the planning zones – where changes can be made and the tradeoffs of a change.
5. Responsibility and Accountability
What this looks like: Accountability (who the executive is expecting to deliver the results) and responsibility (who has to get it done) for the plan is clearly defined and documented.
Key Points: Sales owns the booking plan, Operations owns the supply plan and the shipping plan is an outcome of the process. If the plans are out of tolerance – the accountable person should know why. This is understood by everyone and reinforced by the executive.
What this looks like: The S&OP process pulls data from your ERP system. Note: If the data is bad, S&OP should highlight that a data clean-up needs to happen. Actual historical data (bookings, shipments, aged backlog, production) is used to evaluate the performance to plan.
7. Measurements
What this looks like: S&OP should deliver results like improved customer service, reduced expedited freight, right-sized inventory. Before you get results, you need to make sure you are doing the right things (a good process) and the right things are being done right (effectively).
Key Points: Measurements are used to improve the process, and reinforce accountability. Measurements should be at three levels: the process, effectiveness, results. Process measurements include tracking meeting attendance and data gathering. Effective measurements evaluate plan accuracy. Finally, the business results (OTD, etc) should be tied to families so that they are actionable.
8. Executive Engagement (Ownership)
What this looks like: The person running the business uses the Executive S&OP meeting as a critical management meeting. They attend and/or run the meeting, hold the team accountable, and sign off on the SS&OP plans.
Incorporating these elements is sure to make your S&OP a more effective process and increase executive engagement. Over the next several weeks we will dig into each of these areas in more detail, starting with setting the correct S&OP Family Structure. You also can watch our related video, S&OP: What does good look like?, which expands on implementing these points into your S&OP process.
At DBM, we provide your team with coaching and the tools needed to run an effective S&OP process. Through the Virtual Accelerator process, you can implement a sustainable Executive S&OP process in just six months. Not quite sure where to start incorporating these best practices into your S&OP process? We can help! Reach out to us. We’ll help you unlock the power of S&OP in your organization.
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At DBM Systems, our consultants have over 20 years of experience providing S&OP leadership to businesses worldwide. We equip teams with coaching and the tools needed to run an effective S&OP process. Learn about our process and unlock the power of S&OP in your organization.