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What S&OP is Not - Part 1: S&OP is NOT a Tactical Process

There is a lot of confusion around what S&OP is and what S&OP is not. This “What S&OP is Not” series will address some of the common misconceptions around S&OP and the common issues or disconnect organizations face when starting to implement or improve their S&OP processes.

Executive S&OP (or S&OP) is a monthly management process where the Senior Executive ensures:

  • A clear link between strategy and execution

  • A place to set the flow rate for the business

  • A place to establish clear accountabilities

  • A regular and repeatable management process

The process should be used or driven by Senior Management and it should be used to develop and direct the organization.

So, why do so many S&OP processes fail or never get the appropriate engagement from management? Is it because management doesn’t get it? Have all the new tools available, and the information insights and computing power that comes along with them, made Executive S&OP unnecessary and redundant? Or are we trying to do the wrong things with the process? It’s within this backdrop that this 3 Part Series covers What S&OP is Not:

  1. S&OP is not a tactical process, it is a management process. (this article)

  2. S&OP is not a real-time decision-making process.

  3. S&OP is not a magic bullet.

To begin, S&OP is not a tactical process. How do we get the S&OP process away from being tactical? Recall that it’s about directing and managing. The process needs to engage executives in order to do this.

There are 5 things executives need to know from their team so they can better manage the process, which should all be answered as part of S&OP.

  1. Are we in control?

  2. Does the plan lead to the objectives?

  3. What are the risks in the plan going forward?

  4. Do the current actions improve the level of control and ability to reach objectives?

  5. What decisions do the executives need to make to address any challenges in the plan?

To answer these 5 questions, organizations and executives can use a standard format to model their business at the family level. It’s called the 5 Section Sheet. It provides a visualization to model the business for a family and helps answer these questions. You can find out more about the 5 Section sheet here.

The 5 Section Sheet can be used to answer the above questions:

1. Is the process in control?

Does the team follow through on what they were supposed to do? Clear accountability needs to be present for the plans and the execution. If someone does not follow through, it must be made known why they did not and what steps are being taken to correct it.

A plan must be in place, along with the ability to measure against the plan. On the 5 Section Sheet, for each section (specifically bookings, shipments, and production) always measure the actuals from the month that just passed against the plan for that month. Establish a tolerance level, so that any performance outside of the tolerance level will be flagged. This will clearly show any in tolerance or out of tolerance performance when looking back over time.

In this example, actual bookings have consistently been higher than planned bookings. Why is that? What is going on in the marketplace that is driving such a large order inflow?

2. Does the plan lead to the objectives?

This is the forward-looking part of S&OP. Demand and build plans can be compared to growth plans. Having a summary of the Current Year Expected (CYE) and comparing this against the last plan, last year’s plan, and the budget can help evaluate if targets will be met or not.

This current CYE Shipment plan has been brought down significantly from the last plan and is below budget. Does this make sense with the order inflow? What is driving the softening in the plan from last month?

3. What are the risks going forward?

This can be hard to see from just the 5 Section Sheet. The team should present the major risks and assumptions in their plans. What are the things that might stop us from getting where we need to?

In this example, one risk is: How can production of 118 units per day in one month increase to 195 units per day in the next month? The production team should be able to answer how this will happen. What is changing in the next month?

4. Do the current actions improve the level of control and ability to reach objectives?

The level of effectiveness, or the ability to operate within a tolerance level, should be improving over time. Any out-of-tolerance measurements should drive root cause analysis. Outside of the data presented on the 5 Section Sheet, the causes of the issue should be identified, and the team should fix the root causes of those issues. The aim is to continuously improve.

If significant changes are planned, whether that is a new product launch, additional capability coming on board, significant shutdowns, etc., these types of events should be reflected in the forward-looking plans, and the appropriate actions should be highlighted.

5. What decisions do the executives need to make to address any challenges in the plan?

These decisions won’t necessarily show up on the 5 Section Sheet, however these imbalances and issues should be highlighted. This may include constrained demand, persistent past due backlog, or the need for additional capacity. A standard format helps everyone get to the same story and can be taught to executives so they stay engaged in the process.

This is why S&OP is not a tactical process, but instead is a management process.

This is part 1 of our series “What S&OP is not”. If you liked this article, subscribe to our newsletter to be notified for the following parts.


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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 to quickly start and sustainably run an effective S&OP process. Learn about our process and unlock the power of S&OP in your organization.


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