The question often arises as to why S&OP is still treated as a monthly process, especially when businesses change quickly in real-time. With the systems, software and tools and available to us today including AI, the monthly planning cycle might appear outdated since S&OP is a concept from the ‘70s and ‘80s, but there are three compelling reasons for its continued implementation.Â
 The first reason is the inelasticity of supply. Although planning and replanning can be almost instantaneous with modern systems, the physical production of goods cannot be expedited to the same degree. During this inelastic period, businesses are constrained by previous decisions. Changes within this period are possible, but often comes at a cost. For example, if McCallum runs out of 18-year-old whiskey, they can't immediately replenish their stock. They must wait for the 17-year-old whiskey to reach the desired age.Â
Another reason is the alignment with strategic objectives and financial plans. S&OP serves as a link between long-term goals, like 3 to 5 year plans or financial objectives, AND daily execution. It establishes the operational parameters for day-to-day decisions, ensuring that everyone is working towards common goals. Without this alignment, there's a risk of losing sight of broader objectives, getting bogged down by daily decisions.
Finally, S&OP is an opportunity to step back and evaluate. It's a moment to assess the daily decisions made and whether they align with the company's objectives. This process is essential for managing the business, reassessing plans, realigning strategies, and importantly, learning from mistakes. It involves examining which assumptions in the plans were incorrect and how to make better assumptions in the future.Â
Ultimately, S&OP resembles the huddle in American or Canadian football games. It's the time when the team regroups, assesses the previous play, plans the next move, and ensures everyone is on the same page before executing the next step. Â