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An effective Executive S&OP process is one where everyone who is engaged in the process knows what is expected of them. The RACI matrix breaks down each person's role, and we mainly focus on the responsibility and accountability here. Accountabilities and responsibilities are tied to the specific S&OP plans. Using a RACI matrix makes it easy to see who’s responsible for what, ensuring things stay on track.

Planning Horizon ensure the Sales and Operations Planning (S&OP) process looks far enough ahead—like a whole year or more. This helps organizations match up their long-term strategies with their day-to-day actions. The goal is to plan and modify the plan within the right time frames so that they can meet their big-picture goals and handle the daily grind effectively.

The Executive Presentation is a once-a-month key meeting where executives make big decisions. It's all about being clear and telling the story of business using the product families. Since you've only got 1-2 hours, it's crucial to keep it concise, predictable and data driven to keep the meeting on track and drive decision making.

The Executive S&OP process is like a monthly routine with four meetings. The goal is to make smart decisions using data to balance plans for the business. It starts with a loose plan and ends with the business leader signing off on the proposed plan in the final meeting. Each meeting follows a checklist to make sure everyone knows who's responsible for what, in order to move you through a well-executed S&OP process.

A solid Executive S&OP process is built on well-defined family structures that align with your strategic goals, balancing detail with big-picture clarity to enhance decision-making and maintain executive engagement. Keep these insights in mind to ensure your S&OP initiative remains both actionable and strategically focused.

In a recent exploration of Sales & Operations Planning (S&OP), expert Doug addresses a complex question: What data is critical for effective S&OP? He emphasizes the importance of data storytelling, focusing on aligning data with strategic objectives for product families, such as growth, market share, and service level improvements. Doug outlines the necessity of an actionable plan that integrates sales forecasts, operation plans, capability, and inventory plans to achieve these objectives. Highlighting actionable data's role, Doug insists on the need for plans to reflect strategic objectives accurately and to be evaluated for their effectiveness in meeting demand and production targets. He underscores the importance of understanding the assumptions behind plans and the risks involved. Doug recommends a structured approach to data analysis: Contextualizing Data: Analyzing historical performance against current plans to spot risks and changes.  - Read the article about monitoring performance of the plans here. Consolidating Data for a Complete Picture: Gathering demand data, shipment plans, production capabilities, and inventory plans for each product family.  - Read article about supporting data here. Standardizing Data Presentation: Utilizing a "5-Section sheet" covering bookings, shipments, backlog, production, and inventory to provide a clear narrative of the operational status and strategic alignment.  - Read article about a effective executive presentation here. Doug's guidance offers a concise blueprint for leveraging data in S&OP processes, ensuring organizations can effectively narrate their strategic journey and operational readiness, crucial for informed decision-making and achieving strategic goals.

In the realm of Sales and Operations Planning (S&OP), the effectiveness of executive meetings is a crucial factor for the successful integration of sales and operational strategies. A primary challenge faced by many S&OP coordinators is ensuring regular and meaningful executive participation. Understanding the secret to an effective S&OP meeting and engaging executives requires a blend of preparation, presentation, and process clarity. Preparation is crucial, with data recommended to be available at least 24 hours in advance. This preparation goes beyond data review; it involves coaching executives to fully engage with the material. When presenting data, a unified approach that combines sales and operations narratives into a cohesive 'family story' is most effective. This method highlights the interconnectedness of different business units, providing a comprehensive view of company performance. Consistency in presentation is maintained through standard formats like the 5SS approach. Accountability plays a significant role in these meetings. Having accountable individuals present their part of the plan, be it sales demand or operational supply, not only defines clear responsibility but also ensures active engagement from all participants. This approach forces a shared understanding and agreement across different departments, making the meeting outcomes more actionable. Challenges in engaging executives often stem from unclear roles or an ineffective S&OP process. Success requires the process to be led by senior executives, who are instrumental in balancing demand and supply. For executives new to S&OP or those with past negative experiences, external coaching can offer valuable guidance. Additionally, the current S&OP process should be evaluated for effectiveness. If executives perceive little value in the meetings due to poor preparation, excessive detail, or lack of a clear narrative, changes are necessary. This might include restructuring the meetings to focus on family-by-family analysis, ensuring timely data availability, and enhancing data presentation. In conclusion, the secret to an effective S&OP meeting lies in preparation, accountability, and the clear presentation of integrated data. Engaging executives requires a process that works for them, one that is led by them and is clear in its expectations and outcomes. Often, external help may be necessary to guide and refine this process, ensuring that it is not just another meeting, but a pivotal point in the strategic management of the company.

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. 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. 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. 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.

S&OP (Sales and Operations Planning) and SIOP (Sales Inventory Operations Planning) are interchangeable terms, but there are two reasons why we recommend calling the process Sales and Operations Planning, and why calling the process “SIOP” understates what you should be getting out of the process. Even though I (for inventory) is not in S&OP, it is still important. The inventory plan is an important output of the process, and it is one of the buffers we use to balance demand and supply. However, calling the process SIOP ignores the other two important buffer decisions. The three buffers in S&OP are Inventory, Lead Time, and Upside Flex. Putting Inventory in the name, but not the other buffers, suggests that it is more important than Lead Time and Upside Flex, which is not true. And SILTUFOP is not an acronym that will stick. Let’s define these buffers: Inventory: Inventory is the buffer between shipments and production and is the finished goods inventory in the plant. Inventory is typical in a make to stock environment. Lead Time: This is about understanding the difference between Customer Expected Lead Time and Production and Supply Chain Lead Times. Lead time will flex up and down and will be reflected in your backlog or open orders. Lead time is typically used in a make to order environment. This is about setting objectives, monitoring and potentially extending or decreasing lead time to accommodate for the supply chain lead time. It is important to apply promise dates to orders that align with the adjusted lead times. This helps you maintain your service levels (RDSL and PDSL). Upside Flex: This buffer is about understanding and planning for unused capacity or capability that can be deployed when needed. This can be used to flex up and manage any demand that comes in under lead time. It occurs in the S&OP frozen zone, and involves a purposeful decision on how to use it. You need to know what you can do and for how long, without causing significant challenges in both the plant and supply chain. S&OP is about balancing demand and supply, or balancing sales and operations, and is about improving the predictability of both. The buffers manage uncertainty, risk, volatility, and imbalances between demand and supply. The second reason for using S&OP is that SIOP ignores the most important “word” in S&OP, which is AND. Sales and Operations. To balance demand and supply, you need to bring the S and the O together. The process needs to bring in the owners (those accountable and responsible) for the demand side of the business (sales, marketing, etc) and the delivery side of the business (operations, supply chain, etc). It is an equal partnership, and it requires input and ownership from both sides. Some organizations who call the process SIOP focus on inventory too much, to the point where it becomes the ownership of operations, and sales becomes very passive in the process. You can call the process SIOP while effectively using all three buffers and balance Sales and Operations, but we prefer S&OP since it is a better descriptor for what can and should be accomplished in the process. If you liked this article, subscribe to our newsletter "The DBM Executive" to stay up-to-date on our S&OP insights!

When thinking of S&OP measurements, people often jump to business results, whether it’s growth, promise date service level (PDSL), request date service level (RDSL), or trying to improve inventory turns. This is more specific to what type of business you have and what you are trying to drive for and are not necessarily standard measurements. Metrics for S&OP start at the family level rather than the broader business level. This allows you to tie what you are doing from an S&OP standpoint to each family, and what you are driving from the strategy to that family result. It is also important to establish a baseline when you are getting started. Look at where you are now, where you want to get to, and use this to make sure you are driving towards the results you’re looking for. Then you can do this monthly and include your objectives as a part of your S&OP meeting. There are two measurements you should be including in your S&OP process. 1. S&OP Process Measurement 2. S&OP Effectiveness Measurement The S&OP Process Measurement validates that you are adhering to a regular, standard, repeatable process. It shows if your process is becoming part of your management structure or company culture. We recommend using a scorecard to evaluate this. There are three things that are a part of the process measurement. 1. Participation Is the right participation happening? Do you have the right people attending the right meeting, and have the right accountability and responsibility? 2. Schedule Is the process happening as scheduled and laid out? This is often a good indicator of how important S&OP is to your management of the business. You always have to report financials at the end of every month, it is not an option. The same thing goes for S&OP. Are the meetings happening with the right people in them on a monthly basis? 3. Data Do you have the data to support the S&OP process? Are you getting that data in a timely manner before the S&OP meeting? These three points are your S&OP Process Measurement. The other standard measurement is the S&OP Effectiveness Measurement. Is your process becoming more effective? Overtime, this should be the case. This measurement shows if you are actually improving the accuracy of your demand and production planning process, and if you are reducing the volatility of that plan as you go forward. How do you do that? Start by setting a tolerance level and measuring actuals compared to the plan. If you are out of tolerance, find a root cause. You are looking to improve the process to get it within tolerance. Once the process is in tolerance, begin to measure volatility. How much should you change the forward-looking plan? How do you reduce that volatility and push it our further? This will provide you the S&OP Effectiveness Measurement. So, before you start, make sure you have your metrics broken down to the family level, and track your objectives monthly. Next, use the S&OP Process Measurement, in the form of a scorecard, to highlight what needs to be improved. Then use the Effectiveness Measurement to see if your process is in or out of tolerance, and use the root cause to reduce volatility and improve effectiveness. Doing this, you should expect those business results. Learn more about our Meeting Scorecard and how to integrate it with your S&OP Process. Also see our article “If you can’t measure it, you can’t manage it” for in depth detail on how to create an S&OP Effectiveness measurement.

When implementing S&OP, it can be hard to know where to start. If you are new to S&OP and currently don’t have a process, you might be hesitant to embark on a significant time-consuming project to find a process that works for you. If you already have one in place, but you need to improve some parts or the entire process, the idea of deconstructing and changing an established process may seem difficult, complicated, and not worthwhile. The reality is that implementing a new S&OP process does not have to be a significant time investment and will not alter everything in your business overnight. Starting focused but small, and with what you have today, you can start to make these changes in a controlled environment and perfect the process before it affects the whole company. When starting to implement a new S&OP system, pick one piece of the business to apply the new system to. This will be a product family that is tied to a constraint. This pilot family should: not be too big not be all of the business have some issues or challenges within it not be too complex The benefits of starting implementation with one family are that it is a quicker learning process, it will not agitate the whole business if challenges arise, and once the process is running smoothly for one family, there is a seamless rollout to the rest of the business. Once you’ve selected your pilot family, you can begin pulling together your data for that family. To do this, use whatever data-collection system you currently have in place – if your production plan is currently on a corporate spreadsheet, use that! This is a good starting point to organize at a family level. Compiling the data for the family means you can start discovering the story of that family. At DBM, we use the 5-Section Sheet to easily find the story. This layout forces you to put all the data together and check if it’s balanced. This includes your bookings, shipments, backlog, supply, and inventory. This pulls them all together to see how the plans that you have come together. This will pull together a story, which may not be one that you like or your “ideal” story. You are trying to see if this story lines up with what you are trying to do in the business, and you can use this to identify any risks in the plan going forward. This is the beginning of your new S&OP process! Using a monthly process, you can then iterate to improve your process. Each month, compare the actuals to your plan and see the results. Then, reassess your plan and assumptions, and any risks to the plan, then make changes to improve your performance in upcoming months. You can also evaluate your accuracy month by month, to see if you are improving accuracy and decreasing volatility. This can also help you identify the source of your volatility- is it on the demand side, or is it internal on the production side? This determines where you need to start with improvements. Should I spend time on improving my forecasts, or do I need to spend time improving supply chain and production planning? The process will help you prioritize, ultimately improving performance in the upcoming months and capturing the true value from S&OP. Once this process has been set in place for the initial family, you can then expand the process to other families in the business. It is recommended to only add a few families at a time, so that it does not become overwhelming. You will likely have family data to clean up to ensure it is accurate for the S&OP process. As you get familiar at understanding the story of each family, you will be able to expand to other parts of the business. We highly recommend reading our Effective S&OP Series to learn more about the essential qualities of a good S&OP process and how you can do that within your process.

This article is also available as a video on YouTube, watch it here. S&OP relies on the balance of demand and supply. The graphic below is a great visualization on what the S&OP process tries to achieve. But the image doesn’t tell you HOW. Let’s walk through how you can achieve this. Instead of thinking about just balancing demand and supply, think about S&OP as developing a plan to manage between an external or unconstrained view of the business and the internal or constrained view of the business. The line in the middle of the diagram separates the external and internal views. Above the line is the market or customers. This is the unconstrained view or external view of your business. What will customers take of your product or service. This can be influenced, through pricing, marketing, promotions, product, etc., but ultimately the customers control what they want to buy, when they want it, and in many cases how quickly they would like to have it, with no regard for the business’s ability to supply or their constraints. Below this line is the constrained or internal view. This is what can be produced or supplied. This output is constrained by investment in equipment or capacity, inventory levels, staffing, supply chain capability etc. You can think about it as the things you control. The decisions you have made or need to make based on your strategy and what you think the demand looks like above the line. So, S&OP is then about getting the best possible view of what is above the line (our unconstrained demand) and determining how to either deliver this with current capabilities, or how to change capability to meet this demand. To make S&OP really work, there are three key points. Process Family Structure Data These three elements work to straddle the line and help balance between the external (unconstrained) view and the internal (constrained) view. 1. A good process A good S&OP process uses the standard approach of a monthly S&OP process. The process is the series of meetings that occur during the month leading up to the Executive S&OP meeting. These steps help you move between the external view of the business and the internal view. The first of these meetings is the Pre-S&OP Demand meeting. This should clearly be “above the line”, an unconstrained view. The question “What does demand look like?” is answered here, and the unconstrained demand plan is agreed on. Responsibility and Accountability for this view of demand lies in one or a combination of the following areas of the organization: sales, marketing, or in some cases product management. It needs to be based on reality. To avoid constraining this demand right from the beginning, operations should not be running this meeting. They can participate, but the goal is to develop the external unconstrained view. The second meeting is the Pre-S&OP Operations meeting. This includes all aspects of supply including Supply Chain. This meeting is below the line – a constrained view. Based on the input of the new unconstrained demand, you can now determine if you can meet that demand or if you are constrained. If you can’t meet unconstrained demand, you need to come up with the constrained shipment plan before moving to the next meeting. If you can meet unconstrained demand, then you can go to the next step without changing anything. In the third meeting, the Pre-S&OP meeting, the team determines how to balance any constraints against the unconstrained demand. This may involve decisions around allocation and future capacity decisions. This meeting clearly sits on the line between the external and internal view. This really is the working meeting where the approach is agreed on, and any decisions that need to be moved to the executive meeting are identified. The fourth and final meeting in this monthly process is the Executive S&OP meeting. This is below the line, because it is either where the final plan fits within current constraints and is agreed on, or adjustments are made to meet those constraints. So, having a good process with clearly identified responsibilities, accountabilities, and meeting outcomes is critical to making S&OP work. 2. Family Structure. This is the second key to making S&OP work. Family structures are the collection of products that are put together to provide the level of granularity for S&OP decision making. They need to start below the line and be defined by constraint. This is very important. The constraint view of families will correlate to specific capabilities. Most typically this is linked to a production line or cell in a plant, but in some cases, this may be a specific material that sets the upper limit of supply. In services this may be tied to a specific type of resource. In order to balance the plan, you need to have a clear understanding of what your current constraints are. Are they right sized, or do they need to be changed? If you can’t build it, you can’t sell it. Changing your supply level, or capability, typically means changing your constraints. Determining whether this is necessary requires aggregating the demand plan and viewing it in aggregate by the constraint. You need to start at the constraint level and also need to be able to look at the demand from the market view. This is the above the line or unconstrained view. To do this, you can segment the family demand into demand streams, or a more market-facing view. These demand streams may be by a specific kind of business, sales channel, sales geography, or whether your go-to market strategy is make to stock, make to order, configure to order, or engineer to order. Demand accuracy measurement is at the demand stream level within the family and should be aimed at improving demand planning, driving specific go-to-market strategies, tracking the results of these strategies, and ultimately assigning accountability for demand accuracy and performance. Both the market view and the constraint view are needed for S&OP, but the basis for families should be the constraint view, then further broken down by demand streams to achieve the market view. 3. Data and Data Visualization An effective S&OP process is one where the process is both linked to your planning and execution systems (ERP) AND provides feedback on the validity of the plans in these systems. Data is key to these relationships. Having the right data at the right level of granularity is both important and necessary. S&OP data will highlight processes that are broken and drive accountability. Over the years we’ve developed this standard visualization through something called the 5-Section Sheet. This is the visualization that we recommend using to pull together the supporting data and present the story for the family. We call it the 5-Section Sheet because the five elements of data that are necessary to support S&OP decision making are all pulled together in one place. These are: Bookings – or order in flow. What is our incoming demand? Shipments – or order outflow. Backlog – the buffer between bookings and shipments. Production – what is our production plan and where is it relative to our capability? Inventory – the buffer between shipments and production. The 5-Section Sheet is simply 5-sections of data shown at the right level for planning and discussion for the Executive S&OP meeting. This gives everyone the right view to see the story of what’s actually happening in the business and gives the team the ability to make decisions in the future. It is important to pull all this data together into one view to avoid disconnects between what is presented by sales and what is presented by operations. The “math” needs to make sense. For example, the formulas below force a discussion around reality. If the sales plan is entirely disconnected from the supply plan the difference will show in one of these numbers. Previous Backlog + Bookings - Shipments = Future Backlog OR Previous Inventory + Production - Shipments = Future Inventory A standard presentation used across your S&OP process is also very important. Everyone who interacts with the process learns how to use the same tool, eliminating the need to translate what is being presented as you move from one family to the next. A standard format means also means the process is more sustainable as people move in and out of roles and new people come into the organization. You have a common way of speaking about S&OP and the story behind each family. This also includes your executives. Each of the sections in the 5-section sheet includes the current month’s plan and the previous month’s plan. This helps identify how much the plan is changing month to month, and where in the horizon the plan changes are being introduced. Is most of the volatility in the next couple of months, or is it somewhere in the future? Actual data compared to the last plan is also included in each section of the 5-Section Sheet. The comparison of the two numbers includes a tolerance level that identifies whether or not you are in control of the business. We typically will show the last three months, but access to more months of actuals history is recommended to give a more complete view of how “in control” the business is. Finally, we also include some summary information for each section of the plan. Year to date numbers, and current year expected numbers for shipments, bookings, and production indicate where you are at compared to your fiscal year plans. Are you headed in the right direction? Is there enough year left to make it to your final plans? A rolling 12-month view, which is the next 12 months, gives a directional indicator on where the business is going. To support the balancing of the above the line external view and the below the line constrained view, the level of granularity for the 5-Section Sheet data will be different. Bookings, Shipments and Backlog should be tracked at the demand stream level. This means plans and actuals can be seen at this level to help improve accuracy and to hold the team accountable. Below the line, data is summarized at the family level, which is how it is presented in the executive S&OP meeting. These are the three key fundamental build blocks to making S&OP work and really work effectively. They come together and help you balance between the unconstrained or market view of the business and your constrained or internal view of the business, and support S&OP decision making. Enjoyed this article? Sign up for our newsletter to be notified when a new article is posted and for other DBM content. If you haven’t taken our free assessment yet, click here to receive real feedback on your current S&OP process.