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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.

The APCIS/ASCM dictionary defines S&OP as “a management decision making process that provides management the ability to strategically direct their business to achieve a competitive advantage on a continuous basis”. The first important take away from this definition is the use of the word management. S&OP is a management decision making process. What does this mean? It means it is a process for senior management (the president, CEO, COO, or Genral Manager) to direct the business. Therefore, the process needs to work for them and provide a “picture” or a “story” of what is going on in the business. This allows them to direct resources and hold these resources accountable for setting and achieving the plans. Simply put, if management is not running the process, S&OP is falling short. The second important take away is the use of the phrase “strategically direct”. In some definitions, the phrase “develop tactical plans” is also used. Both are important, since S&OP should be the process where these two concepts come together. Strategic direction is important as it involves higher level strategy such as product development, market penetration, rationalization, and market growth. It also ensures that the execution strategies for demand fulfillment (think make to stock versus make to order, or lead-time reduction), and production execution are aligned. Strategies should be defined and documented, and execution aligned with the strategies. So, S&OP is a management process that links strategy and execution. How does this work? The diagram below shows where S&OP sits in the planning process. Starting at the top is the Strategic plan. This is typically a three-to-five-year strategic plan that covers the overall financial objectives, growth, and product strategy. It is often at high level but may be broken down into individual families. In fact, it should be broken down into families to link it to the S&OP plan. The plan that comes out of the strategic plan is the S&OP plan. This is where strategy becomes more specific. The horizon will not be as long but should be a minimum of a rolling 12-month plan, and at the product family level. The other thing to note about S&OP versus the strategic plan is that the S&OP plan is updated monthly. The plan is put together, then work is done to execute the plan. In the following month, performance can be evaluated, assumptions can be reviewed, the plan can be adjusted, and then executed again. The two important linkages coming out of the S&OP process are the demand plan and the production plan or master schedule. It is important to note that there are two-way arrows between the S&OP process and the demand plan and production plan. This means that S&OP both “informs” and is “informed by” the demand plan and the production plan/master schedule. This is a very important characteristic of the process. S&OP, as a decision-making process, relies on the input from the demand plan, but the process also evaluates the accuracy and effectiveness of the demand and provides input back to the demand plan. The demand plan is the sum of the unconstrained demand for the product family. The sales organization is typically accountable for this plan, and includes a forecast, however it may also include other inputs such as calculated demand from other sources. The supply plan is generated within the S&OP process to balance the demand plan. This is represented by the arrow pointing to the Master Schedule. The supply plan is constrained by capability and represents the flow rate, or the build rate for the family. The S&OP process should highlight if there is an imbalance between demand and capability, in either the short or long term. If demand exceeds capability, buffers such as lead-time (the ability to extend lead-time and therefore increase backlog), inventory (the ability to meet excess demand using inventory) or upside flex for production can all be used. These are strategies that are managed as part of S&OP. They are documented, understood, and monitored as part of the process. One more takeaway from this diagram is that there is an important link between the budget or financial measurements and S&OP. The S&OP family plans should be in units, however by converting them to dollars they provide important feedback to the budget process. Once again, you will notice the two-way arrow between the budget and S&OP. The budget process provides important directional input to the S&OP process to validate if the current year plans are in line with financial expectations AND the S&OP process, which should extend beyond the annual budget cycle (recall the 12-month rolling plan). This will also inform the budgeting process for the following year. So, what are the outcomes of the S&OP process? If the process is working well, what should be happening in and through the process? Richard Ling, one of the original thought leaders in S&OP put it as: S&OP is managements’ handle on the business. This is a great summary of S&OP as a management process, run by and for your senior executives. It works for them to manage the business. There are five outcomes of a successful S&OP process to look for: 1. The process sets the flow rate for the business. To balance between demand and constrained supply, you must use buffers (lead-time, upside flex, inventory) and know how you’re strategically planning to use them. Buffers manage imbalances, fluctuations, and differences between supply lead times and expected customer lead times. Decisions around changing any of these variables in how the business is managed and capability should be highlighted, monitors, and driven out of the process. 2. The process should provide a clear link between strategy and execution. The planning diagram could be extended further, to include new product introductions, product rationalization, and even expanding to new markets. As an executive, S&OP plans should be balanced against long term strategies and provide feedback on the actions being taken to get there. Are they working or do they need to be adjusted? S&OP should also provide feedback on the family strategies around production and demand fulfillment. A great example is expecting that reducing lead time will impact demand. S&OP should show if lead-time is reducing and if this is having the desired impact. Strategy is linked to execution and informed by feedback. 3. S&OP establishes clear accountability for pIans. An executive that’s out of the process should be able to see whether or not the plans are being met. An important part of the process is looking back at the previous month and seeing how performance compares to the plan. It should be clear who is accountable for each part of the plan; bookings, shipments, and production, along with who is responsible for developing and delivering the plan. By establishing accountabilities, executives can better ensure that the organization is aligned to deliver the objectives for the family, and ultimately the business. 4. S&OP is a regular and repeatable management process. It should be regular in that it happens monthly. There is a process that leads up to the monthly executive meeting, and people come prepared to the executive meeting knowing what is expected and what their role in the process is. The work of running the business happens every day. S&OP is the step back from the day-to-day busyness, to evaluate whether promises are being delivered on, and if it is working to move the business to their longer objectives. 5. Measurable results are occurring from the process. Here we are looking for better business results, such as improved customer service, reduced inventory levels or reduced expedited freight costs, etc. The process should also improve the effectiveness of the organization, which should also be measurable. This comes back to measuring performance against the plans. Start one month out: can we put together a plan for production and deliver that plan by the end of the month? If not, why? Use this look-back to drive improvements into the ability to plan for demand and supply variability, and improve assumptions and risk management. These are the key points on what S&OP is and how it can transform your business. To find out more about S&OP and its benefits, subscribe to our newsletter: How effective is your S&OP? Evaluate your process and get recommendations. 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.

In the first installment of this series, three topics or ideas of what S&OP is not were introduced: S&OP is not a tactical process; it is a management process. S&OP is not a real-time decision-making process S&OP is not a magic bullet The second article discussed how S&OP is not a real-time decision-making process, and how most companies make the mistake of believing it is. Lastly, S&OP is not a magic bullet. Having an S&OP process won’t magically fix all the issues in a business. In most cases, S&OP starts to highlight other processes that need to be fixed or cleaned up. S&OP sits in the middle of the planning hierarchy between strategy and execution. As such, S&OP informs and is informed by demand planning, and it is informed by and informs production planning and master scheduling. This is shown by the arrows in the diagram below: The plan is developed and then executed. Of course, real life gets in the way and things don’t happen as planned. You have to adapt. The point of comparing actuals to the plan is so that the organization can learn how to make better plans, how best to set up the parameters for success. Tolerance levels help highlight where the process is out of control. They don’t fix it, they highlight it. Then you need to fix them. A good example of this is master scheduling. Do you have a good master scheduling process? The monthly process has a measuring stick to see if you can actually lay a plan one month out and deliver on that plan. If the process is out of tolerance as in the example S&OP sheet below, where one month is above plan (green outline), and one month is below plan (red outline), then the plan isn’t being delivered within the month. This example is interesting because this particular business is running almost entirely to backlog (in the shipping plan, month one's (March/M1) 4,458 shipments are entirely made up of the 3,934 backlog scheduled for that month plus the 524 past due). This means going into the next month, they know how many units are needed to produce, and they actually have the orders for all of these units. If the plan isn’t delivered to, this is a matter of execution. The process only highlights that there is an issue. The other area where disconnects in the execution process often arise is the management of backlog, specifically past due backlog and the process to establish promise dates. In this situation, it’s not unusual to see a large number of orders in excess of the shipment plan. S&OP data, if presented right, will show disconnects between these processes and disconnects between the shipping plan and backlog as well. Once again, the process should highlight the issues, and then they need to be fixed. Everyone wants to focus on the results from S&OP but results only come from doing the right things. S&OP is about driving the predictability of demand and predictability of supply, THEN setting your buffers to manage within the unpredictable level to achieve your lead-time and capital goals. To get results, you need to do the right things, then do the right things better until the desired results are achieved. So how does this work in S&OP? This is where measuring for success comes in. There are three levels of measurements to break through this issue, and companies should consider measuring their progress in S&OP at three levels. First, start by measuring the process. Do you have the right data? Are the right people participating? Have you made this a monthly repeatable process? What is the organization struggling with? A standard process measurement for this covers these three main topics. Second, are we getting better at what we do? This is the effectiveness measurement. Is performance in or out of tolerance? Are we getting better at putting the plans together? Are we more in control? This only comes from fixing the causes of being out of tolerance. Third, only by improving your effectiveness can you get results. KPIs such as on-time delivery, inventory turn improvements, and reduced freight expedites will only happen if the S&OP process is connected to the execution processes. It must be used to prioritize and fix the challenges within the business. Doing this will get the results. This is the third level of measurement. While everyone wants to measure right away, results will take time. That is why S&OP is not a magic bullet. If you missed the first articles of this series, find them here. Do you want to stay up to date on S&OP content? Subscribe to our newsletter. Lastly, check out our videos on Youtube for more helpful explanations. How effective is your S&OP? Evaluate your process and get recommendations. 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.

“What S&OP Is Not - Part 1", introduced three topics or ideas of what S&OP is not: It is not a tactical process; it is a management process. S&OP is not a real-time decision-making process. S&OP is not a magic bullet. That article covered how S&OP is not a tactical process. Executives must be involved to make it a management process, and the 5 Section Sheet provides the tools to ask the right questions. Next, S&OP is not a real-time decision-making process. In some technology circles there is a push for something called “real-time” S&OP, in which a monthly cadence no longer makes sense. The ability to create real-time dashboards and control towers that show data at a moment’s notice means decisions can be made on the fly, and there is no need to step back monthly and look at the plan. After all, who wants to be locked into a plan that was created 30 days ago, when the world may have changed in those 30 days? We want to be nimble; we want to react. There’s been a push to move from the traditional view of S&OP, where it sits at the middle of the planning process as a separate but connected planning step. Defined inputs and outputs allow this traditional view to occur on a monthly basis. The push with technology is to move to a more integrated approach, where S&OP, demand planning, and production scheduling are all being done in a continuous loop all the time. Companies can react and re-prioritize on the fly, and the three planning processes are happening at the same time. Changes in demand or supply issues can then be addressed all at once. While it is important to be able to react to what’s happening, it is more important to establish operating parameters or operating strategies beforehand that clearly show whether to react or not. S&OP needs to be the step back from the day-to-day operations that looks at what has happened and ensure the daily decisions are still driving in the right direction. This can provide parameters to make these decisions. If a customer asked for a large order to be delivered in 5 days, does that mean the plan should change right now? The answer may be yes or no, but the person making that decision should be clear on the parameters for that decision and be held accountable for making the right decision. Looking at this diagram, the S&OP process informs (or sets the parameters for) the demand plan and the production plan, but also takes feedback from those processes to identify what must be changed in the plan. The feedback loop validates the accuracy of the plans. This provides useful questions to ask: If the plans are not accurate, what happened? What assumptions need to be changed in the next plan? What buffers are needed between demand and supply to meet strategic objectives? Do the plans need to change going forward? This type of step back and evaluation of the plan can’t be done in a real-time decision-making process. First, looking at things on a weekly basis means details are sorted out into smaller and smaller buckets. The smaller the bucket, the harder it is to look further out. Daily variation or noise will always be greater than the average over time. If the planning buckets are smaller, the natural tendency is to respond to any immediate differences or issues. If orders are down today, there is pressure to change the plan right now. This leads to reactionary thinking instead of proactive. Secondly, even though the plan can be redone quickly, that doesn’t mean the entire organization can react or keep up. This is “the illusion of flexibility”. Plans can be flexible, but in most cases, the lack of flexibility in execution constrains the plan. Most manufacturers have a certain amount of inertia in their supply chain, whether this is component lead-time, production change over issues or fixed short-term capability. Understanding what flexibility is available, and the role that the planning horizon has, establishes the parameters that must be operated within. This should be the role of S&OP, to set buffers (inventory, lead-time, upside flexibility) to manage the variation within the frozen planning horizon. Finally, a real-time decision-making process is not necessarily a learning process. To learn as an organization, take a step back from the day to day and look at decisions, data, processes to understand what should be done better. This requires the look back AND look forward that S&OP provides. It requires data to measure the plans against the actuals, documentation of assumptions, and the proper level of detail that engages senior executives without overwhelming them. This is why S&OP is not a real-time decision-making process, but instead something that requires planned execution, and flexibility throughout the organization. If you missed part one of “What S&OP is Not”, read it here. Subscribe to receive our newsletter, “The DBM Executive”, so you can get notified about part three, “Why S&OP is not a Magic Bullet Process”! How effective is your S&OP? Evaluate your process and get recommendations. 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.

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: S&OP is not a tactical process, it is a management process. (this article) S&OP is not a real-time decision-making process. 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. Are we in control? Does the plan lead to the objectives? What are the risks in the plan going forward? Do the current actions improve the level of control and ability to reach objectives? 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. How effective is your S&OP? Evaluate your process and get recommendations. 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.

Our focus is helping companies implement effective Executive S&OP. After implementing hundreds of different processes, it is evident that there are trends that occur when companies begin their S&OP journeys. In this article, we will outline the top 10 pitfalls that these companies make when trying to implement or improve their Executive S&OP process. So let’s jump in. 1) Focusing on technology. I start here, because too often this is the mistake that companies make. Putting your full faith in technology to provide the answer will not work. Improvement comes when your organization learns how to align people, and process then use technology to support it. Too often people expect technology to provide the “answer” to their problems, but the process and understanding of getting to the answer is more important than the answer itself. Technology focused implementation seldom bring about real change in the way the organization is run… they just help you do what you are doing today faster. 2) Not prioritizing learning. S&OP is about aligning the organization on a plan. Implementing effective S&OP requires everyone understanding what is expected, and what a good process looks like. Alignment around roles, outcomes, objectives and presentation should not be assumed, especially as you work across the different areas of the organization. Don’t assume everyone is on the same page. Outline specific outcomes by teams, and decide what good looks like early, then once everyone has a common understanding of the framework, you're on the right track to getting there. 3) Trying to Boil the ocean. This can be a challenge in any project but even more so with S&OP. If you’re not familiar with the expression it means trying to fix everything all at once, or “the big reveal.” S&OP is complex as it connects all teams, data and information from across the organization. You will learn a lot as you start implementing, such as some of your current data and process issues. However, if you try to implement everything at once, you in turn create more work for yourself. Start with a product family, develop your understanding of the story and execution, and grow the process from there. 4) Expecting perfection right out of the gate. The process won’t be perfect, future plans never are. What’s more important is to start where you are, then use the monthly S&OP cycle to improve your process one step at a time. Because of this, we advocate the iterative approach to change. If you get it 50% right the 1st time, and improve by 50% each time within 6 cycles you will have the process pretty close to complete. Doing this for a pilot family enforces a proper learning and understanding of the process, and allows you to grow to perfection. 5) Not allowing the process to stick. I’d love to tell you that implementing S&OP leads to immediate results, but it doesn’t. Getting the process to work well takes time. Much like any new skill, you need to allow time for it to take root. Remember, this isn't about just adding new daily tasks to your operations. Your entire organization has to come to a common understanding of their role before you see change. Allow time for the process to stick, and you will see growth on all sides. 6) Don't get into too much detail. Most people think the answer to a better plan is in the details. Don't confuse precision with accuracy. Your goal should be to get the story of what is going on in the business, and base your decisions around that. The story is supported by details, but the details can’t be the story. 7) Not allocating resources to the project. This pitfall specifically focusses on the role of the S&OP coordinator. Often this is a new role in an organization. It takes time to organize the meetings, document the process, manage the executives and follow up on improvements. A good S&OP process will also uncover problems/challenges in other areas. You can’t expect results without taking the time and allocating the required resources to fix these. The S&OP coordinator is critical to ensuring the project is receiving the proper funds and attention it needs. Cheaping out on your inputs will show in your outputs. 8) Getting caught by conflicting metrics. Before you start, it is important to know the outcome you are expecting from improving your S&OP process. Is it reducing inventory, improving service levels, or reducing expedited freight? These metrics are often at odds with each other within the planning process. You need to be clear on what objectives and measurements you are trying to drive through, and you need to measure these by family. They may be different for each family so clarity and specificity is important. 9) Not assigning clear accountability. Bookings, shipments, production, backlog and inventory are all elements of the S&OP plan. Accountability refers to who owns what part of this plan, and it needs to be clear who the senior executive holds responsible for each part of the plan. If people understand the tangible outcomes, and their contributions to achieve it, it makes for easy engagement and action across the organization. 10) Not getting Executive leadership involved. It may be stating the obvious, but S&OP is an Executive Management process. Accountabilities need to be assigned by your Senior Executive, and the story needs to work for them too. In short, the process needs to work for them. Don’t make the mistake of implementing a process, then try to “sell” it to the Senior Executives after you’ve worked out the details. You need to start from the end first. At DBM, we have the experience help your team by laying out the framework and tools you need to achieve an effective S&OP process. Take our Executive S&OP Assessment to get an idea of where your process stands with our benchmarked S&OP process. It will only take about 10 minutes, and you'll get personalized feedback to help find out where your process needs help today.

In this series, Effective S&OP, we are identifying the key characteristics required to have an effective Executive S&OP process. In this article, we will outline how to establish and maintain a clear Executive Engagement. Executive S&OP is a management process for the Senior Executive. Ultimately the process needs to work for them. Your Senior Executive (President) is accountable for the performance of the business. They should be able to use the Executive S&OP Process to evaluate performance (specifically the ability to plan and execute) have clear line of sight to a workable plan. Their input and ownership of the process is necessary for this to happen. Your President should expect the following outcomes from the process: 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. Your President should be engaged in the monthly Executive Meeting. This starts with showing up. They are the leader of this meeting and should be driving most of the discussion and asking most of the questions. They should expect the team to come prepared and knowledgeable to the meeting, and hold them accountable for their plans and performance. This means if operations did not hit the previous plan, the operations leader should know why. Your President has final sign off on each family plan coming out of the Executive S&OP Meeting. Asking for this sign off is a good way to make sure you have a clear, achievable, and well-understood plan. This simple step can often be the catalyst to improving executive engagement. Accountabilities and responsibilities should be set and managed by your President. It should be clear to them, when reviewing each S&OP family (performance AND plans) who in the room owns what part of the plan. Educating your President (Senior Executive) on what to expect out of the process and how to make it work is often necessary to make this happen. They may know what they want, but most likely not how to get there. This will help them drive the improvements necessary to get the most out of the process. This assessment provides the basic framework and recommendations. Additional coaching for your business leader is often required. 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. Our coaching provides executives the support and guidance to drive S&OP and get to the true story of the business. Let us help you unlock the power of S&OP in your organization. Reach out to us. How effective is your S&OP? Evaluate your process and get recommendations. 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.

PRESS RELEASE – Feb 28, 2023 10:10 AM EDT KITCHENER, Feb 28, 2023 – Legrand Pass & Seymour is focusing on improving their business operations and customer relationships. They have chosen to do so by implementing an executive S&OP process. The DBM S&OP Accelerator program will provide a proven path for Pass & Seymour to establish an effective Executive S&OP process. It is not uncommon even within an organization with an established SIOP (Sales and Operations Planning – S&OP) process to have gaps in how that process works according to Roger Kanaan, VP of Operations, Legrand, North & Central America: “We see the need for a demand and strategy driven process and a link between agreed upon strategic choices and execution. We want to instill a decision-making management process to ensure we do what we say we are going to do such as identify and quantify customer expectations, and operational capabilities. Additionally, we want to ensure prioritization and communication of trade-offs and the understand impact of our decisions.” Organizations with an S&OP process already in place but looking to improve or re-engineer are faced with decisions on the best path forward. They must decide if true and lasting change can be achieved with the current team or if additional help is required. “We felt a gap in the SIOP (S&OP) competency within our team and needed help with a proven process to help us establish a standard work process. Our goal is to increase our maturity and ensure our teams get trained to adopt, follow and continue improving our S&OP,” Roger shared. Legrand Pass & Seymour chose the DBM S&OP Accelerator program to help get them to their goal of an effective, Executive-led S&OP process. Roger explained “DBM’s proven methodology and good references on adoption and business process improvement” were reasons DBM was selected to help with implementing S&OP. “The Legrand team felt comfortable with DBM’s approach, the Accelerator pilot, knowledge base and willingness to teach and instill a process to help the organization get to the next level of SIOP maturity.” If your organization is looking to revitalize your S&OP process to get results, we can help. We have the process and tools to make change happen. Through the DBM S&OP Accelerator, your organization will have an S&OP process that everyone understands in just six months. If your organization is looking for a proven path to improve your S&OP process, like Roger, let us help you unlock the power of S&OP. Reach out to us www.dbmsys.com About Legrand, North & Central America Legrand is the global specialist in electrical and digital building infrastructures. Their North and Central American division is the largest component of Legrand worldwide. There are over 6,700 employees and product categories that span across residential and non-residential business markets. Pass & Seymour are well-known for their electrical wiring devices such as electrical outlets, switches and connectors. Learn more at www.legrand.ca About DBM Systems DBM Systems Ltd. has been at the forefront of Sales and Operations Planning (S&OP) thinking since 1980. Their team of consultants are providing proven S&OP solutions for industry leaders across the world. DBM has coached and equipped teams with the tools needed to run an effective S&OP process. Unlock the power of S&OP in your organization. Find out more at www.dbmsys.com

In this series, Effective S&OP, we are identifying the key characteristics required to have an effective Executive S&OP process. In this article, which is the last in the series, we will outline how to measure and improve the process through each cycle. There are three levels of measurements you should use to track your progress towards S&OP maturity: Process, Effectiveness, and Results. While it is important to know the business results you are looking for out of S&OP, if this is your only measurement of progress it can be frustrating. These measurements can be considered like steps or building blocks. You need all three measurements in place, but results won’t happen consistently unless you have a good established process and continue to improve the effectiveness of your planning. Process measurements provide feedback on whether your Executive S&OP process is setup for success. Are you doing the right things with the right people and in the right way? Two tools are recommended for this: Process Assessment tools. Assessment tools, like the S&OP Assessment, provide valuable benchmarking on how your current S&OP process is doing. You should have a cross-section of S&OP participants complete a process assessment on a regular basis. This will help identify where there are disconnects on practice or expectation across the organization and help to provide a common understanding of what is expected. Track your results over time to determine how your S&OP is maturing. Meeting Scorecard. This is a good measuring stick to determine if the basic S&OP process you have laid out is happening. Do you have the right people, methodology, and data to engaged with the right accountabilities? The S&OP meeting scorecard should include a measure of participation, schedule and data availability. Effectiveness measurements provide feedback on the team’s ability to develop a plan and deliver on that plan. An effective S&OP process is one that delivers accurate plans. Establish tolerance bands for your bookings, shipments, and production plans. Measuring whether each of these plans is in or out of tolerance will provide an indication of how you are improving over time, identify where you need to focus improvements, and ultimately help you manage risks and set operational parameters. Ultimately tolerance bands should be set to match your operating buffers (lead time, flex capacity, inventory) so that out of tolerance measurements identify where these buffers may need to be adjusted or planning activities improved. Finally, result measurements are the Return on Investment (ROI) that management is looking for when starting an S&OP implementation or improvement project. These could be operational results like reduced inventory, improved on-time delivery, or reduced stockouts. Strategic results may be to increase market share or improve new product introduction process. Financial results might be to improve margins or reduce expedited freight charges. These measurements should be at the family level. Having the measurements in place to track your process, effectiveness, and results, will allow you to accurately evaluate and improve your S&OP process. This is just one key way that can make your S&OP a more effective process. See the Executive S&OP: Best Practices to get a full picture of what an ideal process should be like. How effective is your S&OP? Evaluate your process and get recommendations. 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.

President's Note 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. In this series we are identifying the key characteristics required to have an effective Executive S&OP process. In this article, we will outline what data is required to support each step in the cycle. The Executive S&OP Process needs to be data supported. The data should model the plan for each family and be supported by historical information to assess the validity of the plans. At the center of this is the 5-Section Sheet. This sheet is a family view that connects demand with supply and covers the buffers or levers to manage the business. These buffers being inventory, backlog and flex capacity. Pulling this data together presents a “story” for the family and will drive you to have a balanced or viable plan. Current or actual data should come directly from your ERP system to ensure the S&OP process is connected to your execution and financial systems. ERP data that doesn’t make sense should drive improvement projects to other processes. For example, if aged backlog reviewed by family is consistently past due, seeing the summary data each month should drive improvement for backlog management. It is strongly recommended to have an identifier in your ERP system for the S&OP family. This will support pulling inventory, production, open orders out of the system quickly. Data needs to be normalized across sales and operations to give a complete picture of what is happening in the family. All data is in the same unit of measure for a family. You should be able to compare actual data to the plan for each month completed. Future plans should be balanced and incorporate any firm orders (production orders, open customer orders (backlog)) available in your planning system (ERP). The 5-Section Sheet below demonstrates how the full plan comes together for a family. The blue lines show the actuals (M-1, M0) and the current plan (M1 to M3), while the line above represents the previous S&OP plan. In the example, February is the month just completed. (Note: The sheet is truncated to only show 3 future months of the 12-month rolling period.) o Bookings (orange arrow): Actuals (February) are the sum of the new orders taken the previous month to be compared to the forecasted bookings for the month (in units). March and forward are the bookings plan, or forecast developed by sales. o Shipments (green arrow): The sum of the shipments (typically called sales) that have happened (actuals) or are planned. In this case we are showing the constrained shipment presented at the executive S&OP meeting. o Backlog (blue arrows): The aged backlog is a snapshot of the current open customer orders, based on the month you have promised them. This is a picture of your customer commitments. The total backlog plan is a forward projection of backlog based on bookings and shipments (previous backlog plus bookings minus shipments equals new backlog). Projected backlog should reflect plans to reduce or increase lead-times. o Supply (red arrows): The current Supply plan is the sum of actual production (M0) and planned production (M1+) for each month. The plan is production’s commitment to a build quantity. This is constrained by the capability for this family. Planned increases or decreases in capability should be reflected in the capability line. o Inventory (yellow arrows). The calculation for each months ending inventory starts with the current inventory and projected with the following formula: ending inventory = starting inventory + supply – shipments. A balanced plan should hold inventory below the target level and above zero. Good data is critical for making S&OP worthwhile. Knowing where it comes from and how to use the information to support the plans is one key way that can make your S&OP a more effective process. See the Executive S&OP: Best Practices to get a full picture of what an ideal process should be like. 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. Our training provides participants of S&OP the support and guidance to effectively execute S&OP and get to the true story of the business. Let us help you unlock the power of S&OP in your organization. Reach out to us.

View this article as a PDF here. In this series we are identifying the key characteristics required to have an effective Executive S&OP process. In this article, we will outline how to establish and maintain clear responsibilities and accountability at each step of the S&OP cycle. An effective Executive S&OP process is one where everyone who is engaged or touches the process knows what is expected of them. A good way to define this is using a RACI matrix or framework. The acronym RACI stands for responsible, accountable, consulted, and informed. This is how each of the 4 components is defined: Responsible: a manager or team member who is directly responsible for successfully completing the task. Accountable: the person with final authority over the successful completion of the specific task or deliverable. Consulted: someone with unique insights the team will consult. Informed: someone who may not be directly involved, but should be kept up to speed. To keep things simple, we recommend focusing on the Responsible and Accountable. This means having a clear definition of who is going to put together the plan, or make sure the meeting is happening (responsible), and a clear understanding of who ensures there is a plan and ultimately makes sure the plan is executed (accountable). The basic accountabilities and responsibilities can best be looked at by thinking about the outputs or plans developed. We are not covering additional details that may be part of your plan such as budgets, financial plans, staffing, and new product introductions (NPI), but focusing on the core requirements. Unconstrained Demand Plan: Accountability for the unconstrained demand plan should sit with the sales leader (VP of Sales). This is the person who signs-off on having the plan they can commit to. The plan should include both bookings and shipments not constrained by supply. It is the external view of the demand at the demand stream level, consolidated to the S&OP family. Responsibility for getting the plan together typically lies with a demand planner, or individual sales representatives. Supply Plan: Accountability for the supply plan lies with operations (VP of Operations or in some cases VP of Supply Chain). This is the person who signs off on what the organization is capable of supplying and committing to for each family. Typically, the master scheduler or S&OP coordinator is responsible for developing the plan. Constrained Shipping Plan: This is the shipping plan developed following the supply plan. Accountability for this plan lies with the team and more specifically the sales and operations leaders. If constraining is required, decisions around constraining (allocation, use of upside flexibility, lead-time push outs) need to be made. These are critical decisions that should come out of the S&OP process. Inventory, Lead-times, Capability (including upside flex): These plans are an outcome of the process. How you plan to use these strategic buffers for each family is ultimately signed-off on by the Senior Executive (CEO, President) when they sign off on the plan. Accountability lies with Senior Executive. S&OP Process: The S&OP Coordinator is responsible for the monthly process. They are the ones making sure the meetings are happening, roles and responsibilities are understood, and data is available. As noted in the previous section, the Senior Executive is ultimately Accountable for making the process work for their organization. It is their management process. Documenting RACI for your Executive Process is necessary for the Senior Executive to really hold the team accountable. The RACI matrix can be extended beyond the basic supply and demand to include such areas as NPI and financial plans. The responsibility and accountability may be different for each family or production site and may change depending on the planning horizon. Not quite sure how to incorporate these best practices into your S&OP process? We can help! Reach out to us. We can help you unlock the power of S&OP in your organization. DBM Systems provides organizations with the coaching and tools to quickly start and sustainably run an effective S&OP process. Through the Virtual Accelerator process, you can implement a Executive S&OP process in just six months. How effective is your S&OP? Evaluate your process and get recommendations. 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.

View this article as PDF here. Robertshaw implements an Executive S&OP process through the DBM Virtual S&OP Accelerator program. PRESS RELEASE – Nov 9, 2022 11:30 AM EST KITCHENER, Nov 9, 2022 – Robertshaw has begun an executive S&OP implementation through the DBM Virtual S&OP Accelerator program. Over a six-month period, DBM will support Robertshaw to establish an S&OP process for a pilot S&OP product family. Additionally, the program will lead the Robertshaw team through S&OP consultation, S&OP online training courses, and implementation coaching sessions. “The supply and demand challenges experienced coming out of the pandemic exposed the failings in our current processes. Inventory dramatically increased, customer service levels dramatically decreased, and try as we might we were unable to make meaningful progress.” says John Hewitt, CEO of Robertshaw, on why the company needed to implement an S&OP process. “We needed a fresh perspective on the challenge, and the ability to accelerate progress by deploying a proven solution. Robertshaw lacked or was under-leveraging many of the core capabilities necessary to implement lasting change in the S&OP process.” DBM Systems was a recommended as the experienced S&OP consultant to bring about a sustainable S&OP process at Robertshaw. John Hewitt on the decision to implement the DBM Virtual S&OP Accelerator: “The simplicity of the approach, the proven results demonstrated in reference companies, and the focus on clarity in roles and responsibilities made DBM a perfect fit for Robertshaw. We loved the focus on getting the process right first, and then scaling through system solutions as opposed to implementing a system as a solution.” The DBM Virtual S&OP Accelerator program is the culmination of decades of industry experience, and the fastest way to implement a sustainable S&OP process. In just six months, your organization will have an S&OP process that everyone understands. About Robertshaw Robertshaw is a global market leader for appliance and HVACR controls. The company designs, engineers and manufactures controls for a wide variety of commercial and home appliances. Learn more at www.robertshaw.com About DBM Systems DBM Systems Ltd. has been at the forefront of Sales and Operations Planning (S&OP) thinking since 1980. Their team of consultants are providing proven S&OP solutions for industry leaders across the world. DBM has coached and equipped teams with the tools needed to run an effective S&OP process. Unlock the power of S&OP in your organization. Find out more at www.dbmsys.com