No matter where you turn, it seems that everyone who is involved in manufacturing has been talking about sales and operations planning, or S&OP for a decade or two.
There are certainly enough success stories now to give it credence and demonstrate that this is more than just a short-lived trend. Early adopters are reporting measurable gains in profitability, as a result of having more flexible production and being better able to identify and deliver on the most lucrative orders.
But as the rest of the market feels pressure to regain ground and take back some of that competitive advantage, there is a real risk that business leaders lose sight of what S&OP is really about.
Although it can be tempting to think of S&OP as an IT project, the organisations that are reporting success with S&OP have all treated it first and foremost as a business transformation initiative.
With Sales and Operations planning, you need a big shift in mindset, culture even. People working in traditional manufacturing businesses were reassured by familiar patterns of production, safe levels of inventory and proven distribution strategies. But with S&OP the most profitable ways of doing business often look quite different to embedded ‘best practice’ – including frequent change, reduced volumes of production and even turning away what used to be considered good sales orders.
Overturning conventional wisdom cannot happen overnight. You need everyone in the organisation to not just understand, but to experience for themselves how it will deliver benefit. To achieve this, a successful S&OP initiative will typically follow a phased approach, starting with quick wins that deliver immediate returns and turn sceptics into allies.
To succeed with S&OP, it is essential that your plans are communicated effectively and actioned fully throughout the organisation. But this doesn’t mean meetings and memos; the new business direction needs to be embedded into every employee’s targets and configured into sales, production and inventory systems.
In Production, your people will have intimate knowledge of what works technically and what doesn’t. Your systems and processes need to be designed so this expertise enhances rather than conflicting with the forecasting and optimisation algorithms.
There are as many ways of implementing S&OP as there are distinct company cultures and management styles. It is essential that you select tools that can adapt and flex to fit your new, changing business processes, rather than rigid systems that enforce someone else’s idea of how your business should operate.
It is inevitable that some of your people will be affected more profoundly than others by these new ways of working. To maximise the chances of acceptance and successful change, consider how new tools or automations would help streamline the process and minimise additional workload.
Establishing S&OP in a business is acknowledged to be challenging, particularly bringing everyone with you as you realign key parts of the organisation. But by starting small, focusing on quick wins and above all, putting people and process ahead of software and systems, you can achieve the transformation you need to increase margins, improve customer satisfaction and gain real competitive advantage.