Navigating the Journey to Streamlined S&OP: Initiative, Tools, and the Value of Decision Support
Since the term S&OP was first coined in the 1980s, sales and operation planning has become an important mission for companies striving to align forecasting, production, inventory management, and other organizational functions for optimal results.
While S&OP sounds straightforward in theory (after all, how difficult can it be to get all departments on the same page and working toward the same goals?), a properly implemented strategy is anything but easy to attain. In his work with manufacturers, Aberdeen Group vice president and principal analyst Bryan Ball emphasizes the importance of solid, streamlined S&OP for companies of all sizes and across all industries.
Singling out best-in-class companies that have streamlined their S&OP processes, Ball says Aberdeen's research shows that such firms have nearly a 10 percent improvement in customer service rates and a 38-day cash-to-cash cycle advantage over all other businesses. The problem, says Ball, is that S&OP cannot be completed effectively without reliable, accurate information gathered from across the organization.
"The S&OP team must have up-to-date information regarding future time-phased demand, production capabilities, inventory status, and any limitations on resource availability to realize these best-in-class benefits," says Ball.
Getting there requires more emphasis on management support and belief in S&OP, says Ball in an interview with MSDynamicsWorld, and less focus on the related processes. Those processes typically revolve around bringing information from disparate systems into view on a single map - something that can't be done until all managers and decision makers are on board with the unified S&OP vision.
Leveraging Microsoft Dynamics ERP Tools
Ball says Microsoft Dynamics ERP users are particularly well positioned to leverage streamlined S&OP solutions, namely because most already work with unified applications versus disparate systems. Quality S&OP software can extrapolate forecasts, inventory targets, and required make-and-move recommendations, and offer other capabilities to provide a financial business plan snapshot that can be accessed on demand.
"Dynamics users should try to get the most out of their systems' S&OP module," Ball advises, noting that augmenting with spreadsheets - which are used by about 95 percent of best-in-class companies - is a viable way to handle the mapping, data gathering, and analysis associated with S&OP. "It's not unusual to see those functions handled offline using spreadsheets."
"Use the S&OP module as much as you can and then augment as needed," says Ball. "If you get to the point where you're spending too much time on process versus decision making, you may need to move to a third-party solution that better meets your needs."
Put the Focus on Good Decision Making
Regardless of exactly how the S&OP function is managed, Ball says the most important point to remember is that the strategy should center on good decision-making, and not on the processes running it. Too many firms create confusion and miscommunication by using multiple plans across various departments, says Ball, who sees overcoming resistance to change as well as support from all functional areas of the company as the keys to a streamlined S&OP process.
"The first step to a streamlined S&OP process is buy-in across top management," Ball advises. "If you get stuck in the mud on the process and/or mechanics of S&OP, it becomes the reason for not getting it done." In other words, he adds, "If your boss isn't interested in streamlining S&OP, the initiative will never stand on its own two legs."
The good news is that once all of the important decision makers have their eye on the S&OP ball, the streamlined process can come into focus. From there, companies can make decisions, improve results, and take other tactical steps to improve service levels, cash-to-cash cycles, gross margins, and forecast accuracy.
"You can get a bird's eye view of the entire organization, run scenarios, look at contingencies, vet your plan, and test its limits," says Ball, "all without interruption or hang-ups."