Holding S&OP process back business efficiency planning process

Sales and operations planning (S&OP) has become an integral part of supply chain management as businesses align their operations with their go-to-market strategy. But many organizations have yet to benefit from the success and value the process creates. This despite investing millions in training, technology and process improvements to set up a cross-functional consensus capability.

Many organizations use S&OP as a reporting tool rather than a decision-making process. There are myriad reasons for this and why organizations commonly fall short in their S&OP process. We’ve identified seven main reasons:

1. No clear vision. We often find top executives lack engagement or fail to provide the strategic vision for the process. The failure to balance different goals across the different functions participating in the S&OP process leads to the absence of a clear goal and a tug-of-war for competing objectives.
2. Misaligned key performance indicators (KPIs). Organizations struggle to develop KPIs that focus on business impact while establishing metrics with competing objectives within the organization.
3. Failure to make decisions. S&OP meetings are often dedicated to previous plans instead of developing a strategy for the future.
4. No alignment to strategy. The overarching business strategy fails to serve as the central catalyst for decision-making.
5. Not a “one number” plan. While S&OP focuses on a consensus forecast, it’s generally a supply chain plan with demand signals that various departments involved use. It often diverges from the stated consensus demand plan.
6. Corporate mindset. Organizations often lack a real commitment to the S&OP process, which ultimately leads to strategy dissolving into nothing more than a set of meetings with little to no corporate governance.
7. No alignment to execution. While there’s an existing emphasis on S&OP to operational execution, there’s little thought given to S&OP and go-to-market execution.

These seven common issues often lead to finger-pointing and a game of constant blame. However, we do need to review the core value of and key motivation behind the process. Companies that use the S&OP process primarily to report on the demand and supply balance may never fully mature to realize its extended benefits. Ultimately, if S&OP is seen only as either a supply chain or an operations process, that’s all it’ll ever be.

If any or all of these issues exist within a company, and if S&OP struggles to keep up with the pace of today’s business, how can it expect to meet tomorrow’s needs?

Managing internal organizational dynamics can be challenging enough. To secure a successful S&OP process, organizations also must manage an increasingly complex and ever-evolving business environment. Some of these challenges include:

• Increased SKU complexity
• More engaged customers
• Higher expectations of service (a la the “Amazon Effect,” which also impacts business-to-business)
• Increased competition from market disruptors
• Increased economic, geopolitical and climate volatility

And emerging technologies, if not deployed as part of a broader planning framework, may fall short of being a panacea to address these challenges.

The limitations of the S&OP process combined with the changing business landscape require a more expansive approach to the planning process. To have a meaningful impact on the business, it can no longer be limited to the supply chain realm. The S&OP function should be elevated into a central business planning and execution framework — called business efficiency planning (BEP). This framework can help organizations make better, smarter, faster decisions.