Welcome to the S&OP Experts Blog Series. This series will feature a weekly Q&A with an industry thought leader on sales and operations planning trends and strategies. A follow-up question and answer session will be hosted in the S&OP section of the Supply Chain Expert Community. Registered community members may submit their questions for the expert of the week.
Tom Wallace, of T.F. Wallace& Company,is a writer and educator specializing in Sales & Operations Planning. Tom is author or co-author of over a dozen books and is currently a Distinguished Fellow of The Ohio State University’s Center for Operational Excellence.
Kinaxis: Do you think the definition of S&OP is clear in the marketplace? If not, is that a problem? How do you define S&OP?
Tom: A significant problem exists with the meaning of Sales & Operations Planning, which formerly meant an aggregate volume planning process in units and dollars, involving top management. Over the past 8 to 10 years, that term has morphed to include the detailed mix tools such as master scheduling, plant and supplier scheduling, advanced planning systems, kanban, and so forth.
Confusion abounds. When someone hears Sales & Operations Planning or S&OP, they don't know whether the speaker means the volume process, the mix processes, or both.
Is this a problem? You bet it is. When top management in companies not yet doing S&OP learns that it means the detailed, mix processes as well as volume, they will not be receptive to getting involved — nor should they. The detailed stuff is not their job.
For this reason, we use the terms Executive S&OP for the top management process and Operational S&OP for the detailed, mid and lower management functions. It is becoming more widely adopted as more people see the confusion. I use the term S&OP interchangeably with Executive S&OP and refer to Sales & Operations Planning as the combination of the two.
Kinaxis: Many are advocating the evolution of S&OP to Integrated Business Planning? Are you a proponent of IBP? Tying the financial plan/measures directly into the process is a key component of IBP, what else distinguishes IBP from S&OP?
Tom: Tying the financial plan/measures directly into the process is a key component of S&OP, and it has been since almost Day 1. I'm not certain exactly what IBP is, but I suspect it's a lot more similar to S&OP than different.
Kinaxis: Can the S&OP process be carried out without technology? Does this relate to the S&OP maturity model?
Tom: Yes to both. The S&OP process (that's Executive S&OP) can be carried out without S&OP-specific software. Today there are still more successful S&OP users with only spreadsheet software than otherwise.
And yes, there is some relationship between S&OP-specific software and S&OP effectiveness. The really leading edge users have found that Excel will take them only so far and that they need software help to go forward.
Kinaxis: Is it possible to have an effective S&OP process that only looks at the aggregate or "volume" level? How important it is to consider the operational feasibility of the S&OP plan?
Tom: Close in, looking at aggregate data is not sufficient; granular detail is required inside what APICS calls the Planning Time Fence, the point inside of which one needs to know which specific products will be produced. In most companies, this ranges from two to twelve weeks into the future.
Beyond that point, aggregate planning works well provided that the data (average selling price, bills of resources, and so forth) are kept current.
Kinaxis: There is indeed a great deal of cross-functional cooperation and collaboration that is required for managing S&OP — how are companies enabling this, and are they doing it successfully?
Tom: Cross-functional collaboration is not a pre-requisite for successful S&OP; it’s a result. Improved teamwork is a natural by-product of S&OP. I tell people that if they've implemented S&OP and have not seen an improvement in teamwork, they didn't do it right. It's that simple. Enhanced teamwork follows successful S&OP just as day follows night.
Kinaxis: What role does exception management play, or should play, in S&OP?
Tom: Some, but not as much as one might think. This is because Executive S&OP deals with aggregated volumes and thus there are far fewer numbers to look at.
Kinaxis: How and where do what-if capabilities fit into the S&OP process? Is it a priority capability for an effective S&OP process?
Tom: They're essential. But . . . this does not have to be highly detailed simulation eight months or so out in the future; simulating at the aggregate level is adequate in virtually all situations. In the near term — inside the Planning Time Fence — the simulations need to be much more granular.