Sales and Operations Planning (S&OP): State of The Union
The Role of S&OP in Driving Organizational Alignment and Agility
By Lora Cecere, Founder and CEO, Supply Chain Insights LLC
Sales and Operations Planning processes are now in their fourth decade of maturity. The processes are growing more complex. Progress is slow. The infographic below shows the current state of the union of sales and operations into S&OP processes.
In this world of uncertainty, good planning matters. Complexity and volatility are escalating. Improving S&OP in a systematic approach, focused on goal evolution and systemic process governance, makes a difference; but, it requires education. A barrier to improvement is the executive team not understanding the supply chain as a complex system. It is the goal of this report to help alleviate this problem.
Sales and Operations Planning aligns and connects the functions of the company. It is one of four horizontal processes that are essential to becoming market driven and building effective value networks. The other, complimentary processes are revenue management, supplier development and corporate social responsibility
(CSR). In mature organizations, these four processes form the fabric of decision making for the end-to-end supply chain.
Unfortunately, in many organizations, the term supply chain is a “politically-charged” word. When supply chain is defined narrowly as a function, versus an end-to-end process, there is an endless debate on the role of supply chain in driving S&OP excellence. As the reader can see by the definition of supply chain in figure D in the Appendix, each organization defines the reporting relationships differently. Based on our experience with manufacturing organizations, the narrower the definition of the term supply chain within the organization, the longer it takes for S&OP processes to mature. Here, in this report, we try to sidestep these issues. We use the term supply chain to describe the processes from the customer’s customer to the supplier’s supplier.
Sales and Operations Planning is defined by the Association of Production and Inventory Control Systems (APICS) as “A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain …” For manufacturers, retailers and distributors, it has become a critical process to power growth, improve resiliency and drive efficiency improvements. In the last decade, it has seen a renaissance of activity.