12 Most Common Threats to Sales and Operations Planning Process (2005)

Discusses key pitfalls which often derail the S&OP process, and how to deal with them ... the ideal S&OP leader _____should be a process facilitator and manager, not a practitioner who s subject to the outcome of the process itself ... metrics are vital to ensure success as they point out the core temperature and pulse of a business, as well as the progress towards the goals. You have heard about Apollo 13, The Chicago 7 and The Jackson 5. Now you can add to this list of dubious numerical nomenclature, the S&OP Dirty Dozen - the 12 most common problems preventing business leaders from getting maximum value from their Sales and Operations Planning (S&OP) processes. Compiled over the past five years from dozens of rigorous development and implementation initiatives for clients ranging from multimillion-dollar, mid-market firms to Global 50, this rogue's list sheds light not only on the most common S&OP pitfalls, but also on strategies for avoiding them. Before you can appreciate the S&OP Dirty Dozen, it's important first to have a clear understanding of what S&OP is and what it is not. WE ALREADY HAVE AN S&OP PROCESS As consultants, we are often asked to assess the current state of existing S&OP processes. It is not unusual to find many business leaders who say, Oh, we already do only to discover when we probe a little deeper that they are referring to nothing more than a process of sitting around the corporate trying to come up with a common single number forecast. The generation of a single number forecast is a worthwhile goal. Of course, in many instances, the campfire is a robust demand consensus process. However, demand consensus is an important element of S&OP, but it is by no means the complete process. So what is S&OP? S&OP is a five step process (see Figure 1) by which key business leaders review (1) product life cycles (portfolio plans), (2) demand plans, and (3) supply plans in an ongoing effort to align business strategy with business reality. A fourth step (4) is an issue reconciliation step where metrics and gapping techniques are used to measure and monitor the organization, as well as the execution of the corporate strategy. When a gap between results and business expectations appears, the gap is given a dollar valuation, and then prioritized. As part of the reconciliation process, ideas and scenarios are formulated to close these gaps. The last step (5) is a Senior Management Review (SMR) where metrics along with demand and supply plans are presented to management. The SMR examines significant demand and supply issues, gaps, and gap closing opportunities. During this review meeting, senior management offers direction, decision, prioritization, and information to help resolve any issues or gaps. Fundamentally, S&OP is an orchestrated effort to influence future business, based on cooperative, ongoing analysis of available intelligence and key metrics with the following end goals: * To continuously measure business performance * To align operations with goals * To create precise demand and supply plans * To strike a balance of supply and demand that improves overall supply chain efficiency and cost effectiveness of the organization. S&OP is clearly more than just demand consensus and the creation of single number forecasts. THE TOP TWELVE PITFALLS Although the process looks straightforward, there are many pitfalls, which on the surface might appear to be very minor, yet have the potential to derail the entire process. These pitfalls are not isolated to any one type or size of company - they are common across companies of all sizes and types of industries. Here are the twelve typical pitfalls: 1. There is a disconnect between S&OP and corporate strategy 2. Senior management indecision 3. The Single-number forecast is not Reality based 4. …