S&OE – Where the Rubber Meets the Road: The Pointy End of S&OP

by Greg West, Farthing West Chief Brilliance Officer

Gartner has been helping improve supply chains for many years and their research and advice are always worth listening to. So, when Gartner recently began talking about the importance of Sales and Operations Execution, it is worth reflecting on this issue. The overall message that Gartner is conveying is that there is a difference between the monthly S&OP process and the weekly execution of the plan.

This distinction is something that I had previously taken for granted. But like most things in life our understanding increases when we make the implicit, or what we take for granted, explicit.

The model that I use to explain the S&OP is summarised below. It consists of a monthly process and a distinct but linked weekly process.

The monthly S&OP cycle has distinct steps:

  • It starts with the development of a realistic demand plan. This plan is created using the best intelligence of the business. Blending statistical forecasts with the input and strategic insight of key players – sales, marketing and finance. The Demand Plan that is created is the company’s best guess at future demand and looks forward over a typical horizon of 18 months.
  • Armed with this vision of the future, the next step is for Supply to review the plan looking for potential problems. That is, do we or do we not have the materials and resources to make the plan?
  • This then leads to the 3rd step in the process – resolving issues. Can we postpone a promotion, fly in material, place new orders, put on overtime, develop new promotions, change the promotional mix? Resolving these issues brings balance back to the plan. This is how satisfy the budget requirements, satisfy customers and capitalise on market opportunities and react to market forces.
  • The outcome of this alignment stage leads to the final step in the process – a Committed Demand Plan that the executives sign off.

So, what is S&OE or the weekly S&OP? This is where the rubber meets the road. It is where we execute our committed demand plan.

But the fact that it is called Sales & Operations Executions should not be confused with a total focus on the “Do” part of Plan, Do, Check, Act.

The execution phase has a lot of planning. For a manufacturing operation, a feasible production plan has to be reviewed against the raw material and packaging plans and scenarios developed to arrive at a committed production plan and a committed MRP plan.

Planning is always central to great outcomes.

Then as we execute the plan we have to adjust for reality. Our committed Demand plan is our best guess. So, it is important that Demand and Supply jointly resolve the issues that develop or are likely to develop. For example, extremely hot weather or rain may change demand. We need to replan for these contingencies and we need to check how our execution has gone and make further adjustments.

The execution meetings are focused on resolving short term issues and they are help typically weekly or fortnightly. They are focused checking progress to plan and making pragmatic corrections to the plan.

That is, the S&OE meeting have a different focus to the longer range S&OP meetings.

Businesses need to ensure that both the weekly and the monthly S&OP meetings are properly resourced and that appropriate processes are developed.

The link between S&OP and S&OE the Committed Demand plan.

Good tools such as FuturMaster greatly improve the success of your S&OP and S&OE process by making explicit what needs to be focused on and managing work flows. But the most important element is the interaction of your people and your processes.