by Greg West, Farthing West Chief Brilliance Officer
The great rewards from S&OP / IBP come through collaborative processes and focused planning. Forging a company culture that is unified in purpose. A company culture moving forward positively to achieve a common strategic direction.
The following is a guide to developing and improving your S&OP process. I have broken it into 4 sections. The first three sections are about People, Process and Technology, while the fourth is the importance of being Future Oriented.
In the previous blog, I highlighted the importance of the first two steps which focused on process.
6. Crunch big data. Present concise information.
It’s difficult to make good decisions when the full data set is not available.
It is even more difficult to make good decisions when you are drowning in data.
The old expression is that there are only two types of forecasts. Lucky ones and wrong ones. Striving for the perfect forecast is unrealistic.
Make sure that there is agreement on how the “one number” is generated. This allows the cross functional team to concentrate on the meaning of the number rather than challenging how it was derived.
Early in your S&OP / IBP journey establish a basic forecast that everyone agrees on and then over time refine it.
Regularly share and discuss any assumptions used to generate the forecast. Ask your team: – Do they remain relevant or do they need updating?
This approach allows you to continually improve and keeps the focus on making meaning of the output.
The scheduled meetings are about agreeing actions based on the numbers, not arguing over the calculations.
Use the processing power of advanced planning tools like FuturMaster to take the tedium out of the number crunching and information sharing and spend your time focused on the insights needed to drive actions.
7. Focus on the exception
Your S&OP / IBP process is designed to make the best decisions. To achieve this, you need the most complete picture. Data provides the pieces of the puzzle. And then experience helps you to develop a set of clear actions that deliver your strategic goals.
Simple isn’t it!
Unfortunately, reality gets in the way.
Todays supply chains are complex and we typically don’t have the time to review everything.
The value content experts add to the S&OP process is their business intelligence and experience. They use this experience to develop solutions that are backed by the facts and are in line with the corporate strategy.
However, there are many decisions that can be handled by your advanced planning system. Good planning tools like E2open can and indeed should be used to make recommendations based on agreed rules without the need for meetings.
Invest early in your S&OP process in good planning tools. This allows your people to manage the exceptions.
Good Advanced Planning tools like E2open have alerts and exception management features. They also incorporate optimisation tools and machine learning. These features allow your team to manage what needs to be managed.
Focusing on the important few improves the quality of the output of the S&OP process.
8. Integrate the plan with real financial data
There are distinctions between S&OP and IBP but at a basic level it is often considered to the be the integration of the planning with financial data.
Working off the one set of numbers means that the financials are aligned with the sales numbers, which are aligned with the supply numbers, which are aligned with the distribution numbers etc.
Early in the S&OP journey it’s simpler to understand impacts and trade-offs if the focus is on is on volume as opposed to value. And that the skills required to balance supply and demand are focused on customer services.
Modern advanced planning tools like E2open now make it relatively simple to take into account real costs and real revenues. Importantly, understanding the financial impact of decisions improves decision making and promoted cross functional collaboration.
Take the time to assess the maturity level of your organisation. Incorporating financial data early in the process leads to better decision making. But guard against overwhelming your people.
As the process matures, a financial view is necessary to quantify the impact of decisions on the overall financial position of the company. This increases the value and relevance of the process internally.
To be continued…