How Mature is your S&OP Process!!

S&OP has found a great acceptability in a lot of organisations now a days. S&OP has seen as a one stop solution to a lot of chronic issues in the organisations. Though, a lot pf organisations have implemented S&OP or parts of it, still there is a huge gap in how many top management, other functions ( other than SCM ) understand process and importance of their role in the process.

S&OP has a common perception to be a Supply Chain process, as its usually run by Supply chain in most of the organisations. On one hand, this gives an opportunity of Supply chain team to take center stage which usually is taken by Sales, Finance or Manufacturing ( depending on the Sector the organisation is into). With growing popularity of S&OP process, SCM team is more widely recognized within the firm. But at the same time, if not implemented right, not only creates more confusion in the system but also ends up resulting frustration for the people who takes onus of running it.

S&OP evolution is typically defined as a four step process by Gartner.

Achieving Stage 1 ( Reacting ) :- If you have started having a S&OP meeting in your organisation, then Congratulations , you have already reached stage 1 ( reacting ).

1. U have a structure to the S&OP meetings. Don't worry about the efficacy, participation or occurrence of the meetings in stage 1.
2. U have a forecasting process in place, again be it as naive as it may be.

Usually , in the stage, as the name suggests, the organisation is in reactive phase. Most of the time instances happen as a surprise to the organisation, and everyone tries to fire-fight the same.

The question now arises that what is the right way to implement S&OP process in the organisation!! what are the symptoms that S&OP in your organisation is not implemented correctly.

1. Well , lets go back to basics. What is the goal of a successful S&OP? One single number across entire organisation. Sales, Finance, Supply Chain, everyone has a different numbers in their plans, and there seems to be less alignment in all of them. Does your organisation has multiple set of numbers on which each function works?
2. You do not have a clear cut calendar in your firm with blocked dates of the required meeting?
3. People usually do not come to attend S&OP Meetings on their own, without being dragged into the meeting?
4. Sales do not understand their role in each of the meeting? Most of the meetings end up as a Sales review meetings.
5. Most of promotions, big institutional orders, Maintenance breaks comes to you almost sudden , without any warning.

If most of these question has answer "Yes". Then u still have way to go to achieve Stage 2 in S&OP.

Achieving Stage 2 ( Anticipating ) :- In this stage, usually we will have somewhat communications flowing between the departments. In this stage, sales, Marketing and supply chain understand their role in the process. However , most of the other functions are still unaware of their responsibility in the S&OP process.

The clear diagnostic to this stage would be:-

1. You have a better calendar to the Demand Planning, Supply Planning, and Executive S&OP meetings.
2. You see that Sales do attend the S&OP meeting, and have a plan to discuss. Do not worry if the plan is accurate or not. But u can see the effort they are putting in to give u right signals.
3. The Promotions, Big Sales orders, and Maintenance Shut downs are not planned in a better way, so that the other side is better prepared to ensure stock availability in market.

However, you are still away from Stage 3, if:-

1. Your S&OP is still happening in Volume, and not on Value terms. Converting Volume to value has to be done by FP&A (Finance) team, and not by Supply Chain team, who use approximate figures.
2. If there is not much involvement of Top Management in the process.
3. There are no tough questions asked to the right people, and everyone stays in that "Goodey- Goody" mood after every meeting , month on month ( well, unless the business is doing wonders).
4. You still are not able to attract other than Sales, Marketing and supply chain functions into these meetings.
5. You still end up accepting "Sales Targets", as your forecast, by ignoring reality. This is also known as building ambition as your forecast.

Achieving Stage 3 ( Collaborating ):- This is usually a high level of maturity stage of the S&OP process. A lot of companies struggle to achieve this, but the organisations who have achieved this can only see real benefits of the S&OP process. This involves lowering of costs, high profitability, and increased "Employee satisfaction".

To achieve this stage, usually you need a high level of involvement and perseverance from the top management. They need to drive the importance of the process through their team, and make sure that their team contributes to the process whole heartedly.

The signs that you have achieved Stage 3 are below:-

1. Entire company is thinking from a top-line and bottom-line point of view. Every decision taken has these in back of mind.
2. Departments has stopped thinking individualistically, but overall companies benefit is kept in mind, even if that means loss at departments KPIs.
3. All functions not only attend and contribute to S&OP meetings, but also know their role in each meeting.
4. All the possible solutions to any problem are discussed without fear of being judged.
5. NPI planning by this stage should be an integral part of the S&OP process.

Though, achieving this stage itself is a great progress, but one should not stop here but try and achieve Stage 4. But how do u diagnose that you have not achieved Stage 4, and still in Stage 3. You know it when:-

1. S&OP is still run by Supply Chain, and in absence of Supply chain, no other department is adept to run the process.
2. You still need S&OP meetings to discuss issues.
3. S&OP is just an internal process, with no participation from external stakeholders.

Achieving Stage 4 ( Orchestrating.) This is the stage when a organisation is reaping total benefit of the S&OP profit. All the functions are not only chasing "One Number", but also thinking alike. The top boss, usually the CEO / MD / CFO of the company in addition to all other board of directors should consider S&OP decks as future annual reports of their company.

You know that you have achieved Stage 4 when:-

1. External stakeholders have a say in your planning. Usually done through collaborative forecasting for customers and joint capacity planning for vendors.
2. Since most of departments are thinking alike, most of the issues are solved without them being bringing to S&OP meetings.
3. S&OP becomes a process dependent , and has less dependency on person/department.

S&OP as a process is indeed a solution to most of the issues usually a organisation faces. But it has to be implemented first time right. This helps keeping the focus of the top management and key stakeholders.

Note: This article is written with my limited knowledge on S&OP, and just illustrates my views. I would be happy to hear your views on the topic.

Please let me know if you liked the article in the comments section. If you like to understand anything about S&OP, that I may answer with my limited understanding.