The Institute Of Business Forecasting (IBF) defines S&OP as “process that integrates demand, supply, and financial planning into one game plan for business.” It also “links strategic plans to operational plans, and attempts to develop the most desirable product portfolio and product mix to maximize sales and profit.”

The Challenge

Call it by any name. S&OP, SIOP, IBP or IBM, the basic framework remains the same. And S&OP, instead of being an end to end business capability, has evolved into purely a supply chain capability. After 30 + years of S&OP we still don’t see the involvement of Sales people in the S&OP process in most organizations. They are reluctant participants at best, and are not seen at any S&OP seminars or conferences, nor will you see them writing blogs or posts on LinkedIn groups. This lack of engagement is what is holding back S&OP from its full potential.

Has anybody seen the Sales department?

The Real World

Most organizations start S&OP from a purely operational perspective. It is mostly initiated by the head of Operations. In fact, if you go back to the roots of S&OP, it was created to be a process that led the master schedule. Studies have shown that in most S&OP implementations, the process owners are typically heads of supply chain.

I once had the good fortune of having two sales managers attend a presentation I made at an S&OP conference. I started the session by asking the audience how many were from the Sales & Marketing side of the business and, being sure that nobody was going to raise their hand, this was my way of showing that Sales were missing from the S&OP process. To my surprise, I had 2 hands go up. I requested them to stand up and asked the audience to give them a big round of applause. This was a rare sight and something to be cherished.

I do not see Sales people coming to S&OP conferences if we are going to be talking about and showing off our technical systems and processes.

The two sessions after mine were on Artificial Intelligence and Demand Driven forecasting – very technical content totally focusing on the Tools and capabilities to improve demand forecasting. Guess what happened when we returned after lunch? The two Sales guys have gone missing. We scared them away by talking about complicated new fangled technology that had nothing to do with their jobs or objectives.

If we cannot get Sales involved, we may as well remove the “S” from S&OP and add it to our supply chain processes.

I do not see sales people coming to S&OP conferences if we are going to be talking about, and showing off, our technical systems and processes. S&OP is a great process but it continues to suffer from being a supply chain focused process. If we cannot get Sales involved, we may as well remove the “S” from S&OP and call it by any other name and add it to our supply chain processes.

Four Pillars to build the S&OP Process

To successfully build the S&OP process with the full commitment of the Sales and Marketing team, it is important that we address these four areas. These help deliver a collaborative process that benefits every department.

Top Management Support

The most important thing about S&OP is bringing Sales and Operations together in charting the future of the company and this can be done only by the person to whom both report. Without the commitment of the most senior executive, the S&OP process will fail. It is important to ensure that all meeting requests are sent out well in advance and all S&OP Executive Meetings are chaired by the CEO.

The beauty of S&OP are the soft benefits which come early on. Sell soft benefits to the CEO and he will be all ears, this gets him motivated and keeps him engaged. When results appear, he’ll wants to attend all Executive meetings.

Consistency & Discipline

Consistency in meetings and discipline are the framework of a robust S&OP process. Consistency is the difference between failure and success as it enables measurement, creates accountability and reinforces the message.

Fixed agendas for the meeting communicated well in advance facilitate the discipline required for these meetings. Without a fixed agenda and discipline, the meetings will soon be unproductive – people wander off topic and participants spend more time digressing than discussing. Stick to the agenda!

Transparency In Data sharing & Agile Decision Making

Transparency in  S&OP data, measurement metrics and the feedback loop enables higher trust levels among participants.

In S&OP meetings, success is often determined by the ability to be quick on your feet and react to changing scenarios. It is very critical that each person in the S&OP meeting has the authority and is empowered to take decisions when required.

Follow-up actions from every meeting need to be properly documented and communicated to all stakeholders

Once the Demand Forecast is agreed on by S&OP stakeholders, any discussions on forecast accuracy should be on what WE got right, what did WE miss, and how do WE improve the process. The discussion should not be on what the demand team forecasted and placing blame.

Trust

S&OP is a collaborative process. Collaboration happens when participants trust eachother. An open, trusting attitude is a must for success. Every participant must believe that they all share a common goal, and everyone else is doing their best for the common success of the team.

In most companies, the S&OP leader is either from the Sales or the Operations team. The biggest boost to trust levels can be brought about by having the S&OP leader report to the CEO.

Who gets excited about S&OP?

Most organizations start S&OP from a purely operational perspective. It is usually initiated by the head of Operations. The process owners are typically the heads of the supply chain and S&OP is therefore a very supply chain focused area. It should, in fact, encompass all different departments. In reality, it rarely does.

Why Sales Departments Might Resist S&OP

Sales departments are recognized for sales and the profit they make, not administrative tasks. Time is money and any time spent on activities which do not lead to a sale is considered a waste of valuable time. Therefore, many of the sales executives you are looking to engage into S&OP will resist cooperation because they see no reward. Understand that their motivations are different to yours.

A quick look at KPIs can show the different priorities

Personality Differences

For Sales, the glass is always “half full”. They are very optimistic by nature. Operations, however, deal with facts and details. While both departments have the common goal of total customer service, they approach the end result in different ways and use methods that are not synchronized. The reality is that drawing people together from these very different departments and reconciling their personality differences is very difficult.

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Conflict

Conflicts between Sales & Operations are sometimes so severe that the two sides hardly speak to each other. The two groups often work in their own silos and spend most of their time communicating through emails, gathering evidence against each other and marking copies to top management to justify their position.

While the primary requirement is increasing participation by Sales & Marketing, effectively managing their resistance to it is key to success.

Four Key Pillars of S&OP

• Top Management Support
  The most important thing about S&OP is bringing Sales and Operations together in charting the future of the company. This can only be done by the person to whom both report. Without having the commitment from the CEO, the S&OP process will fail.
• Consistency & Discipline
  These are the framework of a robust S&OP process. Consistency is the difference between failure and success as it enables measurement, creates accountability, and reemphasizes the message.
• Transparency
  Transparency in all the S&OP data, the measurement metrics and the feedback loop encourage trust amongst participants. Follow-up actions from every meeting must be properly documented and communicated to all stakeholders.
• Trust
  The foundation of trust is built on by finding common ground. The common objective of the company is “We all want to serve the customer.” The biggest boost to trust levels can be brought about by having the S&OP leader report to the CEO.

Finally, Success

The most important input to the Demand Forecast comes from the sales team and they know more than anyone what the next few months will look like in terms of sales and which customers are likely to confirm and which orders could get delayed. They are closest to the customer and they know customer behavior better than anyone else. As such, the Sales team can add significant value to the forecasting process. We just need to harness the intelligence they possess.

Like the headlight of a car, sales input is expected to give the Demand Team the insight to future sales.

Once the Demand Forecast is agreed on by both the demand & supply team, it now becomes the company’s forecast for the next 18-24 months.  Any discussions on Forecast accuracy should be on what WE got right, what did WE miss out, and how do WE improve the process. The discussion should not be on what the demand team forecasted.

I participate at IBF programs and look forward to possibility meeting you at an upcoming IBF conference. I am always happy to exchange ideas.