I recently read Bob Stahl’s newest book, Sales and Operations Planning – An Executive Update, and I came away with a different perspective on a long-time problem; how to get consensus on a challenging forecast.  

Over the course of my long career, I have been part of, or facilitated, more than a thousand consensus meetings. And while most of these sessions generated little to no organizational tension, there have been times when it has been particularly difficult getting different parties (Sales, Marketing, Finance) to agree on a forecast. Under normal circumstances, early in the year and new product forecasts tend to cause the most tension because of the significant commercial ambitions loaded into these plans.

However, even these plans are often malleable with sufficient supporting data and conversation. The most difficult consensus challenges are always those forecasts that are most speculative, with little supporting data or with the greatest uncertainty.

Finding Consensus During Demand Chaos

COVID created forecasting chaos for many organizations. Tension increased during consensus meetings, especially during the early phases of the pandemic when, as an example, the fortunes of different product families were trending in opposite directions. Demand felt out of control.

“It was as if the pandemic froze us into inaction.”

The once-in-a-lifetime disruption confronting all of us made it hard to arrive at a forecast that everyone could agree on, despite having considerable supporting data. And for those product families for which orders and POS activity were down, arriving at consensus often seemed more difficult. No one wanted to “give-up” on the forecast so early in the year – especially given the unknown nature of consumer behavior in disruptive times. It was as if the pandemic froze us into inaction.

How I Handled Disagreements During COVID & What I’d Do Differently

When I was faced with the inability to arrive at consensus for many of the declining categories, I found myself proposing a simple approach that short-armed the forecast. I suggested looking at only at the next two to three months—acknowledging the reality of a short-term decline–while also holding the outermost forecast range to prior expectations.

We then provided a growth ramp back to the original forecast. It was a cheat of sorts. We did not “put the moose on the table” as Bob Stahl might have suggested but the short arming allowed us to move forward, effectively kicking the can down the road to the next month when better or more confirming information might be available.

While this tactic felt right in the moment, it also tossed out the window some time-honored S&OP concepts regarding managing the depth of horizon of a forecast. And while it is hard to call this approach a mistake, as we were in dark and unknown waters at the time, in hindsight it would have been better to press the issue more—to lean less on the crutch of uncertainty and rather push each member of the consensus group for their best (in this case, lowest) call.

“Start with a plan that everyone can roughly agree on, and then further challenge the assumptions.”

Instead, we did not so much collaborate on a plan; it was more like we ducked for cover. Which brings me to Bob’s book, in which he makes a pragmatic point that really resonated with me: Start with a plan that everyone can roughly agree on, and then further challenge the assumptions of that plan to get further clarity.

The ‘Greatest Common Denominator” Approach to Planning

Think of this as almost a “greatest common denominator” approach to planning. Effectively, the consensus facilitator starts by asking everyone their estimate and supporting data before trying to seek agreement. For example, in the face of double-digit declines ask, “Does everyone agree the forecast should come down for the year ?” Then follow that up by asking, “By how much, and how would you pace the decline?” By asking relatively open ended questions all voices and opinions are heard, and the range of perceived opportunities are dimensioned.

After reading Bob’s book, it became apparent to me that by putting in a short arm “device” we avoided much in the way of thoughtful conversation. We did not seek common ground. I know this because nearly everyone walked out of the consensus meeting thinking that the forecast should have been lower. We did not reach consensus – we only postponed the hard decision by four or five months when we finally made the hard calls needed to reset the forecast lower.

Some Conflict is Normal is S&OP – Embrace It

Most long-term S&OP practitioners know all too well that at least some level of tension, conflict, and disagreement are normal in consensus meetings. In fact, some disagreement within the S&OP process is to be expected and perhaps even encouraged. No one wants an S&OP plan put together via groupthink and without some rigor of organizational tension applied. Unfortunately, in the midst of COVID, we avoided this tension.

“No one wants an S&OP plan put together via groupthink.”

One of the most important lessons to come out of the COVID crisis (and Bob’s book) is to solicit more opinions and points of view as a way to put more voices into the forecasting process before trying to arrive at an agreed number. Let the opinions of the consensus team come out and bloom to see if there is a unifying or common perspective before trying to narrow the forecast. Disagreements over outcomes earlier in the pandemic would have helped avoid “chasing the forecast down” phenomena that ultimately occurred.

If history offers a lesson, avoiding tension is, well, wrong. If we believe disruption will become more common place, this is a lesson worth learning.

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1) Achieve supply/demand alignment
2) Increase customer service levels
3) Lower inventories
4) Reduced lead times
5) One game plan/organizational alignment
6) Soft benefits such as better communication, teamwork

There are definitely much, much more I am not listing. But the general theme I noticed, specifically surrounding the ‘hard’ benefits were that they were mostly operationally focused. Not that any of these benefits are to be downplayed, they are all valuable contributors to an organization’s growth and profitability.

I also noticed that a majority of the attendees were from the operations side of the business, where the representation from sales & marketing was fairly limited. While many of today’s organizations receive the needed input from sales & marketing to keep the process moving, a lot of us continue to ask ourselves the question – ‘How do I get sales & marketing to be more involved in the process?’

A pan-organizational process is successful when it delivers the needed results, but it is effective only when it delivers value to all the participants. A typical value one sees for sales as participants in S&OP is on-time product availability, improved customer fulfillment, and more. If we look deeper into what intrinsic needs of the sales & marketing teams can be met via a powerful process and data warehouse such as S&OP, we can uncover an entire new paradigm for sales & marketing involvement in S&OP.

Crossing this bridge is not too difficult for a well-developed/more mature S&OP process. Some of the easy avenues where S&OP can fit into the sales process is in areas such as opportunity/sales funnel management. Integrating the discipline and ‘big-data’ approach of S&OP with the opportunity/sales funnel management process is a win-win proposition. In return for providing the structure and discipline, a whole new dimension of demand visibility is added to S&OP.

Taking this further, the sandbox is as big as you want to make it. There are multiple avenues for further integration, where the core theme for all of them is intrinsic motivation. If you deliver a process which has value built into it for the participants, you will receive improved participation, better data and an intrinsic motivation for the participants to be part of the process versus having those taking part because they are required to.

Your sales and marketing teams bring a lot to the table. Delivering them a process where they get what they need to manage their side of the business will transform the way your company looks at what S&OP can do.

Arvind Arumbakkam
Corporate Master Planning
nLIGHT Photonics

Hear Arvind speak more on how to get sales & marketing more involved in S&OP at IBF’S Business Planning & Forecasting: Best Practices Conference in Orlando Florida, November 4-6, 2013

In today’s business climate, it has become so important that businesses focus on three imperatives:

1) Get business planning right the first time, as much as possible
2) Build stronger business teams
3) Start linking current operations to long-term growth strategies

S&OP is a ready-made solution to address these challenges head-on. With its structured processes, organization and procedures, S&OP can bring a strong sense of direction and order to our businesses.

Generically speaking, though, there is variance from business to business as to what S&OP looks like on the surface. Underneath its core, there are basically 5 individual phases. These sequential phases are designed to gather information for building a proposed business plan, perform supply checks, and reconcile Demand / Supply gaps that may surface. Then, finally, the process culminates in two levels of S&OP meetings. The entire process is designed to garnish participation in developing, and alignment on the proposed go-forward Business Plan by key players and executives alike in Sales, Marketing and Operations.

Other aspects of S&OP’s structure are its monthly, very predictable cycle. S&OP also integrates at the Business Planning phase that includes critical business issues such as Innovation Pipeline opportunities (NPI/NPL), promotions planning, information from Category Management (if available), and other Business Intelligence sources. Additionally, the 2 levels of S&OP meetings serve as important open forums for discussion, and decision-making on key business issues. Quite literally, from stem to stern, S&OP serves as a business-centric process, which could almost, after the passage of time, become self-steering.

While the structure and ordered processes may be the strength of S&OP, reliance on these alone as a strategy to drive for success in your business could possibly expose a weak point the “Kryptonite” to S&OP. How can this be? How can a business-centric process that is so vital to the planning of our business activities over a long time horizon (18+ months) be so strong, but at the same time become vulnerable to a possible internal weakness?

Please consider this. S&OP actually has two sides, the first is very recognizable as discussed above– it is the sum total of its strengths as derived from its structure, ordered processes, and its cyclical nature. It is true, that you can’t even get out of the “starting block” unless you have the structure of S&OP. Make no mistake, structure is the foundation. But the other side of S&OP – its Drivers are equally important, perhaps even more so.

The Drivers of S&OP are the culture of the organization, the behavior of its employees, and values…those aspects of the organization which are most important to us as individuals, we value them above all else.

I will interject here with a question. Which organization below, in your opinion, will be more successful on a sustainable basis?

ORGANIZATION #1: An organization in which everyone participates, provides input and analysis, one in which everyone attends the meeting? Things are precise in this organization, but, perhaps, things sound sort of routine here.

ORGANIZATION #2: An organization in which there is extraordinary engagement by all, collaboration and consensus decision-making flourish, teamwork is viewed as the only way to work, and more specifically, there is an undercurrent of passion to win and succeed, coupled with inspirational leadership.

I submit that you better not get in the way of Organization #2 type of Super-charged S&OP. Better yet, you should probably hope and pray that your competitors don’t bottle this either.

So, what about the “kryptonite”, the weakness of S&OP notion? Well, I submit, if you allow your S&OP to just move along, if you rely on its structure alone to control the pace of your business then you may just be tempting exposure of its weakness.

Now, how do you get around and beyond this weak point? Try this on for size…Lead by example, your employees will emulate. If you want engagement, then become the most engaged. If you want teamwork to be the only way of working amongst your employees, then first make sure your executive team operates this way–knock down functional barriers, and before anything else, collaborate and increasingly utilize decision by consensus as a way to bring about wining solutions. And try a little passion, not the red-faced yelling type of passion. But, I mean the type of passion you see when nothing else matters, full speed ahead, the, “I am all in” type of passion – show your employees that you will be passionate at helping them win and succeed.

Your comments are welcome.

Richard P. Kerivan

Tracy Cherba

S&OP is such a basic concept, yet so difficult to implement effectively across the globe.  It’s hard enough trying to get one S&OP process created, but how do you go about creating a process that works together across time zones, language barriers and cultural differences?  It’s a journey that takes time, patience and consistency.

Elanco is a world leader in developing products and services that enhance animal health, wellness and performance across the globe.  In order to make sure that everyone understands the impacts of demand and supply decisions around the world, we had to develop a process that would facilitate the communication and decision making process and make sure that the right conversations were taking place at the right time.

I was brought into the role of S&OP Global Leader with the assignment to create a process that would enhance our level of communication, create a consistent process that could be replicated across 5 geographic regions and provide tools / training that would work for all levels of the organization. S&OP is not a new concept to Elanco and has evolved over the years to mean many different things to different people within the company.   The key is working with all of the S&OP levels (Executive, Affiliate, Site, External Manufacturers, etc.) and S&OP participants (SC, Marketing, Finance, Quality, etc) to come up with a process that can work for everyone!

The first thing I did was ask for S&OP packets across the different areas of the organization – examples from a manufacturing site, a sales affiliate and an external manufacturing hub.  Who knew that this request would produce so many inconsistencies?  And in some cases it proved to be impossible to locate the packets at all.  Those packets I did locate, didn’t necessarily tell anyone what needed to be done next but included numerous amounts of slides.  Many of the meetings were long, didn’t include the right people and really didn’t have concrete actions coming out of them.  There were some examples where the S&OP processes were very good and could be replicated to other areas.  Developing a set of tools and training to facilitate the S&OP meetings was a necessary first step.  This includes setting expectations on what metrics will be reviewed, who will participate, what information will be communicated and the timing of the meetings.  It can’t just be left to up to those with “Supply Chain” in their title!

The Elanco S&OP structure includes an Executive level, 5 regions, sales affiliates located all over the world, 5 manufacturing sites and 5 external manufacturing hubs. If we didn’t have the right people in the room with a clear understanding of what the goals were – this was never going to work!  We couldn’t have “part-time” players…  and we HAD to have leadership support throughout all levels of the S&OP structure.

We’ve learned a lot along the way…  The S&OP rollout continues to be a journey that evolves as we learn more.  We’ve learned a valuable lesson along the way that one size does not necessarily fit all.  We’ve also learned that the global nature of this effort means that patience and flexibility need to be your friend!  While S&OP may be a basic concept – creating an S&OP process that people across the globe feel is valuable isn’t so basic!

I will also be elaborating on our Global S&OP Journey at IBF’s Supply Chain Forecasting & Planning Conference, February 24-26, 2013.  Hopefully, we’ll see you there.

Tracy Cherba
Supply Chain Global Leader – S&OP/OSSCE
Elanco Animal Health/ Eli Lilly & Co.