“Perfection is the enemy of progress.” – attributed to Winston Churchill

Disciplined Sales and Operations Planning (S&OP) has long been recognized as a transformative process for aligning demand, supply, and finance with long-term strategic goals, providing a single, integrated view. For many organizations, the promise of S&OP is very compelling in its potential to achieve improved service levels, lower costs, better overall alignment, and faster, data-based decisions.

So, then, why do so many companies stall or fail in their S&OP implementation efforts?

First, the bad news: one common culprit is perfectionism. A fully mature S&OP process that functions flawlessly on day one simply does not exist, and an organization’s pursuit of perfection before implementation often becomes the very reason nothing meaningful gets launched at all.

The Trap of the “Perfect” S&OP

All too often, organizations defer S&OP implementations until:

• All data is available, clean, and integrated across all systems
• Forecast accuracy is “high enough”
• All stakeholders are on board and trained
• The “perfect” KPIs are defined
• Executive leadership is 100 percent aligned

These are all worthwhile goals — but they should not be prerequisites. After all, a well-designed S&OP program, geared toward continuous improvement, can help address, or even resolve, these very concerns. If company leadership’s demand for a perfect process becomes the bar for starting S&OP at all, there’s a high probability that it won’t ever actually happen.

Overused analogy aside, S&OP is a journey, not a single release event.

Start Small Rather than Waiting for Perfect

When companies choose progress over perfection, they quickly gain:

• Momentum: Small wins build credibility and energy
• Learning: Real-world feedback reveals what’s important
• Buy-in: Success breeds adoption, even from skeptics
• Clarity: You see which data, metrics, or tools are truly essential
• Flexibility: Each cycle identifies course corrections for the next

Why Good Outperforms Perfect: A Simple Case Study

One organization delayed its S&OP for six months, waiting for IT to complete a custom dashboard. Another kicked off with a simple spreadsheet showing demand vs. supply for their top ten items. Within two weeks, the second group was having better discussions — and catching issues early. Six months later, their process was more advanced than the one still waiting for perfection.

Keys to Making Progress Now

Launch, or relaunch, your S&OP process without falling into the perfection trap:

1. Start with what you know: Use existing data and systems.
2. Focus on issues and decisions, not documentation: The goal is alignment, not reports.
3. Engage the right people: Cross-functional doesn’t mean everyone — just the key voices.
4. Set a cadence and stick to it: Monthly reviews with a clear agenda are enough to begin with.
5. Be transparent about gaps: Call out data issues, assumptions, and tradeoffs — it builds trust.
6. Make iteration part of the plan: Document learnings and evolve over time.

Progress Is the Path toward Perfection

“Perfect is the enemy of good.” – French Philosopher Voltaire

There’s nothing wrong with aspiring to have a best-in-class S&OP process. But this doesn’t come overnight — it’s achieved through consistent progress.

• You can’t optimize what doesn’t exist.
• You can’t refine what hasn’t been tested.
• You can’t learn until you’ve started.

So start now. Start simple. And improve relentlessly.

Because when it comes to S&OP, good can be more rewarding than perfect, especially when it leads to more rapid alignment and better decision-making.

Sales and Operations Planning (S&OP) is a structured, cross-functional business process that aligns all areas of an organization around a unified set of assumptions to drive coordinated decision-making. The goal of S&OP is to ensure that business plans and objectives are balanced and that financial and operational plans are synchronized. It serves as the critical integration point between strategic planning and daily execution, enabling companies to translate high-level business objectives into actionable plans.

At its core, a mature S&OP is not just a supply chain or operations process. It is a business-wide planning framework that brings together sales, marketing, finance, operations, product management, and supply chain to work collaboratively. The result is a comprehensive plan everyone supports and works toward, reducing misalignment, improving responsiveness, and increasing overall business performance.

The process typically operates on a monthly cadence, with inputs from various departments converging into a final executive review meeting where trade-offs are discussed, decisions are made, and a single, unified plan is committed to.

The Value of S&OP

Implementing and executing an effective S&OP process provides tangible value across the organization. At a high level, S&OP delivers:

• Improved forecast accuracy and demand visibility: S&OP allows companies to move from reactive to proactive planning, reducing surprises and enabling better preparedness for market changes.
• Balanced supply and demand: With cross-functional collaboration, companies can more efficiently manage supply constraints, optimize inventory levels, and meet customer service goals.
• Financial alignment: S&OP ensures that operational plans are financially viable and support the broader goals of the business. It connects demand and supply plans to financial projections.
• Increased agility: The ability to run scenarios and analyze the impact of decisions across the business improves agility in the face of disruptions or demand shifts.
• Enhanced collaboration: S&OP builds a culture of accountability and transparency. It fosters communication across silos and ensures that all stakeholders work from the same assumptions.
• Executive-level visibility: With clear insights into upcoming challenges and opportunities, executives can make informed decisions with confidence.

Organizations with mature S&OP processes often see improvements in service levels, inventory turns, working capital, and revenue growth. But the actual value lies in the enhanced decision-making capabilities and improved alignment across the business.

How to Build a Sales and Operations Plan

Developing a robust sale and operations plan requires a clear structure, defined roles and responsibilities, and a commitment to consistent execution. While tools and technology play a role, the foundation of effective S&OP lies in process discipline and cross-functional collaboration.

Here are key building blocks to consider:

• Leadership commitment: Executive sponsorship is essential. S&OP must be seen as a strategic business process, not just a supply chain activity.
• Defined ownership and governance: Each step of the process should have clear ownership, with defined roles for demand planning, supply planning, finance, product management, and executive teams.
• Calendar and cadence: A standard monthly cycle should be established, with defined inputs, outputs, and meetings for each phase. Concurrent weekly S&OP meetings help manage near-term deviations.
• Unconstrained and unbiased planning: The demand plan should be developed independently of constraints or biases, providing a true reflection of expected demand. Only then can supply plans be adjusted accordingly.
• Data and metrics: Reliable data is the backbone of S&OP. Forecast accuracy, bias, inventory health, and capacity utilization are some of the key metrics that drive accountability and improvement.
• Technology and tools: While not a prerequisite, modern planning tools can enhance collaboration, scenario planning, and automation. However, these tools must support—not replace—a sound process.
• Culture and change management: S&OP is as much about people as it is about process. Building trust, encouraging open dialogue, and reinforcing accountability are crucial for success.

Key Steps in S&OP

A typical S&OP process includes several structured review steps culminating in an executive decision-making forum. Here is an overview of each phase:

Product Review

• Purpose: Align the product and portfolio roadmap with business strategy.
• Activities: Review new product introductions, end-of-life plans, promotions, and phase-outs. Evaluate the impact of changes on demand and supply.
•  Participants: Product management, marketing, R&D, operations, and finance.

Demand Review

• Purpose: Develop an unconstrained, consensus demand plan.
• Activities: Analyze historical performance, market trends, customer input, and promotional plans. Identify risks and opportunities.
• Participants: Demand planning, sales, marketing, and finance.

Supply and Resource Review

• Purpose: Determine how to meet the demand plan with available resources.
• Activities: Evaluate capacity, inventory, procurement, logistics, and supplier capabilities. Highlight constraints and propose scenarios.
• Participants: Supply planning, manufacturing, procurement, logistics, and finance.

Pre-S&OP/Reconciliation Review

• Purpose: Identify gaps between demand and supply, align on scenarios, and prepare for executive discussion.
• Activities: Review financial implications, resolve issues, and recommend decisions.
• Participants: Cross-functional team leads, finance, and planning leadership.

Executive S&OP Review

• Purpose: Make final decisions, approve the consensus plan, and provide strategic direction.
• Activities: Review scenarios, validate financial impact, approve trade-offs, and document decisions.
• Participants: Executive leadership, heads of major functions, and finance.

Concurrent Process: Sales & Operations Execution (S&OE)

While S&OP focuses on the mid- to long-term horizon (typically 3 to 24 months), S&OE manages near-term execution (0 to 13 weeks). This weekly process addresses short-term deviations from plan and ensures agility in responding to real-time changes. Key focus areas include order fulfillment, short-term supply imbalances, and demand shifts. S&OE connects strategy to execution, ensuring that decisions made in S&OP are implemented effectively.

Sales and Operations Planning: The Final Word

In today’s complex and volatile business environment, Sales and Operations Planning is more than just a process—it’s a mindset and an essential capability. Companies that embrace S&OP gain the ability to navigate uncertainty, align cross-functional teams, and drive smarter, faster decisions.

The future of S&OP is one of greater integration, intelligent automation, and real-time visibility. But, at its heart, the success of S&OP will always depend on three things: collaboration, transparency, and consensus.

Organizations that invest in building a strong S&OP process—supported by leadership, informed by data, and aligned with strategic goals—will be better positioned to thrive. They will not only deliver superior performance but also foster a culture of shared accountability and continuous improvement.

In short, Sales and Operations Planning is the bridge that connects strategic intent to operational execution. Done right, it becomes a sustainable competitive advantage.

The essence of Sales and Operations Planning (S&OP) is the active participation of different departments. Participants come from varied backgrounds, each with different daily objectives and challenges, and they need to reach consensus to advance the process. Achieving this alignment in an environment of trust while balancing risks and opportunities is the main challenge.

The Demand Review is a foundational step in this process It is where a picture of future demand is created by taking a statistical forecast and adjusting it according to information about clients and the market from Sales & Marketing. It is where consensus on future demand is achieved.

The building blocks of the Demand Review include a statistical forecast, input from Sales and Marketing, and technology that supports the planning process to track the different clients, SKUs, and each person who collaborates in each stage of the S&OP process. In addition, transparency is key whereby all participants have the same information regarding past performance and future expectations.

Pre-Demand Review

Before the Demand Review, we must build a statistical forecast. I highly recommend having a quick meeting at the beginning of each month to show the results of the main KPIs, similar to the daily meetings proposed in the agile methodology. This helps us to understand the main difficulties of the last month and encourages conversation between the Sales team and Demand Planners. It is important not to focus too closely on each SKU and to keep it high level. I have been in Demand Reviews that lasted more than one hour per category, causing managers to leave the meeting. At this stage, keep discussions concise and focused.

In these pre-meetings, we can gain information about products or clients. For example, we might have a deviation from the forecast because our competitors increased their prices, or a client decided to increase shelf space, or conversely, the client decided that the product will be sold in fewer stores.

At the same time, it’s important to look at our service levels for different clients. Variations in sales could be due to internal problems. I recommend discussing Fill Rate, Market Share, and Days on Hand (DOH) for each client/category. If our colleagues have this information, we can react faster to changes in sales. For example, if we see that a retailer has increased its DOH, it is highly possible that our sales for next month will be lower. Information from the past helps us identify new sales trends and focus on products or clients that could pose risks or opportunities for our projections.

The desired level of aggregation depends on the planning time horizon. We take a more granular view the closer the horizon, and a higher level view for longer horizons. I suggest breaking it down as shown in Figure 1.

Figure 1 | Aggregation by planning horizon

Inputs We Need Before The Demand Review

We need a few different types of data for our Demand Review, which we collect from different sources.

Statistical forecast: We forecast based on historical data, assuming what happened in the past could happen again. The unconstrained demand forecast is our foundation for further discussion. This forecasting step can be improved with technology. For example, with APO or IBP, it is possible to keep a history of sales affected by out-of-stock situations or promotions, leading to a cleaner history and allowing Demand Planners to create better forecasts.

Input from Sales: Collaboration from the salesperson for each client is crucial, as they know the client’s perception best and will execute the sales plan. Therefore, they must be committed to the plan, considering it is usually their goal for the next month, with correlated financial incentives. The unconstrained forecast can be adjusted accordingly.

Input from Marketing: This area must incorporate knowledge of expected future share of the category, promotions, launches, or any product changes that could mean replacing a current SKU. At this point, the effectiveness of the Demand Review increases, as all the previous hard work will help have a decision-making meeting with managers. The unconstrained forecast can be adjusted accordingly.

During the Demand Review Meeting

During the Demand Review, I recommend starting with a one-page overview focusing on each category, showing the projections in terms of volume, price, and margin. This should be high level; only go into detail for SKUs that show significant deviations versus the last three months or have notable characteristics for the next months. In this meeting, we expect the participation of the sales manager, business manager, finance manager, or revenue manager.

The S&OP leader should encourage consensus to obtain a single plan that must be followed and executed. However, the S&OP leader also needs to create tension among the areas by asking questions such as:

• Are we considering pending orders in this demand?
• With the current projection, what could be our market share? Is it similar to what we expect?
• If we create a scenario in which competitors increase or decrease their prices, what is the expected volume difference?
• Which SKU poses the biggest risk? (If we anticipate higher sales than planned, we can project a bigger proportion of the demand at the beginning of the month, adapting the production schedule accordingly and react faster to potential out-of-stock situations.)
• Are we considering discontinued SKUs according in our revenue forecasts?
• Are we considering cannibalization between SKUs?
• Are we comfortable with this plan? What is the gap between this plan and the budget?
• What do we need to do to achieve our strategy? (We can adjust projections for a specific client, considering the sales manager’s participation in the meeting.)

One of the outputs of this meeting is a realistic yet challenging demand plan, with alerts for the next stage of the process. This will facilitate the next step in the S&OP cycle, the Supply Review. While uncertainty about the future always exists, we must take action with the best information available and prepare to react to new opportunities or risks. This is why it is essential to discuss the questions above.

Overcoming Bias & Achieving Alignment

I have been in Demand Reviews with biased behavior. We cannot forget that the demand agreed on at the end of the process will be part of the sales goal. Therefore, sales teams may try not to overcommit, thinking that selling more than planned is a good problem to have. At the same time, I have seen Marketing overpromise sales for new launches to ensure sufficient inventory, even at the risk of expiration. To promote cohesion, ensure that all participants share the same overarching goal (profitability for the business). Occasionally, let everyone adopt the CEO perspective. This approach helps identify what is best for the company and reduces siloed thinking.

Conclusion

In conclusion, the Demand Review is a critical step in the S&OP process and its success depend on the quality of the data and information used in preparation. This preparation allows for a decision-making meeting instead of an informational one. The S&OP leader must align the team through commitment, transparency, and trust, creating positive tension that addresses potential risks and opportunities.

This article first appeared in the fall 2024 issue of the Journal of Business Forecasting. To access the Journal, become an IBF member and get it delivered to your door every quarter, along with a host of memberships benefits including discounted conferences and training, exclusive workshops, and access to the entire IBF knowledge library. 

]]> https://demand-planning.com/2024/07/01/working-with-the-sales-sharks-in-demand-planning/ Mon, 01 Jul 2024 11:07:34 +0000 https://demand-planning.com/?p=10340

In many companies there often appears to be a difficult relationship between the sales and demand planning teams when it comes to the plan numbers. While some tension between these teams is inevitable, it seems to me that perhaps we are viewing this relationship incorrectly.

Based on my several decades of experience dealing with salespeople, I think many people – including Demand Planners and Managers – do not really understand that salespeople are not the enemy when it comes to planning.

They can, in fact, be your best ally. If you understand how the salespeople tend to think and operate, and the environment they operate in.

Every Salesperson’s Goal is to Make Plan

Salespeople are hired to sell a certain volume of product at a specified margin percent each year. If they meet the plan numbers for a year, they get another chance to do the same for another year. If they fail to meet the plan for a year, they are then under more pressure to make the numbers the following year.

Most plans increase incrementally each year, so every year the salesperson must be more creative, more focused and motivated to make the new numbers. Effective salespeople are always hunting for new opportunities to help them make plan.

Salespeople as Sharks

If we think of salespeople as sharks, we can get some insights into why they might seem like an enemy in planning. Sharks are hunters, apex predators with few enemies.

To be successful as a salesperson, a you must think and sometimes act like a shark.

To be successful as a salesperson, a you must think and sometimes act like a shark. Swimming slowly through the sea of sales opportunities, constantly searching for the next sale, exploring new areas, and acting quickly when an opportunity appears. Their only real competition is other sharks, that is, competing salespeople.

You Cannot Tame Sharks, But You Can Learn to Feed Them

I often see Demand Planners and salespeople arguing over the details of plan numbers, and in most cases, this is both useful and inevitable. However, this should not be viewed as something negative. We want plan numbers that are the result of honest deliberation. Where this process can derail is when each side sees the other as an opponent when, in fact, they both want the same goal – sales growth. So learn to feed the sharks.

Learn to feed the sharks.

Share every piece of relevant information you can with them. And do not limit yourself only to data available within the company. POS and inventory data are nice to have, and in fact necessary to guide a business. But include news about the companies that the salespeople are serving, and that they may not have time to review on their own.

Significant changes in location counts, staffing, programs of competing suppliers (including promotions), management changes and company performance are all useful pieces of tactical information that can help a salesperson judge when and how to approach a customer with a sales opportunity.

Ask to See the Math

While what I have said so far might seem like I think Demand Planners should always follow the sales team’s direction, there is one fact that Demand Planners need to ask when a salesperson proposes a new plan.

Show me the math.

Show me the data that you used to get to the numbers you want to use. Do not make me use your numbers just because they “feel” right, or because you need these specific numbers to make your plan.

Keep it real. After all, the Demand Planner’s key job is to make sure that what is planned actually gets sold. A demand plan is a request for product. A sales plan is a map to meet the sales goal. Both need to be based on realistic math that shows a clear path to the goal.

Above All, Build Solid Relationships with Salespeople

Effective sales are based on good relationships. We tend to buy mostly from people we know and trust. Effective planning is equally dependent on solid relationships. This means we can disagree with each other without becoming disagreeable.

We can disagree with each other without becoming disagreeable.

We can playfully challenge each other and play hardball when we see the other side gaming the numbers or hiding information. And never try to prove that the other side is “wrong”, as this can permanently damage the relationship and prevent future sharing of information.

Let the Sales Team Be Your Teachers

Good salespeople are in regular close contact with their customers. They know what drives their customers and what they need. If you are a Demand Planner, learn to regularly ask them about their customers and their business. They often know things about their customers that can help you with your planning.

Are their customers over inventory against their plan or open-to-buy? Are there buyer changes coming? Is the company in merger talks or under financial stress? Are they planning to repeat last year’s holiday promotions again this year? This kind of information can lead to especially useful discussions about how to plan future business.

Sales is a Game, and You Both Need to Win – But Not at Each Other’s Expense

Collaboration is often more difficult than merely playing to win. It requires more effort. However, in the long run, it produces more wins for more people, and helps support ongoing relationships.

So get to know the sharks that make your company successful. Feed them what they want and help them find the opportunities that will make you both successful.

“What can be measured, can be managed.” This statement is certainly accurate with respect to the real value and purpose of using KPIs, or key performance indicators, as essential tools for measuring, monitoring, and managing process performance.

KPIs serve as benchmarks for identifying opportunities for optimization and innovation. They are of great use in decision-making, and are good instruments for creating accountability by setting clear expectations for execution. These indicators are mostly used to measure and evaluate performance against specific objectives or goals. For example, it is common for companies to establish KPIs as quantitative measurements of performance—to assess how well the organization is meeting its yearly objectives.

Even so, it is important to note that KPIs are not only limited to quantitative applications, as they can also be used to communicate good stories. Diligently analyzing and interpreting these indicators, far beyond comparing them to a target, enables the discovery of what they are truly communicating. By learning how to interpret KPIs, past events can be better understood and used as valuable evidence to predict trends, propose impactful business actions, and effectively communicate them across the organization.

Additionally, integrating and effectively managing KPI indicators through financial statements results, provides organizations greater visibility and improved decision-making processes that support their financial health, and enhance their ability to sustain long-term growth and profitability. For example, integrating Sales and Operations Planning (S&OP) KPI metrics, such as forecast accuracy, inventory turns, customer service level, supply chain costs, and working capital ratios, among others, to the Income Statement and Balance Sheet, allows businesses to achieve greater operational efficiency and financial results, which by effect, lead to sustained competitiveness and increased market value.

LINKING KPIS TO THE INCOME STATEMENT

The income statement is an essential financial statement that provides insights into a company’s economic position, profitability, and efficiency in generating revenues and managing expenses.

Income statement figures can reflect actions taken by demand and supply planning to make a positive impact on revenue, generate cost savings across various areas of the business, increase profitability, and optimize costs—such as selling and marketing costs.

Linking S&OP KPIs to the income statement, facilitates a direct understanding of how operational performance impacts financial results, and establishes clear correlations between them, thus leading corporations to strengthen their ability to make informed decisions that drive profitability and sustainable development.

From a revenue perspective, accurate forecasting ensures that the right products are available to meet customer demand, hence preventing lost sales opportunities. Higher customer service levels also drive repeated business, further boosting revenue. As such, improvements in forecast accuracy and customer service levels contribute to positively impacting the top line.

From the Cost of Goods Sold (COGS) viewpoint, effective inventory management reduces carrying costs associated with excess inventory, and minimizes the risk of obsolescence—resulting in lower COGS. Moreover, effective supply chain management facilitates negotiating better prices with suppliers, reducing procurement costs, and optimizing resource utilization. Overall, these cost-saving strategies directly impact the bottom line of the income statement by reducing operating expenses and consequently improving profitability.

The combined effect of higher revenue and reduced costs leads to improved gross margins. Gross margin improvement is a key indicator of the company’s operational efficiency and profitability, benefiting the income statement by impacting the company’s bottom line, while enhancing profitability and shareholder value.

LINKAGE TO THE BALANCE SHEET

The balance sheet is another essential financial statement used by organizations to provide a clear picture of the company’s financial position at a specific point in time. It presents the company’s assets, liabilities, and shareholders’ equity. While balance sheet items are not typically considered KPIs themselves, certain financial ratios and metrics derived from the balance sheet can serve as metrics to assess the company’s financial health and performance.

A typical indicator measured on the balance sheet is the efficiency of working capital management. Efficient planning techniques directly impact working capital management by optimizing the weight between current assets and liabilities. For example, improving forecast accuracy and inventory management reduces the need for excess working capital tied up in inventory. This by result liberates cash that can be used for other operational needs or investments, and at the same time, improves liquidity and financial stability, ensuring that the organization can meet its short-term obligations and/or invest in other significant growth opportunities. Another efficient planning technique is tighter accounts receivable management resulting from improved customer service levels that by effect can reduce the Days Sales Outstanding (DSO), further improving working capital efficiency.

Other S&OP KPIs such as inventory turns and inventory levels can directly influence the balance sheet as well. Higher inventory turnover ratios imply efficient inventory management practices, that lead to lower inventory levels, reduced excess inventory, and minimized carrying costs. Further, optimizing inventory levels reduces the risk of inventory write-downs and obsolescence, which can impact the company’s financial health and asset valuation. These reductions also free up cash for additional investment, and could even lead to debt reduction. Improved financial performance resulting from effective planning practices can positively impact debt management, enhancing profitability and liquidity for better debt management, reducing interest expenses and financial risk.

In summary, a strong balance sheet with healthy ratios, such as higher profitability and better liquidity ratios resulting from improved working capital management, can enhance the company’s creditworthiness, access to capital, and reduce its reliance on debt financing.

REPORTING KPI RESULTS TO EXECUTIVE LEVEL TEAM

Executives are mostly interested in the company’s financial health and sustaining its long-term growth and profitability. As such, KPIs play a crucial role in driving financial performance and aligning operational activities and efforts with strategic goals and objectives, ensuring that everyone is working towards the same outcomes.
The linking and analysis of KPIs to the company’s financial results is not fully successful until information is effectively reported to the Executive Level Team (ELT), as actions and important decisions need to be made accordingly. Reporting KPIs to Executives in a frequent manner can serve as the basis for productive discussions and collaboration among Executives, as this encourages dialogue around strategic planning, performance trends, challenges and opportunities, and enables informed decision-making.

When communicating and reporting KPIs to the ELT, it is of great importance to determine clearly what each KPI measures and why it is important for the business. It is also crucial to consider setting clear communication and presentation goals where relevant and meaningful information is presented to ensure that Executives have a comprehensive understanding of the organization’s performance and strategic direction.

When presenting KPIs, it is best to present them in a visually concise, focused, appealing, and easy-to-understand format via charts, graphs, and dashboards to illustrate trends, comparisons, and key insights. Including contextual information and analysis alongside may allow Executives to better interpret the data accurately. When deemed necessary, identify key findings and insights derived from the KPIs and highlight actionable steps or strategic decisions that need to be taken based on the results. Monitoring progress against KPIs over time is fundamental to track changes in performance, evaluate the effectiveness of strategies implemented, and determine the need to adjust KPIs or initiatives as necessary.

CONCLUSION

In conclusion, in today’s dynamic marketplace, it is vital for any organization in search of fostering a holistic approach to performance management, to be able to translate operational efficiencies into financial successes. As such, aligning a company’s operational KPIs with its financial statements can be of great help in support of this goal. The benefits of linking operational KPIs to the income statement and the balance sheet can be substantial, as they can drive organizations to better understand the financial implications of their performance metrics and make better-informed decisions to drive revenue growth, improve profitability, and achieve strategic objectives.

I recently wrote an article titled, “Why Surging Adoption of S&OP is No Accident“. In it, I argued that S&OP remains key for any business contending with 1) external, fiercely competitive markets; and 2) internal, persistent directives demanding more agility and operational efficiencies.

Why, then, aren’t more organizations deploying this business process? In perplexing instances such as this, it can be more useful to play devil’s advocate and explore why more companies aren’t deploying S&OP, or at least not successfully. While S&OP promises a plethora of benefits, it is surprising that many businesses have been slow to embrace this transformative practice or have failed in their initial attempts. This article delves into the reasons behind the hesitancy, and offers insights to help organizations overcome these obstacles to reap the practical rewards of S&OP.

The Promise of S&OP

S&OP is a cross-functional process that involves all functional areas—Sales, Marketing, Operations, Finance, and Supply Chain Management—working together to develop one unified plan toward business goals. The primary objective of S&OP is to synchronize demand and supply over a strategic horizon, allowing organizations to optimize resource utilization, reduce inventory costs, enhance customer satisfaction, and increase profitability. Yet, despite its potential advantages, S&OP adoption has been far from universal.  So, what’s holding some companies back?

Barriers to S&OP Adoption

1. Lack of Top Management Support: S&OP requires substantial organizational commitment and willingness to change. Without support from top management, it becomes both practically and politically challenging to allocate resources, implement necessary changes, and drive the cultural shift needed to make S&OP successful. Relapses can occur when there are regime changes at the top, especially if new leadership tries to mark their new territory by moving in a different direction.

2.Siloed Organizational Structure: Traditional hierarchical structures can foster the creation of silos within organizations, hindering the free flow of information and collaboration between various functional departments. S&OP relies heavily on cross-functional teamwork, making it challenging for companies with rigid structures to effectively implement the process. Whether intentional or not, it’s hard to overcome a tiered, closed-off system that promotes a “stay out of my sandbox” mindset.

3.Data Quality and Integration Issues: S&OP hinges on accurate and timely data availability from various sources. If a company’s data management systems are not up to par, or if there are ongoing, unresolved data integration gaps, the entire S&OP process can be compromised, leading to inaccurate forecasts and decisions. Making decisions based on bad data will only lead to one thing—a bad decision.

4.Resistance to Change: Introducing S&OP often necessitates changes in processes, responsibilities, and even company culture. Resistance to change is a natural human response and can emerge due to employee fears of job insecurity, loss of control, or unfamiliarity with the new processes and/or technology. What is true of any process change, but particularly so with S&OP, is that changing hearts and minds can really test an organization’s resolve to pivot from entrenched daily routines and move toward more forward-looking, sustainable strategies.

5. Lack of Clear Communication: S&OP demands a clear and transparent exchange of information between organizations. Poor communication and lack of strategic direction can lead to misunderstandings, misaligned objectives, and flawed decision-making.

6. Complex Implementation Process: Implementing S&OP may evolve into a more complex endeavour than anticipated due to a combination or even culmination of these potential barriers. Like any worthwhile endeavour, S&OP development and deployment involves substantial time, resources and a commitment to change to ensure success. Companies might shy away from adoption due to concerns about potential disruption to ongoing operations during the implementation phase.

Overcoming the Hurdles

1. Top-Down Support: For S&OP to thrive, leaders must champion the cause and demonstrate their ongoing commitment to the process and its benefits. Clearly defined strategic objectives and financial goals must be communicated throughout the entire organization.

2. Cross-Functional Collaboration: Breaking down silos and fostering collaboration between departments is crucial. Organizations can facilitate this by creating dedicated cross-functional teams and promoting a culture of cooperation to drive company-wide success.

3. Master Data Management (MDM) / Data Management Enhancement: The evidence is clear that investing in robust data management systems and integration capabilities will ensure more accurate, real-time information flow. It’s not uncommon to start with disparate systems bound together through Excel and other various query tools.  However, develop a plan for technology deployment over time.

4. Change Management: Addressing employees’ concerns and providing adequate training can mitigate resistance to change. Transparent communication about the benefits of S&OP can also help ease the transition. Develop a change management program at the onset of your S&OP deployment project and designate an in-house articulate communicator/leader to champion this effort.

5. Project Management / Phased Implementation: Kudos to those businesses that adopt a phased approach to S&OP implementation to minimize disruptions and allow for gradual adjustments. In many cases a phased-in implementation is actually the smarter approach—first crawl, then walk, then run. S&OP deployments take time to mature, so set the expectation of improvement over time through continuous cycles of learning.

6. Technology Adoption: Leveraging advanced technologies such as AI and machine learning can enhance forecasting accuracy and decision-making in the S&OP process. Integrating new technology can also occur over time, but these advanced tools must serve the demands of the endorsed process, not the other way around.

The Bottom Line

Sales & Operations Planning still holds the promise of coordinating and reconciling an organization’s functions to maximize efficiency and effectiveness. However, businesses must recognize that the road to successful S&OP implementation requires commitment, collaboration, and the willingness to embrace change. Because of its transformative potential, enterprises that 1) are willing to self-evaluate to determine potential internal hindrances to S&OP adoption; and 2) implement appropriate, proactive measures to resolve or mitigate these issues are already way ahead of the game.

Whether your organization hasn’t started an S&OP deployment or continues to struggle in its efforts, achieving a better understanding of your own barriers to success is half the battle in conquering these obstacles. The recommended solutions outlined above can help your enterprise unlock the tangible benefits of S&OP, thereby gaining a more competitive edge in an increasingly dynamic market landscape.

To learn the fundamentals and best practices of S&OP/IBP, join us in Chicago from June 12-14 for the biggest conference of its kind. With several workshop sessions, networking, and panel discussions it is where you’ll make S&OP a reality in your organization or elevate an existing process. Click here for more details.

One of the most crucial elements of supply chain planning is Sales and Operations Planning (S&OP). It provides the channels of communication necessary for top management to coordinate the many planning initiatives within a company.

The major goal is to create a comprehensive business plan that combines the efforts of several functional planning initiatives. If S&OP is not integrated and operating under a cross-functional plan, the business could fail. Here are the top five advantages of S&OP and why every company should implement this method.

1. S&OP Leads to Improved Customer Service

One of the most significant benefits of S&OP is its ability to improve customer service. By bringing together different departments within a company, S&OP enables organizations to better understand customer demand and develop a more accurate forecast of future demand. This, in turn, helps companies optimize their inventory levels, ensure timely delivery of products, and avoid stockouts or overstocks.

With S&OP, companies can also better align their production and delivery schedules with customer demand, reducing lead times and improving on-time delivery performance. By improving customer service, companies can not only enhance customer satisfaction but also increase customer loyalty and generate repeat business.

2. S&OP Means Better Efficiency & Productivity

S&OP also helps companies increase efficiency and productivity by improving their planning processes. By integrating different departments and functions, S&OP helps companies identify and eliminate bottlenecks and inefficiencies in their supply chain, production, and logistics processes.

S&OP also enables companies to optimize their use of resources, such as labor, equipment, and raw materials, by aligning production schedules with demand forecasts. This helps companies reduce their production costs, improve their asset utilization, and increase their overall productivity.

3. S&OP Means Better Collaboration Between Different Functions

Better integration between functional areas in a business is one of the major payoffs of S&OP. By bringing together stakeholders from sales, operations, finance, and other areas of the business, S&OP enables companies to share information, align their goals, and coordinate their actions.

S&OP also helps companies break down silos and overcome functional barriers, creating a more integrated and collaborative culture. This, in turn, helps companies improve their agility and responsiveness to changing customer needs and market conditions.

4. S&OP Will Enhance Decision-Making

Another significant benefit of S&OP is its ability to enhance decision-making across different departments and functions. By providing a holistic view of the business, S&OP enables organizations to make informed decisions that align with their strategic objectives.

With S&OP, companies can evaluate different scenarios and options, such as changing demand patterns, market trends, or supply chain disruptions, and develop contingency plans to mitigate risks and capitalize on opportunities. This enables companies to make better decisions, reduce uncertainty and improve their overall performance.

5. Without S&OP You Lose a Competitive Advantage

Finally, S&OP can provide companies with a significant competitive advantage by enabling them to differentiate themselves from their competitors. By optimizing their supply chain, production, and logistics processes, companies can improve their delivery performance, reduce their costs, and enhance their customer service.

S&OP also helps companies become more agile and responsive to changing market conditions, enabling them to quickly adapt to new opportunities or challenges. By leveraging S&OP to improve their overall performance, companies can create a sustainable competitive advantage and achieve long-term success.

In conclusion, Sales and Operations Planning (S&OP) is a critical process for any organization looking to improve its performance, increase its efficiency, and enhance its customer service. By providing a framework for improving communication, collaboration, and decision-making across different departments, S&OP can help companies achieve a significant competitive advantage and achieve long-term success.

To get up to speed with supply planning and S&OP, join us in Nashville from August 9-11, 2023 for IBF’s Supply Chain Planning Boot Camp. It’s 2 or 3 days of expert instruction designed to give you the knowledge to establish or improve supply chain planning in your organization.  Early Bird Pricing now open. Click here for details.

One of my favorite books is Good to Great: Why Some Companies Make the Leap…and Others Don’t. Published in 2001 by business management professor Jim Collins, it outlines the fundamental ideas that set successful businesses apart from ordinary ones. I have seen first-hand how these principles can be applied to drive success in Sales and Operations Planning (S&OP).

Collins discovered that success was the result of three key elements:

• Disciplined people
• Disciplined thought
• Disciplined actions

In S&OP, we always talk about People, Process and Technology as the crucial pillars of success. We don’t think in terms of disciplined people, disciplined thought, or disciplined actions. But S&OP, when it has the right People, Process, and Technology, what we get is disciplined people, disciplined thought and, best of all, disciplined actions.

Let’s dive into these 3 pillars of S&OP and see how Vanguard organizations who take S&OP from good to great apply Collin’s key principles to each.

Disciplined People in S&OP

Jim Collins discovered that outstanding (level five) leadership was a shared trait of all great businesses. I have witnessed how strong S&OP always has involved, humble, open, and strategic leaders. These people maintain a spirit of humility and perseverance. These level 5 leaders develop core principles that go beyond just making money. Such people support the S&OP process, participate in it as advocates, and offer corporate strategy, which gives the process direction.

A cross-functional team with the correct skills and culture is necessary for an S&OP process to go from good to great. Collins emphasizes the phrase “First Who, then What?” Applying this to S&OP teams, it is essential to include more than functional representation—you must also bring the right individuals to the table. Emerging S&OP processes that make the transition from good to great begin with “who,” not “where.” Figuratively speaking, you direct the bus first, and then you convince others to follow.

Disciplined Thought in S&OP

To start, as Collins says, people must face the harsh realities of their present situation. We must be honest with ourselves and address any inefficiencies or bottlenecks in our supply chain and logistics procedures.

Companies making the shift from good to great must be prepared to recognize and evaluate their defining facts through the S&OP process. Collins lays out a four-step procedure to raise awareness of new trends and potential issues.

1) Lead with questions, not answers. Take a Socratic approach to questioning; ask questions to understand rather than to manipulate. Instead of asking “Why don’t you agree with that,” one can ask “Can you explain that to me?” or “What should we be concerned about?”

2) Engage in dialogue and debate, not coercion. Discuss and argue issues instead of using force. Use dialogue to not only secure “buy-in” but also to identify the optimal course of action.

3) Conduct autopsies without blame. Use KPIs as tools rather than as rewards or prizes. Try to draw lessons from your prior failures and achievements.

4) Build red flag mechanisms that turn information into information that cannot be ignored. Having the power to draw attention to an unpleasant fact is using the red flag. Beyond mere transparency, it involves fostering a climate in which everyone feels free to express the truth, no matter how harsh it may be.

Disciplined Actions in S&OP

Next, Collins emphasizes the significance of having a succinct and clear approach and taking focused action. Like this, a successful S&OP process necessitates that businesses have a solid grasp of their goals and create a cohesive strategy. Do not imagine that this calls for a despotic, rigid devotion to a constantly evolving process. Every team member is instead given the level of personal authority and freedom needed to realize the goals the company has set for itself. This is accomplished via a methodical procedure and a focused vision to achieve a common goal.

Collins describes the idea of the flywheel, in which persistent work generates momentum and produces ground-breaking outcomes. Like this, an effective S&OP process necessitates that businesses continually assess and enhance their performance, creating momentum toward their goals. Positive momentum is created by making choices and performing activities that support and affirm the company’s vision.

The S&OP process is energized as a result of the accumulation of observable positive outcomes. Reactive decision-making, overextending into too many various areas of focus, adhering to transient trends, and making frequent modifications to plans results in a lack of interest in the procedure and underwhelming outcomes.

Bonus Tip: Technology Accelerates Change, it Doesn’t Create it

The final tenet in going from good to great is understanding that technology accelerates success rather than creates it. Technology is crucial, without a doubt, but it is never the primary factor in determining whether an S&OP process is successful or not. Companies that have gone from good to great steer clear of trends and instead concentrate on the areas where technology can speed up the S&OP process.

None of the good to great businesses Jim Collins researched started out with cutting-edge technology. In my experience, many Vanguard organizations have led the way in applying technology after establishing their S&OP process.

In conclusion, a successful Sales and Operations Planning (S&OP) process can be achieved by applying the ideas presented in Jim Collins’ Good to Great. This entails assembling the ideal team, facing reality head-on, formulating a specific plan, fostering a spirit of cooperation, and consistently raising performance. Companies can produce ground-breaking breakthroughs and sustain long-term success by using these concepts.

Take your S&OP from Good to Great, or get started with a brand new process, at IBF’s S&OP & IBP Global Conference from June 14-16, 2023. Held in the heart of Chicago, you’ll learn from and network with S&OP/IBP experts from the world’s biggest companies. Click here for more information. 

At IBF’s S&OP Best Practices Conference in Chicago, we put seven S&OP leaders in a room together, threw some talking points at them and set the cameras rolling. The following are some highlights from that conversation.

Speakers:

Misty Eldridge, Senior Manager Planning and Fulfillment Systems, GE Appliances

Rich Gordon, Advanced Analytics Manager, Standard Process Inc. 

Debbie Climer, Director of Integrated Business Planning, Cummins Inc.

Imane Sabeh CPF, Associate Director Of S&O, KBI Biopharma 

Michael Zinkewich, Senior Director, North America Sales and Operations Planning, Beam Suntory

Scott Salzler, Senior Principal, Oracle Cloud Infrastructure

On How S&OP Has Changed Post-COVID 

Debbie Climer: Companies were so stress-tested by COVID and failed so miserably that everyone in supply chain now has elevated importance and status. It really showed where the deficiencies were. A lot of things remained hidden when we were in a stable environment and being suddenly thrown into such volatility forces companies to start thinking about things differently.

 Imane Sabeh: S&OP is getting more attention than ever before and it’s a great thing because it tends to be associated with supply chain when it really is not; it is a cross-functional, collaborative process. The surprising thing is that the voice of supply chain is now being heard across the different functions. So there’s a lot of momentum out there and we need to build on that. It is eye-opening to see how important S&OP is becoming.

On The Increased Recognition Of The Field

Debbie Climer: It’s been really good that the field is now exciting for young people. When I was young we didn’t even have supply chain as a major. Now it’s an exciting career because there’s so much innovation and so much more technology. This is not the supply chain of the past; it’s exciting, it’s new, it’s innovative and imaginative. One of the things that struck me [at this IBF Conference] is how many young people are coming in who are new to S&OP and moving the field forward. It was really good to hear everyone’s stories and where they are on their journey.

Scott Salzler:  Years ago when I started doing S&OP it was a very small niche – you didn’t really have S&OP jobs out there that you could go and apply for. Now you know every company is out there promoting the discipline and promoting it is a career.

On The Rise Of S&OE

Michael Zinkewich: S&OE is about defining your time horizons, making sure that S&OP is looking further out, and how short term planning and S&OP work together.

Rich Gordon: It’s nice to see S&OE emerging as an upgraded version of the Master Plan – that was eye-opening for me.

Scott Salzer: It’s nice to see focus on the separation between those two activities because for newer people you get easily caught up in the S&OE piece of it because the near term is always more pressing. It’s more difficult to focus on longer range thinking, so it’s good to see S&OE and S&OP treated distinctly.

Debbie Climer: We’ve really seen the need for a short-term execution process for your S&OP or IBP to work, to avoid your S&OP or IBP becoming a monthly S&OE process.

Eric Wilson: When companies start doing weekly S&OP, it’s because they don’t have that tactical execution component like S&OE.

Misty Eldridge: During the pandemic, companies were having to go into that [making S&OP weekly]. Post-pandemic they’ve decided they need to keep that short term planning execution but also get back their longer term S&OP.

What It Takes To Achieve Vanguard S&OP

Debbie Climer: It’s a business process so the best way to get the business to see the value of IBP or S&OP  is to show how it helps manage the business, not just your supply chain. With that, the connection to Finance is really critical. I mean everything that we do is related to money right? So making that connection and bringing those pieces together is really important for a successful IBP or an S&OP process.

Misty Eldridge: Several presentations talked about how S&OP links to the bottom line and EBITDA, and how inventory relates to cash flow. It was great to hear presentations about how S&OP allows a business to do that as it encourages buy-in of the process and facilitates maturity. Product reviews are part of becoming a Vanguard S&OP organization. Top companies are talking about their products – that sets the tone of the next five ten years so why not talk about what you’re going to do with the strategy of your items. That’s huge.

Michael Zinkewich: The change management piece is key. S&OP requires cross-functional engagement and that requires talking the same language. For us at Beam Suntory it’s about making sure we have Marketing engaged, Finance engaged, and a lot of that comes down to training as it allows us to learn how to talk the same language.

Imane Sabeh: Financial teams should be part of that training because again, S&OP is not only a supply chain function, it is a business process that benefits everybody.

Michael Zincewich: Cross-training is absolutely key because it’s cross-functional teams that drive change management and engagement in the process. S&OP doesn’t come overnight and it’s never static – good S&OP requires continuous improvement and ongoing training is part of that.

On Evolving From Supply Chain To Value Chain

Scott Salzler: We’ve talked a lot about the very basics like getting through demand the review with a credible plan and working to one number. That’s all great but this conference is one of the first times I’ve heard the discussion of what comes next. You know, not just IBP or something like that but more of a of a directional change to a value stream focus. I’m really looking forward to seeing what the next step is.

For to see the full range of S&OP Unplugged videos, click here.

For more leadership insight into S&OP/IBP, forecasting and planning, join us in Orlando for IBF’s Business Planning, Forecasting & S&OP Conference. The biggest and best conference of its kind, this community-oriented event offers dozens of workshops sessions, leadership panels, roundtables and social events. Find out more here. We’d love to see you there.

When it comes to the term “S&OP”, there is some uncertainty around how it all started. Some say it started with Oliver Wight in the early 1980’s, others say it was Richard Ling and Walter  Goddard in their book Orchestrating Success: Improve Control of the Business with Sales & Operations Planning. I’m not here to debate that because for me, it all started in 2007.

I remember the first S&OP presentation that I saw. It was as basic as you can imagine with Excel graphs copied and pasted into PowerPoint presentations. I am sure some of you are thinking to yourselves “we still do that”. You’re not alone. S&OP is a journey, not a destination and with every journey, it takes time.

Over the next few years, improvements were slow but gradual. We stayed with Excel and PowerPoint for quite some time. Different metrics came and went and unfortunately, so did some Demand Planners. The most important thing stayed constant, though – support from leadership. When you have buy-in from leadership and they truly understand the value behind S&OP, then resources such as personnel and systems start falling into place.

Remember, change is good. Change means stopping doing what’s not working, keeping doing what is working, and always making improvements.

With the support of leadership, we continued to upgrade our forecasting tools, we integrated our systems with both our promotion planning tool and a short term demand sensing tool. Things were starting to click, but we still needed improvement on the presentation side.

In 2019, Microsoft invited a few members from my company, mostly IT people, to their corporate offices in New York City. The point of the meeting was to introduce some of their tools that we weren’t taking advantage of: Yammer, Teams, and Power BI. Fortunately for me, someone couldn’t attend, so the invitation was passed along. So on a cold rainy day in the Fall, I took a short train ride with a coworker, spent the day in the city, and was immediately enamored with Power BI.

If you’re not familiar with Power BI, some say it’s closer to Excel than Microsoft Access but I like to think it’s the best of both worlds. Not only can it handle large amounts of data, like Access, using it’s query editor, but it’s a great tool that has interactive data visualization options that can help tell your S&OP story.

Power Bi was introduced into our S&OP process shortly after the trip.

When this happened, it brought energy back into the process. You could tell there was more excitement than there was in recent years. We were still showing similar data, but we were showing it using our shiny new toy.

We weren’t done yet.

We needed to keep up the momentum so it was time to partner with our friends from IT. We wanted to make the shift from static data to interactive data. We wanted our S&OP meetings to be able to answer questions on the fly. “What was case fill last year?”, “What caused that drop in forecast accuracy last month?”, “How does our inventory this quarter compare to inventory last quarter?”. The objective was to be able to answer these questions at any time.

Luckily, we had the right support. So, by partnering with IT, we were able to directly connect Power BI with data coming from our transactional system and just like that, magic. We had an interactive S&OP presentation. Don’t get me wrong; this took a lot of time and energy.

We now had one Power BI document that could be filtered on a specific Planner’s brands. Not only that, but we could filter our visualizations to show different time periods and we could begin to answer the questions that we previously had to follow up on.

One of the biggest improvements was time. There was no longer the need to make a dozen different PowerPoint presentations with Planners doing the same repetitive work. Instead they could use time more wisely; looking into forecast accuracy misses, explaining gaps to other forecasts, and laying out assumptions. We were working smarter, not harder.

And that is currently where we stand.

Over the last 15 years, I like to think we came a long way. It wouldn’t have been possible without the support and dedication from those involved.

The journey isn’t over. We are further along today than we were yesterday so let’s start thinking about tomorrow.

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