S&OP-Sales and operations planning is a methodology that enables businesses to conduct an integrated business management process each month for matching demand with supply more efficiently (APCIS, 2018). In this regard, S&OP is a collaboration tool that bridges the operations to the sales department to form a single production plan. In this sense, the broader goal of S&OP is to align a company’s operations to its corporate strategy (APCIS, 2018). However, S&OP bridges many more departments that are involved in creating and dealing with demand and supply forces such as finance, transportation, manufacturing, procurement, and marketing. Therefore, S&OP translates to a long term and comprehensive process through which a business collects departmental plans that are amalgamated into the business/corporate strategy and financial performance of a company.
One thing that stood out is the integration of the demand and supply elements that represent long term processes to the short term processes. As Bob Stahl alludes to, the fundamentals of S&OP are the mix of demand, supply, volume, and mix. Bob insists on the balance of demand and supply as the marker optimum performance of the S&OP process (APCIS, 2018). Bob states that in keeping the S&OP process in balance, two groups of people are critical. One is the executive and the other is middle management and each has specific roles to play in the demand and supply hence the S&OP process.
Executives carry out functions related to volume in the demand and supply chain. Volume as Bob noted is dealing with how much manufacturing will be done. Manufacturing volumes relate directly to how the company sets its corporate strategy policy, conducts policy risk determination, and undertakes to budget among others. A discursive reading of all of these activities bestowed upon executives paints a certain picture in the S&OP process (APCIS, 2018). The tasks of executives are beyond the planning of short-term horizons. Depending on the capital intensity of a manufacturer, scheduling takes at least 18 to 36 months.
Middle management is involved with the granularity or specificity of the volume the executive has created. Thus, the job of middle management is to come up with a mix of volumes. Thus, middle management determines which mixes are going to run first and the details of a specific product, specific customer, or the specific order the volume mixes will run. The tactics of the middle managers run within the framework of the corporate strategy with an emphasis on execution. Execution is the core of the supply chain. In this sense, the execution is on a shorter-term basis typically 1 to 3 months. Bob states that the short term planning and execution are where the granularity is high. The company has to deal with customer orders that are specific as opposed to executives who look at the orders in groups. Thus, what stood out is the clarity with which Bob was able to tie strategy to execution. Executives create the strategy and the middle management executes it. In this context, middle management is responsible for operating within the framework of those strategies that the executive has set bridging the S&OP process.
Another element that stood out is representing what S&OP really is. Bob defines that S&OP is a multistep process that involves supply and demand planning where the top and middle management meet each other for decision making and authorization. However, such a definition is just but the cusp of what really S&OP represents (APCIS, 2018). Here, Bob uses an analogy to capture the real positioning of S&OP within the demand and supply chain. He states that S&OP is like a keystone of an arch. S&OP is the keystone of the supply chain process. S&OP just as a keystone does not begin the supply chain process. However, without a keystone or the S&OP in this regard, nothing else can take place. For most organizations, crystalizing that idea of the positioning and function of S&OP has been problematic. As Bob points out, the real challenge with S&OP is not learning the logic of its operations. Learning logic is a simple step. The real test of S&OP comes with organizing or the arithmetic of its implementation.
In dealing with the challenge of operationalizing S&OP, Bob points at critical research that also stood out when seeking to understand the real machinations of S&OP. Looking at the results of the study by Lora Cecere, the discourse of the findings ride or drive behavior within the organization. The challenge is changing the way the organization behaves or the way it organizes (APCIS, 2018). It comes down to reconciling conflicts and differences of opinions. For me, the difficulty of S&OP lies in change management. As Lora hypothesized, applying S&OP falls within the constructs of the 60/30/10 success rule. At a high level of proficiency, 60% of the results of S&OP implementation came from behavior or culture within the organization. 30% of the results relate to clear process definition and high discipline within the organization (APCIS, 2018).
What was a surprise that only 10% of the success factors were attributed to technology! Anyone thinking about the S&OP process will note that mostly runs through a software application. The software is a complicated application with many inputs from different departments that ultimately can culminate in a technological challenge (APCIS, 2018). Bob firmly states that S&OP is not a technological challenge. The technology is already mapped out and any technicalities or glitches can be worked out by the relevant specialist. In terms of executive and middle management, the technological challenge that they face is in the application of technology. Applying technology and other elements S&OP is not so much so about the complexities of the technology but rather the simplicity and change in behavior. The software can be acquired but it is the usage that matters (APCIS, 2018). The change in behavior that should be pursued is to create buy-in across the full cross-functional composition of the company. In simple terms, for S&OP to function as it should, every department mentioned earlier should play its part in feeding the system with relevant inputs. In this context, consistency is key in establishing a robust S&OP regime. From this argument, it is logical to relate to the findings that Lora had presented in her study.
The other element to the S&OP process that stood out was disagreements. Inherently, given the departments that are involved in the S&OP process, disagreements are inevitable. Pat Tillman talks about the tension in the S&OP process (APCIS, 2018). He argues that tension is within the S&OP process is healthy because it creates a more honest framework that is realistic. Pat states if disagreements are not openly addressed they tend to hide. However, at an advanced stage, conflicts emerge from the disagreements and become destructive elements that serve up a whole of other different manifestations. Disagreements are discomforting activities. They are not talked about they are uncomfortable and therefore, people hide them. In this context, Pat introduces the concept of S&L. S&L should be properly viewed in the context of S&OP. The S&OP process must understand that raising disagreements is worth it (APCIS, 2018). It is from the disagreements that the company can establish a robust plan that is problem proof.
The plan of the company is driven by the demand market. The determining factors are the resource requirements and financial implications involved in new product development. In this context, problems arise from resource determination and requirements as presented by various departments. Appropriating resources has financial implications for the company but more importantly, when thought about in detail, it is their departmental budgets that are affected. In such a context, attempting to state or think that the department involved in the S&OP process will not have any disagreements or misunderstandings is a mischaracterization of the process that can be costly to the plans of the company (APCIS, 2018). In fact, as Pat states, companies should start thinking about S&OP as a troubleshooting process. The process involves raising and defining disagreements so that they can be reconciled and eliminated in the process altogether.
Therefore, in summary, the current video resource on S&OP is educating from multiple points of view. Most of the content dealt with representing what really S&OP is all about. S&OP is not about the technicalities of operations but rather the conceptualization of behavioral change around the processes of demand and supply chain. Inevitably, S&OP raises conflicts that should be positively embraced as a troubleshooting process.
American Production and Inventory Control Society. (2018). S&OP: Myths and Truths. https://www.youtube.com/watch?v=ryrN-mXYrrY&feature=youtu.be
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