Discover below the most common pitfalls in Sales & Operations Planning (S&OP) and the best way to avoid them!
- Imbalance of the long-term corporate strategy, the S&OP planning objectives and the day-to-day operational activities
Many organizations acknowledge that one of the hardest struggles they encounter, is keeping the short-term activities in sync with the corporate strategy.
If your strategic dream is to be a cost leader and operations is not producing efficiently, the company is clearly in misalignment and this will have an effect on the bottom line results. Very often, this is also true with regards to the tactical S&OP objectives where an alignment between customer service, efficiency and investment in working capital is aspired. This balance has to be weighed against the strategic priorities to obtain the optimal outcome. Moore Stephens therefore advises to not solely focus on isolated S&OP planning objectives but instead to integrate the corporate strategy as a formal check-point into the tactical S&OP trade-offs. A small change to the S&OP process, which ensures your teams keep an eye on the broader company vision!
- Lack of proper S&OP planning processes and metrics to enable continuous improvement
S&OP will only deliver results, if you have a clear-cut process for it! Best-in-class organizations do this via a pretty strict S&OP calendar, with recurring S&OP meetings. Next, your meetings need to run according to a clear S&OP meeting protocol (Demand Review, Supply Review, or (Pre-)Executive S&OP). Each ensuring strategic and tactical discussions are held and informed decisions are made. On top, regular measurements and consistent metrics for evaluating the S&OP process are the base for continuous improvement in the monthly cycle. Without clearly installed processes and metrics, your S&OP effort will not be stable, and is very likely to fail.
- Missing focus on external business trends and the product life cycle stage of your products
S&OP can never be solely inward focussed. This planning process has to keep a close eye on external trends, factor in moving customer behavior and identify emerging outside company walls. In the ever dynamic world of global supply chains, it is expected that companies who are ready to mitigate disruptions in the marketplace will outperform competitors. On top, not only the external enviroment but also the life cycle stage of your products (PLC) has to be accounted for to obtain a complete S&OP picture. The expectations for a product in the “growth”-phase of the PLC are indeed completely different from a declining product. Factoring in these effects, will yield far better results and give you solid S&OP performance.
- Absence of senior management involvement, support and decision making
A robust S&OP process is beneficial for overall company results, as resources and investments are in line with long term strategy. Strangely, it sometimes is a challenge to have leadership participate to the recurring S&OP meetings, to help make sound decisions, in line with the strategic goals. But without management support, S&OP will not deliver to its promise, as it requires leadership for decision-taking in line with the overall strategic goals. Equally important, in our experience, by playing an active role in S&OP, leadership members can also send a strong message to the rest of the organisation, signaling how important S&OP really is for the company. In the end, S&OP is a team effort, mobilizing the entire organisation, realizing 1 common goal.