Third part of the S&OP blog series. Link to the first blog of this series: Sales & Operations Planning – the most important KPI’s for the S&OP process
Customers often ask whether a systems project is the best way to start with Sales and Operations Planning, and if so, should they start with the implementation of the demand planning tool (e.g. SAP APO DP), the supply planning tool (e.g. SAP APO SNP) or with the implementation of the S&OP tool (e.g. SAP xSOP) – or even with a big bang? Does a systems project ensure sustainability of S&OP or should they focus on process and behaviours first? Let’s hear what Duncan Alexander from StrataBridge can tell us about making S&OP processes sustainable, and some of the issues S&OP projects face.
Duncan Alexanderis Consulting Director for StrataBridge the Sales and Operations Planning consultants.
The S&OP Process Rollercoaster?
Talking with a lot of businesses around the world I often encounter the reaction “Yes we tried S&OP a few years ago, but it sort of fizzled out.” Given that there are many thousands of successful S&OP processes around, what makes it work in some places and not in others?
I see it as a roller-coaster, some business issue (e.g. a build-up of inventory) highlights the need for S&OP (stage one in Kotter’s eight stage change management process – ‘Establishing a Sense of Urgency’. The S&OP project is then launched; the team defines the process, setting out a series of inter-dependent activities and meetings and starts running the process. Given the enthusiasm of the team and support from the senior manager, quick improvements can generally be expected, as obvious process disconnects are removed, and information is better communicated (‘Generating Short-Term Wins’, stage six in Kotter’s process).
So why then does the process not go on from strength to strength?
Kotter would argue that the business has probably not paid enough attention to stages two to five (Creating the Guiding Coalition, Developing a Vision and Strategy, Communicating the Change Vision, Empowering Broad Based Action). I think this is valid, but more importantly, the business didn’t press on to stage seven (Consolidating Gains and Producing More Change) and stage eight (Anchoring New Approaches in the Culture).
The crux of the issue is that with massive pressures on businesses from all sides, as soon as one issue seems to be coming under control (in this case inventory because the S&OP process has been implemented), the attention of the business switches to today’s big issue. The newly established S&OP process is left to fight against the natural state of the business – often a strong functional organisation (reinforced with rewards systems that do not encourage cross-functional S&OP behaviour). The usual outcome here is that a few S&OP converts (often supply chain people) fight a valiant rearguard battle to preserve the process, which limps on for a couple of years in name only, until a new senior manager arrives who makes a rapid and simple change by killing the process.
Eighteen months later, other business problems have arisen, and another senior manager arrives and declares “what we need is an S&OP process”. The problem here for S&OP consultants and project leaders is that it’s more difficult the second time around – S&OP baggage exists, and much more effort and resource has to be expended to have a chance of success.
These problems seem particularly common in the consumer packaged goods industry. One factor may be the rapid turnover of staff in sales and marketing roles that makes establishing a medium to long-term planning process extremely challenging. What is certain is that without the strong leadership from the senior manager, S&OP will always be a project. Without exception, all the best S&OP processes I have seen have had strong and committed leadership from the top of the organisation. If your business leader does not say words to the effect “S&OP is what we are going to do, and here are the committed resources to do it that are guaranteed for as long as I’m here”, there is a high probability of the project faltering.
So given that you have strong senior management support and are going to follow a good change management process, what else should you do to ensure sustainability?
1) Run quarterly education workshops on S&OP for new starters to reinforce the initial induction briefing, and train people in how best to participate in the company’s S&OP process.
2) Conduct regular external S&OP process assessments – this refocuses attention on the process, ensures process improvements are executed and maintains process understanding.
3) Automate the process. Although behaviours and process design are the first two priorities in building a good S&OP process, systems automation should follow rapidly. Trying to manage an S&OP process on Excel and PowerPoint is hard work, and ensures that process credibility is eroded when every month the accuracy of some data is questioned at the S&OP meeting!
Let me know what you have seen work to build sustainability in S&OP.
Reference: Leading Change John P. Kotter Harvard Business School Press 1996
If you need an individual roadmap and guidance for the S&OP process implementation please contact either Duncan or me for a workshop. In October we will also offer a S&OP internet Webex session.