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Sales & Operations Planning! Execution to the Commanders Intent

Every good leader has a good strategy. And every efficient organization knows their leader’s intent. All employees at Southwest Airlines know and act to the CEO’s intent. Herb Keleher says to his people: “We are THE low cost airline. Once you understand that fact, you can make any decision about this company’s future as well as I can.” Just check it out… next time you fly from Austin to Denver ask your flight attendant why Southwest doesn’t have First Class seats, Foie Gras for dinner or luggage fees. Yes, I am sure, his answer will be the same as the person who checked you in. Because they all work towards the same goal: to be THE low cost airline, and because it’s not that hard to make decisions on problems like ‘expensive or cheap food?’, ‘expensive seats or more seats?’, ‘expedited boarding process or first class waiting lounge?’. It’s all crystal clear and to the point!

So it should be with your Sales & Operations Plan. The S&OP is your commander’s intent. So, first of all… you better have one!

For some the S&OP is simply the forecast; for others it’s financial budgeting. Many companies, however, integrate their financial planning with a sales forecast on product group level and the real good ones also roughly check if the plant’s capacity suffices and then subsequently ensure a proper transfer of demand. They also re-evaluate their product strategy (MTS vs. MTO vs. FTO vs. ATO) and make the appropriate adjustments in the master data. Is all of that done inside SAP functionality without the use of external applications? Mostly no, but that should be discussed in another blog post.

And here lies the crux of the matter. If you don’t integrate finance with sales… if you don’t connect the production department with a feasible plan… if you don’t make the proper distinction between MTS and MTO… and you work in various, different systems; you will have a very hard time communicating the commanders intent; and have everybody putting their nose in the same direction.

A Sales & Operations Plan carries information about what products do we stock and how much of it? what do we need to invest – resources and capital? what’s going to be our profit? what lead times will we promise for which product? What’s going to be our supplier make-up? and what is our Plan B in case of variability (which is part of our life). Yes, it’s the strategy, policy and general direction everybody should work towards to. For short: The Commanders Intent!

In my mind an isolated look at how you plan your finished goods does not suffice. S&OP is impacted by, and has an impact on, many areas within the supply chain. We all know that… but do we also live by it?

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17 Comments

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    1. Uwe Goehring Post author

      for me, you should not worry about whether my writings are worthwhile to be called blog. This article might be of interest for other participants in this community. If you don’t get any value out of this blog, you should not bother reading it… but judging it because it’s not your idea of what constitutes a blog, is something I would appreciate if you’d replace it with a bit more constructive commentary.

      looking forward to more comments on the subject itself…

      best

      Uwe

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        1. Uwe Goehring Post author

          oh… I just share what I experience and see on SAP projects… are you suggesting that you would want to help me categorizing my blog posts? … what is valuable and what is not? …what is worthy your reading list?

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  1. ' MoazzaM '

    You have explained why sales and operations planing is important but it might be more useful and helping blog if you put some light how to gather data, hot to integrate sd and fi. In short how to configure. I am not asking for whole document but just from where to start.

    Thank$

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    1. Uwe Goehring Post author

      Dear Ali

      in my blog posts I am trying to concentrate on the conceptual issues around SAP processes and less on detailed configuration. For one, the config is different for every company and issue and also, it’s becoming too complex for blog posting. For more information on S&OP and how I see the integration, you may want to read some other posts of mine that I linked below

      all the best

      Uwe

      http://scn.sap.com/community/erp/manufacturing-pp/blog/2012/04/23/that-old-sap-erp-60-sales-operations-planning-which-works-very-very-well

      http://scn.sap.com/community/erp/manufacturing-pp/blog/2012/07/06/mts-mto-ato-cto-eto-strategies-to-connect-sales-with-production

      http://scn.sap.com/community/erp/sd/blog/2012/05/09/have-your-sales-department-and-production-scheduling-dance-to-the-same-song

      http://scn.sap.com/blogs/bigbyte.uwegoe/2012/05/06/standard-sop-with-s076-i-strongly-propose-to-perform-a-rough-capacity-check-for-the-line

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  2. kesari sai krishna Sabniveesu

    Hi,

    Whatever you mentioned in the blog is nothing more than what is a company ? Moreover, the purpose of having robust ERP’s like, SAP is to have a close integration between the departments.

    Could you please tell me what is that I can learn or get more out of your blog?

    Regards, Sai Krishna.

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      1. kesari sai krishna Sabniveesu

        Hi Uwe,

        Thanks. When something is posted in SCN, especially from very senior, experience and Veterans like you, we all try to read and get something out of it. But,surprisingly

        you are saying there is nothing to learn here.

        Regards, Sai Krishna.

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        1. Uwe Goehring Post author

          sorry Sai, but I have to say that I am a bit disappointed at the way I am put on the spot here… I really don’t have the wherewithal to put a lot of insight and depth into all my blogs. I see something and learn something new and then I put it down in a blog and share it… not every time this can be valuable and insightful for all. Sometimes it’s just what it is… another write-up…

          …but the way information is demanded in some of these comments and also four 1 star ratings, do really not contribute to my motivation to freely share everything I learn.

          As you can see in my response to Ali, I am trying to respond as helpful as I can be, on a Friday night after a week of intense traveling and working.

          sorry about coming across a bit harsh, but sometimes I am a bit sensitive to the way my honest intentions are perceived

          best

          Uwe

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  3. Pascal Renet

    Firstly hello all,

    I don’t understand where all these comments are coming from? Since when is SCN a community that requires every for every post, blog or document to make a reference to a transaction, a module, a SAP product or even SAP itself? I have always seen SCN as a valuable source of information that caters to multiple audiences, beginners and experts alike, consultants and industry professionals with no SAP know-how just coming here to understand what SAP is about.

    I find it refreshing to have someone like Uwe come here, share his real life experiences and bring some some thought leadership to the group – just as much as I enjoy reading that transaction code ABCD is going to allow me to perform a certain function.

    I think that a newcomer would get some knowledge of this post. It is important to first and foremost understand how a process works from end to end in real life, before you worry about you can do it with SAP.

    I would say that if experts, such as yourselves obviously are don’t get anything out of this post, take it for what it is and move one, or better still,  take the time to write as many excellent and worthwhile blogs such as those that Uwe as produced in the past.

    Finally, Lakshmipathi I would say that you have abused your powers as a moderator of this group – because I don’t see how this blog contradicts the rules of engagement set out by this community – however I note that your response lacks the professionalism and courtesy that was owed.

    Best regards.

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  4. AMOL MARATHE

    hello,

    with all due respect to seniors in this forum, i would like to state following points –

    1) it was a thought provoking and very well written blog.

    2) one should not expect “How to do …”  blogs, posts every time.

    3) there are people like me who are new to this industry and blog like this give us a new vision to think.

    Regards,

    Amol

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  5. Warren Nash

    Toadd my 20cents!!  I understand what you are saying, but a little bit more details especially in the area of intergration of the business plans with the SAP as the central tool.

    Further on other people’s comments.  There is now a big issue with SAP consultant’s in that they now lack the business knowledge of previous consultants in the late 1990’s and this is why Cloud is becoming a solution for many companies these days.  This blog tried to explain the “high-level” side of a business operation, it was not done to help any “SAP Google consultant’s !!

    Regards

    Waza

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  6. Uwe Goehring Post author

    Thanks all, for your comments. This actually, wants me to point out what I have been trying to add to the SCN: more “business” content. I’ve been talking about the SCN, and most SAP activities (SAPPHIRE?), as being very “tech heavy”. Nothing wrong with that, but let’s not forget that SAP software is meant to support business processes and its ultimate goal is not to just add the newest technology to the companies IT department!


    I consider it a bit of a problem when we put “the cart in front of the horse” and implement SAP for techno reasons only. As I write in my blog “SAP business suite on HANA”, I think it’s crazy to run the planning run faster just to get false results a thousand times quicker.


    Nowadays, most companies already own an SAP license and therefore our community is concentrating on providing our customers with new and exciting technology. That puts IT in charge and the majority of initiatives is focused on HANA, cloud, mobile and other technology advances.

     

    Not a bad thing… But people!  Let’s not forget why SAP exists (I will let you decide for yourself what that is…). If we don’t help the SAP user to “run their business with SAP” and have them understand how they can use this wonderful technology in a business environment to reach the company’s goal (to make money now and in the future within the boundaries of our ethics code), then, in my humble opinion, we as a community will fail.

    Please do not take this as an attack on technology. I consider technologists equally important… But only that: equally important!

    From that perspective I don’t think it’s a bad thing to blog a little about the business of S&OP

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    1. Marilyn Pratt

      I don’t pretend to know nearly enough about your area of expertise Uwe.  But I applaud activities that bridge the business and IT sides.  As many know here, I was a passionate supporter of expanding the original SDN to a more inclusive environment that helps give our technology a business context.  This is now a called the SAP Community Network, no longer purely an SAP Developer Network.  We no longer have a separate Business Process Expert community and I’m glad we no longer try to entirely isolate the business conversations from the technologies.  Of course we do have a robust Developer Center and Code jams and we all know that some of our most knowledgeable, contributive , passionate and veteran members are and continue to be “hardcore” techies.  We are a technology company and it makes perfect sense to continue to encourage and support a constituency that is central to our success . 

      But even our Innojams and Demojams have evolved to highlight the integrated approach of technology in its business context.

      Please let us remember that even historically, ABAP, is a Business application programming language, and without the context of business is meaningless.  And ERP or enterprise resource planning happens in a business environment for business purposes. Over time our solution maps and business maps have transformed to value maps.  The idea is to understand the value and meaning of solutions and their importance to the business process.

      In another thread we have had a passionate conversation around communication styles for different users: Let Us Not Blame the User

      Folks made the point to me in comments to my blog that we cannot assume that navigating, posting and thinking are equally intuitive to all the community members here on SCN.  They reminded us that communicating with techies can really be different from communicating with “others” and we need to have some sensitivity to that fact.  Having a one size fits all approach to communication is false thinking. 

      The dialogue here around Uwe’s blog, might not be “comfortable” or “pleasant” but it is an important conversation for us to have and continue to have.

      Thanks Uwe and G Lakshmipathi for speaking your truths.  Thanks to all for ensuring the talk stays civil.

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