The evolution of sales operations planning, an article in the Bangkok Post

Sales & Operations Planning (S&OP) has become mainstream these
days but many organisations still do not execute it very well. In the
beverage company with which I am working, we have found much room for
improvement. We thought that sharing some of our observations might
help other readers to think about their own processes.

For S&OP to be effective, we first need to recognise that it is a
process, not just a single meeting, and it must be sponsored by top
management, who must also attend the S&OP meeting. If carried out
properly, S&OP should provide the agreed plan that helps ensure
that supply meets demand.

In our case, the process simply was not what it should have been.
Although there was an S&OP meeting, it was really just a
pre-S&OP meeting, where Marketing and Sales simply asked Production
whether it could support the adjusted plan prepared by the marketing
and sales people.

While the team that prepared the plan might have taken production
constraints into account, it did so without full collaboration with
Production.

Papers to be read in preparation for the S&OP meeting normally are
sent to the functions involved ahead of time. However, there is no
clear expected output or action. Therefore, the whole process is really
just one team generating an adjusted plan according to the inputs from
demand and supply sides, and then presenting it at a meeting to
determine whether or not the plan can be followed.

Many times in the meetings, disagreements or issues arise about which
decisions cannot be made. This is because the top management from each
side does not attend. Unresolved issues are then taken to the
respective top management afterward; some issues get resolved but many
times there is no resolution and each side just ends up following its
own plan.

We do have a capable team responsible for preparing the adjusted plan.
It understands the concept of supply chain planning and how to balance
supply and demand. It simulates the plan with different what-if
scenarios _ how much of each group of products at the aggregate level
will be produced, where, and for what market _ with the objective to
select the minimum-cost plan.

There is a process in place to adjust the aggregate plan monthly,
starting from the beginning of every month when the responsible team
will canvas related parties to first adjust the demand plan, and then
gather information about any supply and production constraints. Then
the team goes about its normal business of simulating the plan. It is
then shared among the involved parties leading to the monthly
meeting.

So what is missing and can be improved?

Although it seems like there is collaboration, in fact the responsible
team can only gather information from each side and then generate the
adjusted plan. There is no real participation or sense of ownership for
this monthly process from the involved parties. For example, Sales and
Marketing provide information about any marketing plan or change in
demand, and Production provides information about supply and production
constraints. However, do they really feel that it is also their job to
have to try to work together to come up with the plan that will work
for both sides? Basically, they wait for the responsible team to work
out the adjusted plan and they attend the monthly meeting just to see
whether it will work. There is no clear expectation from each side
participating in the process.

The top management from both the Sales and Operations sides do not
participate in the monthly meeting. They just ask their managers
afterward if there were any problems. In addition, apart from the
president, there is no clear management position who can make a call if
there is an unresolved issue. The result? Many times unresolved issues
remain unresolved.

There is no company policy to support the S&OP process. Often
there is an agreed plan, but each side does not necessarily honour that
agreement. For example, a plant keeps producing the goods that
marketing already has in ample supply in the warehouses. Why? Slowing
down or switching production impedes efficiency. Clearly there is a
need for incentives, such as the right key performance indicators, to
be aligned within the company’s supply chain.

One reason why collaboration is still limited is the time it takes to
update the forecast and the demand plan. The responsible team needs
days just to gather sales data from various sources. The company has an
enterprise resource planning (ERP) system but it is not the only data
source; all data from ERP has to be run through another program just to
generate the first-cut forecast. The resulting information is exported
to yet another program to perform a simulation of the production plan.
Finally it is exported to a spreadsheet program for others to look at.
This is a burden on the team which discourages it from making monthly
adjustments and hence hinders collaboration.

Therefore, enabling information technology will help improve the
S&OP process. In the future we will discuss the IT and other
changes needed to make the S&OP process in this case better.