A robust S&OP process creates Visibility and a broad range of opportunities
I recently had lunch with a client who I helped implement an S&OP process mid last year. As we were catching up, I was happy to hear about the broader benefits they were realizing as a result of their S&OP process.
S&OP is short for sales and operations planning. It is a monthly process to review upcoming capacity and demand and to balance the two. Implementing S&OP well is challenging. It requires significant diligence across the organization because it involves coordination across the organization: procurement, operations, planning, sales, finance, customer service. When it is done well, S&OP creates visibility and alignment across all functions.
This visibility is so valuable as it uncovers clear opportunities that previously could not be seen.
The typical benefits from S&OP are improved forecasting which can lead to reduced lead times, improved sales conversions, improved manufacturing efficiencies etc.
The additional benefits that my client spoke about over lunch were tied to this improved visibility and improved cohesiveness across the organization:
Visibility into potential lost sales and the opportunity to win them back
When a large forecast is calculated by a forecast algorithm, but the sales representative has not heard from that customer it becomes a trigger to connect. My client’s business is cyclical but inconsistent. It is hard for a sales representative to know when a maintenance is coming due to a machine - here the forecast can help cue this conversation and potentially avoid the customer going to market.
Visibility into upcoming sales and the opportunity to influence the customer to purchase an alternative product
When sales is talking to operations and there is visibility into a sales before the order is entered, there is an opportunity to influence the order. For my client, an alternative but viable product may be aging in their warehouse. If the sales representative understands they can provide the customer significantly shorter lead time and reduce aging inventory — a win win!
Improved timeliness and reaction to issues
A robust S&OP process requires multiple cross-functional meetings every month. This creates discussions on issues in the moment rather than after the fact. Prior to this process my client typically waited until the end of the month and then reviewed the health of their supply base, sales and inventory. With the S&OP cadence this changed to review, discussions, and actions taken in the moment not after the close of the month.
As I was reflecting on this conversation, one of the big benefits of S&OP for any organization became clear to me: Cohesiveness across all functions of a business create visibility - this visibility allows the organization to see opportunity. Once the opportunities are visible, they become achievable.
If you would like to speak to me about Sales & Operations Planning, please e-mail me at stacy@pricingvelocity.com