S&OP: The Four Point Difference
Commercial teams — sales and marketing — often avoid active participation in Sales and Operations Planning (S&OP) processes. The belief is that it is not value-added work. Ironically, the biggest benefit is an increase in sales: The metric that is always top of mind for the sales team.
An effective S&OP plan is the goal of many, but there is no clear industry definition of effectiveness. While there are many maturity models floating around in the industry, most are not research based. To better understand the characteristics of an effective S&OP plan, we just completed a study of 73 companies. In the quantitative survey completed this summer, 30 respondents rate their processes as effective and 43 rate their S&OP processes as less effective on a seven point scale. In this column we share four characteristics of companies that rate their S&OP processes more effective:
An effective S&OP plan is the goal of many, but there is no clear industry definition of effectiveness. While there are many maturity models floating around in the industry, most are not research based. To better understand the characteristics of an effective S&OP plan, we just completed a study of 73 companies. In the quantitative survey completed this summer, 30 respondents rate their processes as effective and 43 rate their S&OP processes as less effective on a seven point scale. In this column we share four characteristics of companies that rate their S&OP processes more effective:
- The Organization is More Aligned. Companies rating themselves more effective have tighter cross-functional alignment. This is especially true between commercial and operations teams. The differences, as shown in Figure 1, are significant at a 90 percent confidence level. While we are unsure which happens first — whether an organization focused on alignment and improves S&OP, or if better alignment is the outcome of S&OP — we can see the impact of alignment in the open-end responses. Companies with greater alignment find it easier to conduct an effective S&OP process.
- The Company is More Likely to Use Planning Technologies. Companies that rate their S&OP processes more effective, as shown in Figure 2, are more likely to use supply chain planning technologies in their processes. Those ranking their S&OP processes more effective have a greater dependency on technologies.
- Respondents Rate their Companies More Agile. Companies rating themselves as having an effective S&OP also rated themselves 4.5-times more agile (the ability to have the same cost, quality and customer service given a level of demand and supply volatility). When we contrast the difference between the companies rating themselves as having an effective S&OP and the contrast, we find a significant difference in control, agility and responsiveness.
- More Balanced. In addition, companies rating themselves as more effective in S&OP have greater balance between the “S” and the “OP”. There is balance between the focus on commercial and operational plans. This difference is significant at a 90 percent confidence level.