Companies that have established a Sales and Operations Planning (S&OP) process within their organization have undoubtably spent valuable time and resources to define the process. Toward this end, adhering to a monthly calendar is an integral part of a standard S&OP process, and involves detailed meetings, consistent attendance, and progressive system integrations. If, however, your team has several monthly cycles under its belt which haven’t yet met expectations or garnered positive results, it’s common for faith in the S&OP process itself to falter. In most instances, though, it isn’t the process that’s broken—in reality, the meetings are at fault.
1. The Problem: When S&OP Devolves into a Reporting Exercise
A typical problem within S&OP meetings is NOT a lack of useful information. In fact, many times there’s an abundance of data. The problem is 1) how that data is presented; 2) how that data should be used; and 3) what happens next based on the discussion of that data. These meetings can easily become a series of meaningless, show-and-tell data presentations:
- Here’s what happened last month
- Here’s the forecast through the end of the year
- Here’s our current inventory
- Here’s are supply situation
- Here’s what Sales expects
- Here’s what Operations can produce
Even when a lot of data is presented and everyone leaves informed, if leaders and stakeholders don’t feel responsibility or accountability for making actionable decisions based on this information, the meeting is a failure in terms of both time and resources. A mature S&OP process moves beyond information sharing and serves as a forum for cross-functional decision-making and alignment.
2. Level Set: The Intended Purpose Of An S&OP Meeting
The fundamental purpose of the S&OP process, in the most simplistic terms, must answer a basic question:
“Given what we know today, what decisions need to be made to best support our business plan over an 18- to 24-month S&OP horizon?”
To solve this riddle, an organization must also look forward, rather than simply reviewing and reporting on what happened in the past. Build your business horizon so that it’s further out in time, giving leaders and stakeholders their best shot at implementing the actions necessary to convert future potential opportunities as well as mitigate any potential risks. These meetings should be focusing on:
- Changes in demand and why
- Supply/material constraints
- Capacity issues
- Inventory risks
- Customer requirements
- Financial implications
- Significant gaps between demand and supply
- Decisions that require cross-functional agreement
S&OP meetings shouldn’t review everything. They should focus attention on what requires a decision. Not unlike the airports, “if you see something, say something”. Meaning if all is well, there are no issues, there’s no need to have a discussion. This valuable cross-functional time together should be spent on the issues and decisions and not the report out and presentations.
3. Five Signs Your S&OP Meetings Have Become A Status Meeting
Companies launch S&OP processes with the best of intentions for business success. Yet over time, even a well-designed S&OP process can turn into a recurring status meeting. When this happens, the problem may not be the S&OP process itself; it may be the meeting dynamics that are actually hindering S&OP’s progress.
Here are five signs your S&OP meetings may have become status briefings sabotaging progress rather than effective decision-making forums.
- The meeting is a presentation, not a discussion
If everyone has received the presentations in advance of the meeting as a best practice, then there’s little value to having them read aloud during the meeting. Meeting attendees should focus on exceptions, implications, and decisions. - Meeting participants discuss the same issues/actions again and again without resolution
If attendees are discussing the same demand, supply, or financial issues month after month, it’s highly likely that no one is making important decisions. - Sales, Operations, and Finance have opposing versions of the future plan
A business needs one, yes one, agreed-upon plan that demonstrates a clear understanding of the assumptions, risks, and trade-offs behind it. If multiple plans exist, then stakeholders will have a difficult road ahead in achieving consensus-based decisions. - Participants push out discussions and decisions to future meetings
The purpose of S&OP is to make decisions; if attendees are kicking the can down the road, then the meeting becomes ineffective. In some instances it may become necessary to evaluate and replace meeting attendees, and/or stipulate that a decision authority be present. - Executives limit their participation
All executives may not attend every meeting, but it’s important they attend the meetings and be present to make the necessary decisions that are appropriate to their role.
4. Improve Meeting Effectiveness – Change the Conversation
One of the most important aspects of productive meetings, but also the most difficult to achieve, is moving the meeting from a rote presentation of information to a discussion of the issues. This includes the implications associated with up-to-date information/data to drive corrective actions. So, for example:
- Don’t state this: “Sales forecast has increased by 12%”
Instead, ask: “Is the additional 12% demand solid, can it be supported, and what are the financial and operational implications?“ - Don’t state this: “Inventory is below target”
Instead, ask: “What is driving the inventory gap, what products and customers are at risk, and what actions need to be taken to mitigate any potential risks?” - Don’t state this: “Manufacturing capacity is expected to be short”
Instead, ask: “What alternatives are available to close the shortage, what is the incremental cost, and what’s the best option for the business?”
5. Recalibrate Your Meeting Around Decisions
Think about the purpose of each S&OP meeting. What questions should be asked, and by whom? Raise potential issues and focus on the decisions/solutions needed to close them.
- Demand Management
- Does the demand plan support the current budget, and if not, why? Have the underlying budget assumptions changed that warrant a re-plan?
- Supply Management
- Can we support the demand plan? Can we support the budget if demand were to meet the budget?
- What capacity, inventory, or supplier issues require attention?
- Demand & Supply Reconciliation
- Where are the largest gaps between demand and supply?
- What alternatives exist to close these gaps?
- What are the financial and customer implications and what can the team do about them?
- Executive S&OP
- What decisions require executive alignment?
- What trade-offs does the organization need to make?
- What CAPEX decisions should occur to address longer-term future shortages?
Every meeting should conclude with a review of actions closed, further actions owners can take with timelines for completion, and a summary of decisions made.
6. The Real Measure Of S&OP Meeting Effectiveness
The success of an S&OP meeting is never measured by:
- The number of slides presented
- The number of attendees
- The length of the meeting
- The volume of data reviewed
Rather, the team should ask, “Did we make all of the decisions necessary to support the organizations financial goals and strategic objectives?” A successful S&OP monthly meeting cycle should create:
- A consensus-based, single view of demand
- Alignment on supply
- Visibility to risks and opportunities
- Clear understanding of trade-offs
- Decisions made based on current knowledge
- Assigned actions and accountability
The bottom line—don’t expect your S&OP process to be the magic bullet that will solve all problems. S&OP meetings are not the right venue for an organization to report on a plan. S&OP meetings are the forum in which cross-functional organizations agree on and reinforce the plan and decide on how best to execute that plan. This distinction can be all the difference between an S&OP process that exists strictly as pro forma meetings in the calendar, and one that actually drives better business decisions and overall business success.