Sales & Operations Planning (S&OP) as a business process is just over 30 years old. A lot has been written about why S&OP implementations succeed or fail and why many organization are stuck in their maturity. Recently Supply Chain Insights published a report with the following 5 top challenges on why S&OP is a tough nut to crack.
- 72% has difficulty getting to the right data in a timely fashion.
- 53% is off balance, not aligned.
- 50% lack of understanding from the executive team.
- 50% lack of skilled resources (to do what-if scenario’s).
- Multiple S&OP processes (on average 4).
The observations from Supply Chain Insights are similar to my own S&OP research from 2010, 2011 and 2012 and 2014. The top S&OP roadblocks in my surveys were:
- Senior leadership support (lack of executive understanding).
- The organizational silo’s (lack of alignment).
- Process discipline.
- People skills / resources.
After almost 20 years of practicing S&OP and researching and writing about it for the last 5 years, these observations make sense and seem valid. We can learn from them and try to influence them to get better at S&OP.
But the last years I also started to take a different view. To me, these obstacles seem to be side effects and not the real challenges. If we step back and look from a system and macro perspective at S&OP and have a really hard and honest self reflecting look in the mirror, we might get to other conclusions. We find some hidden and uncomfortable S&OP challenges.
I’ll share with you my view on the hidden challenges why S&OP is so hard to implement, maintain and mature. Secrets no one seems to dare talk openly about. Let’s call them the dirty little secrets of S&OP.
1. S&OP is not motivational
Senior leaders are clever enough to understand the concept of S&OP, that doesn’t necessarily makes them motivated to support it or even lead it. Why should they be motivated to implement S&OP? This question has obvious answers for the supply chain and operations function where S&OP originated and where people are motivated. But it is less obvious for other functions.
If we are motivated by autonomy, mastery and purpose, as Dan Pink’s book ‘Drive’ suggests, we need to find these motivational elements in S&OP for all business functions.
It is questionable if anybody feels more autonomy with a monthly recurring request for data, reports and renewed plans. Often you hear a sigh of relieve in a business when there is a 5 week month and the 5th week doesn’t have an S&OP meeting. ‘Finally a week of peace to do my own stuff’.
A sales person is more likely to want to master relationship management and negotiation tactics to make deals with great sales terms. Which sales person wants to master sales plans and forecast accuracy? A marketer wants to master shopper and consumer insights, building brands and categories, not a monthly reporting fest on all New Product Development projects.
I once tried to define the purpose of S&OP, but for most people their purpose goes (luckily) beyond a monthly business process like S&OP. So for most business functions outside supply chain, S&OP is not really motivational. The real challenge is not that of executive understanding, it is defining and selling S&OP in a way that it becomes motivational for all functions. In this way we would get senior leadership understanding and support. I developed the S&OP leadership quadrant, to help plot if you have critical mass in leadership support during an implementation .
2. S&OP is not clearly defined
After 30 years of S&OP development, there is not a single S&OP definition that wins the heart and minds of every business function. As Patrick Bower point out correctly is his article ‘Integrated Business Planning: is it a hoax or here to stay’, there are no common agreements, definitions, metrics, certifications and there is not a global S&OP governing model. There are many different process and maturity models. I once even published an article with my own 4 step maturity model!
In the last 30 years, the supply chain function, thought leaders and academics – and I include myself here – have not been able to clearly define and sell meaningful S&OP. How can we expect other business functions to understand and lead?
Without clear definition and agree maturity criteria it is hard to set clear maturity goals. My own research shows that only 34% of companies that are implementing S&OP have clear maturity goals and check and update those yearly. How can we successfully align supporting people, process and system needs and assign resources if we’re not clear on our S&OP goals? It is hard to be aligned at anything without clear definitions.
3. People are not made for S&OP
S&OP is a business process where you have to share your plans openly across functions and compare them with your functional budget and strategic initiatives. It requires to cross the functional silo’s pro-actively to solve business issues. It requires honest and transparent reporting of your gaps versus budget in front of the whole business. It requires empathy for the other business function, holistic thinking and actively seeking alignment, even more so when KPI’s are contradicting.
We have to realize that this is not a natural behavioral choice for human beings. Historically we are wired to stay in our silo. That’s just our survival instincts. Staying in our own clan or herd, means risk reduction, certainty, safety and a higher change to survive. On top of this there is research that indicates that only 50% of people cooperate naturally and 30% behaves selfish.
The skill challenge is not to get better at scenario planning. The real skill challenge is to create a critical mass in the workforce with a specific mindset and set of soft skills. That’s also the reason why I added a 5th S&OP phase to my maturity model; emotionally competent! Critical mass of emotionally competent people is not available in businesses unless there are active recruiting, leadership development and training policies to address this.
4. Our S&OP expectations are too high
Change is hard! We know that the average success rate of business transformations is roughly 30%. John Kotter measured it in his book ‘Leading Change’ in 1996. In 2009, McKinsey confirmed this number in a questionnaire across 3200 CEO’s and the 2012 book ‘Beyond Performance’ mentions again that ‘70% of transformations fail, due to an organization inability to adopt the required new behaviors quickly’.
S&OP is a massive change effort. However, it seems many of us expect S&OP to do better than this 30% success rate. Without motivation, a clear purpose, without clear definition, governance, maturity targets and appropriate soft skills? As it stands now, we might have to be pleased with a 15% success rate. That means roughly 1 in 7 companies will implement it successfully. Not a proposition you will hear from the average S&OP consultant.
5. Maintaining S&OP is a pain in the butt!
There! I said it! S&OP is a monthly recurring data gathering, reporting and meeting pain. There is no easy solution to it and no other way of putting it. A marketing director once told me just before the executive meeting; ‘it is like going to the dentist every month’. Even companies with years of experience will tell you privately that every month it is a struggle to get all the data aligned, commercialized and scenario planned. An experienced planning manager from a business that has held the ‘Class A’ accreditation for many years, told me quietly that; ‘every thing looks nice from the outside, but internally it is a monthly struggle’. If the best of the best struggle to get data and plan scenario’s in a timely fashion, who doesn’t?
S&OP is still valid and valuable as a business process and has still potential to develop further and become more important in business management. Surveys are still valuable to get insights in S&OP obstacles. But after 30 years, it is also time to start scratching the surface and address some of the underlying and more fundamental challenges S&OP is struggling with. Let’s not keep them dirty little secrets.
The Author Niels van Hove is a Supply Chain consultant and Mental Toughness coach.
photo by Melissa Alicia
7 thoughts on “The dirty little secrets of S&OP”
Alignment is the key for me. If a Business can see S&OP as a tool for enabling functions to work together in a supportive, mutually beneficial way then Alignment = Success, If not……..it’s generally a chaotic mess !!
Agree, alignment comes before effective integration! But being alignment is also a mindset, personal choice and emotional capability. Alignment is not just dependent on a vision or KPI’s
I wish I could disagree, but cannot. Those of us who lead transformations know that the sale never stops in s&op. Executive support is never stable over years, new owners demand simplicity and break the messy linkages, key members take other roles and the training and skills decline, and urgent issues replace focused executive reviews. Without an owner with sufficient sales, technical, and motivational skills there can be no meaningful maturity journey.
Nice thought provoking article.
Thanks Scott. I had the same talk to myself when i wrote this: ‘ can i disagree with this?’ It is a never ending sale indeed. But you know what? Although frustrating at times, I’ve learned to appreciate and see beauty in this never ending task of getting everyone aligned and integrated.
You nailed it well. In a training on supply chain i was having the participants kept bantering on timeliness and accuracy of the forecast and deep diving into the root causes eventually led us to these reasons too.Addressing it a major challenge.Any advise.?
Thanks someone. Discussions on Timelines and forecast accuracy are important but also supply chain focused and signs of early S&OP maturity. Unless we talk about timelines and status of strategic project progress, or accuracy of the EBIT projection or cash flow. The latter discussions have the interest of CEO and CFO and move in to business risk and mitigation direction, rather then cynicism or functional blaming. So, my advice is: move the discussion to a more mature stage about business risks, opportunities, meeting the budget & strategic direction. Agree some values and behaviours on how you discuss differences in meeting and hold each other to account when you deviate from that. So set yourself clear goals to include budget, strategy and behaviours in the S&OP cycle
Hi Niels thanks for the wonderful article and those points that you’ve raised are elephants in the room for S&OP. I also have those thoughts at time even though I’m driving the S&OP process and it’s a thankless job being the facilitator. However I have identified some key points from my journey with S&OP so far with different companies and hope to share with everyone.
There are 4 stages to me:
1st stage – tools for gathering data like forecast accuracy, sales demand forecast , etc.
2nd stage – escalation with information on impacts to financial, operations, production and inventory and continuity of actions from previous S&OP
3rd stage – communication to the greater audience especially to the people on the ground with the final agreed plan
4th stage – monitoring the physical flow for inventory and materials to ensure that they stock to the agreed plan communicated in the 3rd
To me the 1st stage is like the eyes and the ears for the company. The 2nd stage is the brian of the S&OP. The 3rd stage is the heart of the S&OP and the last stage is the hand of the S&OP. As you can see, the company cannot function properly without the coordination these steps.
To me the above activities are sufficient to set up a department alone but today they are usually parked under supply chain primarily because of stage 4.
Your feedback about the above process is welcome.