The State of S&OP according to 7 Thought Leaders

S&OP continuous to be a popular topic that remains high on the agenda of executives. To assess the current state of S&OP, I interviewed 7 S&OP thought leaders at the end of 2016 for my blog supply chain trend. These leaders all have 20+ years S&OP experience and published books, whitepapers and articles in renowned magazines. A group, eligible to comment on the current state of S&OP. A group, that has shown passion to improve S&OP and a willingness to provide ideas for the future. Some key outtakes from these interviews are that:

  • S&OP can’t be approached as a one size fits all, or simply implemented with a template and existing best practice checklist. S&OP requires hard work from senior leaders.
  • S&OP is still too supply chain focused, although it covers much more than supply chain. It is a business wide solution, and should be taught as such in business schools.
  • Technology and complexity go hand in hand. Increasingly complex organisations require technology to support effective S&OP.
  • S&OP has the potential to not only improve business performance, but also to transform company culture. It is important to define a vision, a ‘WHY’ you’re implementing S&OP.

S&OP is not a silver bullet

When asked about the main fallacies in S&OP, thought leaders often refer to the fact that S&OP can’t be approached in one similar way for every business with the use of best practices checklists.

Sean Culey notes that “the process is often implemented in isolation with an expectation that it is a silver bullet solution, and it will be all rainbows and unicorns once it is in place.  S&OP requires hard thinking, data integrity and disciplined execution by the senior team members.”

Erik Tinker says that, “designing S&OP and putting it in are easy”. However, “getting consistency across your S&OP design, org design, regional/BU and global levels, integrating new acquisitions, IT hierarchies, while keeping busy people engaged, isn’t always easy in a complex business”. Erik doesn’t believe that there is one set of best practices that fits all, although “there are some who claim based on all their self-proclaimed experience, they have the right way.”

Duncan Alexander agrees. “The number one fallacy is ‘one size fits all’. Yes the concept of joined up decision-making fits all, but the practicalities must be tailored to the needs of each organisation. Trying to copy the checklist of someone else’s best practice is not the answer.

S&OP requires continuous focus after the initial implementation. Jim Biel believes that “one of the biggest fallacies is that you can put it on auto-pilot and let it go after initial implementation.”  He stresses that “If an organization is really serious about making this the primary way they plan, manage, and execute their business, the organization needs to staff and resource the process well throughout the life cycle of the implementation and on-going execution.”

Finally, Steven Hainey mentions that “S&OP requires substantial engagement from most functional areas along with senior management, NOT an overnight silver bullet, something which cannot be set on autopilot and forgot, and typically takes years and not months for it to become a supportive competitive advantage.” It is clear these thought leaders believe S&OP is not a silver bullet, they advise to use customized solutions rather than one size fits all checklists and they agree that S&OP requires continuous hard work and engagement from senior executives.

Too much Supply Chain focus

S&OP was developed over 30 years ago from a supply chain perspective. Over this time, S&OP has been mostly developed as a supply chain capability, not as an end to end business capability. This supply chain bias is still reflected in many maturity models, which are focusing on supply chain language. S&OP projects hardly ever start as a strategic enabler. In the worst case, somebody just thought it was a good idea, but often it starts from a burning platform of high waste, low customer service or high working capital. Somebody in supply chain will lead the S&OP initiative. S&OP conferences have a similar supply chain bias. Duncan Alexander, “I have virtually given up going to S&OP conferences because it’s the same people talking about the same things. S&OP experts should be presenting at finance conferences and executive leadership conferences, not supply chain conferences.”

The truth is, that S&OP is still largely unknown outside the supply chain and operations functions and the manufacturing industry. It doesn’t get a lot of traction from other business functions or the academic world outside supply chain. Steven Hainey sees some positives change “I see more companies moving away from the narrow-minded view that S&OP is a planning practice for just balancing supply and demand”. However, also Steven recognizes that “Non-supply chain professionals not properly trained in S&OP have a difficulty envisioning it as a platform to cover the financial strategies, future revenue growth approaches, marketing plans and other overarching business aspects having substantial impacts to organizations’ successes.

The thought leaders agree that education is key to change this supply chain bias.  Jon Kirkegaard even thinks it is the biggest fallacy “that S&OP is only a supply chain solution and thus it is not taught in leading MBA / Finance and undergraduate business courses.” Erik Tinker would simply like to see that “S&OP is the just the way we do business, it’s not something new or unknown.” And Jim Biel sees “a day when most organizations see the simple value of integration and collaboration that S&OP ultimately tries to provide.” Duncan Alexander’s vision for S&OP is “that it is taught in business schools as the way to run a business, not a small part of a supply chain module.”

If S&OP wants to claim that it is a holistic business enabler, it will have to get rid of its supply chain bias. S&OP will have to start integrating more ideas, knowledge and language from other business functions to appeal to them. S&OP will have to show executives and academics at conferences and through research that it is the best way to align, integrate and deploy a company’s strategy.

Technology and complexity

Most thought leaders agree that at the start of an S&OP implementation you can get away with spreadsheet to show a proof of concept. But as soon as S&OP maturity or company complexity increases, S&OP requires appropriate technology support. According to Duncan Alexander, not investing in systems to support the process is one of the reasons why S&OP maturity stalls. “While you can get going on S&OP with PowerPoint and Excel, you need proper applications to embed the process, make it sustainable, and allow you to focus on decisions, not the process mechanics.”

One of the biggest S&OP fallacies, according to Dean Sorenson, “lies in the belief that complex manufacturers can achieve effective S&OP processes without re-engineering financial planning, budgeting forecasting and performance management processes. In complex manufacturers, it becomes increasingly difficult to establish mature forms of integrated planning and performance management processes with a patchwork of technology. There are too many moving and interconnected parts to make processes work effectively. “

The thought leaders agree that connecting all the moving S&OP parts effectively in increasingly complex business environments, seems hardly possible. Steven Hainey, believes that S&OP will be substantially transformed over the next decade, more due to technology than anything else. “We will see customers sharing demand changes, logistics individuals updating port, rail, and truck backups, supply or commodity disruptions, total cost of ownership changes through the entire supply chain, and much more.  Instead of hearing about this type of intelligence through monthly meetings or e-mails, it will be fed real-time in members’ cloud based planning systems providing decision makers exception reports on their predefined parameters.”

Beyond S&OP: transform company culture

Sean Culey and I both believe S&OP can be used for larger purposes than the development and execution of great plans. Sean Culey would like to see “a recognition of the cultural transformation potential of S&OP.” He believes that ”by emotionally engaging in a process that has alignment, integration, openness, collaboration and communication at its core, the S&OP team should be setting the standard and leading the way.  They should also endeavour to ensure that their respective teams also behave in a similar manner.”

My personal vision is for S&OP to contribute not only to strategy execution and company performance, but also to a positive company culture, employee engagement and even wellbeing. Employees who are informed on corporate goals and strategy are more engaged. We further know that a certain mindset and behaviours that are effective for S&OP, also improve individual life satisfaction and wellbeing. I recently published an article on this topic in Foresight; How to Shape a Company Culture with S&OP. Leaders who authentically believe in these potential benefits of S&OP, will emotionally engage and will approach an S&OP implementation with a drive to change behaviours and company culture. This requires a clear S&OP vision that goes beyond supply chain or planning.

Sean Culey mentions that the lack of executive knowledge on ‘Why’ to implement S&OP “is an often-overlooked attribute to stalling maturity”. And to answer, “because the supply chain director or a consultancy firm says so”, just doesn’t cut it. He advices to take a step back to “engage with all the stakeholders to clearly understand why you are doing this.  Once the ‘why’ is clear, the ‘how’ and ‘what’ will be also.  Once the ‘why’ is clear, resistance to this process will fade away, and passion and engagement will increase.”

Many thanks to all these S&OP thought leaders for taking the time to be interviewed.

 

9 thoughts on “The State of S&OP according to 7 Thought Leaders

  1. I agree indeed that the Supply Chain bias of S and OP stunts its ability to be what it should be. Companies and consultants should recognise that it must cover all processes (incl HR, IT, and Finance). It should be leading to a Cash Flow forecast, and the lengthy budget process should be replaced by the annual update of a rolling 3 to 5 year plan. It needs to be about leadership and not planning and management. Leadership should tie with followership. Do what you said you would do. It needs honesty, trust and realism. It should be about strategy. Agreed Niels. So why do CEOs not implement it as a matter of course? It cannot simply be that they did not learn this at Business School.

  2. Thanks Richard. We are indeed in agreement. Also on your point that it is not because leaders didn’t learn it at business school. CEO’s are smart enough to understand the concept.

    I think I know why S&OP is not implemented as a matter of course. And why it is not successful or gets stuck many times.

    Firstly, there needs to be an authentic believe that the underlying behavioural principles are the right ones to live by. As you say: trust & honesty. Add to that openess, willingness to share, Pro active integrated working, autonomy, willingness to challenge and be challenged, constructive feedback and conflict resolution, drive for alignment etcetc.

    If not we get Machiavellian S&OP

    Secondly, executives need to be emotional and behavioral capable to display and execute these behavioural principles.

    Without these, S&OP is a shallow and hollow business process. With them S&OP is sustainable and has change to succeed and be effective.

    Finally, if there is also critical mass in the believe that S&OP can influence business culture for the better through its underlying pre requisite behaviours, S&OP has the potential to be transformational.

    This I would call authentic and emotionally capable S&OP.

    As about 30% of people are selfish, are takers and not givers, authentic S&OP does not happen without recruiting, rewardind and promoting employees who value the underlying behavioural principles of S&OP.

  3. Thanks Niles. I agree with intent and passion. Oliver Wight launched this process in mid 1980. It is still around and going to be around as a process for some time. May me the nomenclatures may change but the core will always remain the same. It is getting better and more “Outside In” from an execution perspective and that is more important.

  4. Thanks Sanja,
    I have a slightly different view. In my post ‘the rise and fall of S&OP’ I made a point that S&OP is not going to be around if we don’t keep innovating it.

    I’ve not seen real significant improvement in the theory or practice of S&OP in the last 5 years.

    Being external oriented is indeed a good thing and has been advocated to businesses before the S&OP inception. Now we call that outside in, market driven or the latest marketing term: demand driven S&OP. Talking about nomenclatures.

    Do you have any evidence that external orientation indeed has grown for businesses that use S&OP? I’m curious to know

  5. It is a very provocative – in a positive way – article.
    Although several organizations, especially the big software sellers, show in the market as thought leaders, they tend to be more commercial than thought leaders. Oliver Wight continues to be the best defining entity to S&OP / IBP. For them, S&OP has been business wide rather than SC for some 20 years at least. The problem with S&OP / IBP survival is less one of innovating and more one of finally deciding to do what has been preached in the desert for decades.
    While it should be business wide, it should NOT be vertically everything. The S&OP needs to remain agregate (families), management level, medium term, monthly buckets, decision and planning.
    There needs to be other, non-S&OP, supporting processes, to detail, execute, control and feedback to the next S&OP cycle.
    One of the biggest mistakes is exactly trying to tightly couple S&OP and the operational processes. Operational processes need to resolve day-to-day problems within a range of autonomy given by the macro-level S&OP.
    Definitely, S&OP needs to adapt to each organization, however, truly adopting S&OP normally means CHANGING the way the organization is managed. If the S&OP is adapted to the point that the important changes are avoided, the organization will be deluding itself, implementing the buzzword to remain the same.
    The Oliver Wight checklist for excellence is NOT a tentative to force one recipe onto all different organizations. It is a very useful compilation of characteristics to force organizations to reflect – “am I doing this?”; “at which level am I doing it?”; “is it a good opportunity for improvement?”; “why is it not appropriate to me?”. It is a great reference for any and all organizations.
    Organizations that honestly use the OW Checklist are surprised by the number of opportunities they identify for improvement. It also serves as a measurement of the progress made over time. Still, each organization continues entittled to define the configuration of its S&OP.
    Yes, technology can tremendously help S&OP with quick scenario analyses and simulations, accurate compilations, etc.. However, in many cases, the technology is really needed in the detailed, daily cycle (or hourly, or realtime) supporting systems. Keeping S&OP at the aggregate, medium term, monthly bucket level, reduces the criticity of sophisticated and complex computer systems.
    Yes, S&OP / IBP requires a specific culture. If the organizations had that culture, their management processes would have evolved naturally to something like S&OP. If an organization needs to implement S&OP, it is because the culture is not that needed for S&OP.
    Unfortunately, rarely the implementations of S&OP identify from start the cultural changes needed and obtain the necessary commitment of top management to change. Starting with themselves and the way they manage the business. Most implementations hope that, given the money and resources to a project team, the process will work. No way to do the S&OP omelet without breaking the cultural eggs.

  6. Thanks for your feedback Daniel,
    Why S&OP can’t deliver on what it has been preaching, is something I’ve tried to figure out for the last 8 years in my blog. I think I’m getting closer to the answer :-).

    I agree S&OP shouldn’t be everything, but I definitely think S&OP can and must be innovated. That innovation is what I miss from supposed thought leaders like Oliver Wight. They deserve credit and have indeed the most extensive checklist, but I haven’t read any freely available innovative S&OP thinking from them for a long time. Similar to the big software sellers you mention, I find more commercial than new thinking with still a supply chain bias.

    One of the biggest challenges remains indeed to connect strategy with execution and you make a great point that companies with an open and integrated mindset would evolve automatically to something like S&OP.

    Therein I believe lies the answer for S&OP to deliver on its promise. An S&OP implementation could be combined with a cultural change program to be more effective. And S&OP can be used to drive cultural change and even employee engagement and well-being.

    That is one of the main points I make in my Foresight article: how to shape a company culture with S&OP.

    We can’t just assume that S&OP works in every company without significant cultural change.

  7. Hey Niels, I really like the thoughts you’ve shared here on S&OP / IBP. I cannot agree more and love that you’ve put in print that “S&OP can’t be approached as a one size fits all, or simply implemented with a template”. Being on the business side of things, I get sick and tired of consultants approaching me with their proven path or rapid deployment solutions. Perhaps for some of the execution activities that businesses have, you can successfully implement the cookie-cutter approach. BUT when it comes to S&OP/IBP and how a business is managed, there are no turnkey solutions out there. Anybody buying that line is wasting money and effort.
    One point that I would like to emphasize that is missed in your article is the importance of implementation. It’s a critical “Moment of Truth” when transforming either your process or technology or both. Organizations will spend months sorting out the best technology and perfecting their processes, yet when it comes time to implement, they don’t execute all that well. And I see two common issues with implementation.
    First, Organizations under appreciate the importance of change management. I work for a very large multi-national that outsources most of their I/T work, and while those external consultants have good strategies for change management, they are ineffective at executing them. They simply do not have the credibility in the organizations, they are lacking the trust.
    Second, Organizations lack sustainability plans. Either they do not put the proper jobs in place to maintain the processes and systems, or they have no thoughts around system sustainability (technology or data). They expect the technology to take care of that.
    Again, loved the read. Just a couple of thoughts that I’d love to get your feedback on.
    Regards,
    Rob

  8. Thanks for your feedback Rob, much appreciated.

    You make a great point for any change/transformation. How do we execute properly what we (think we) agreed?

    I actually did write a lot about how to change and sustain S&OP. My angle is often the behevaioural/cultural change one. I define 4 phases of behavioural change to implement and sustain S&OP. I described them in 4 blogs. Have a look at the first one here: https://supplychaintrend.com/2016/02/22/4-phases-of-behavioural-change-in-the-journey-to-sop-excellence-1/. It has some good references as well, on how to build trust for example.

    I know the angle of behavioural change is not complete and doesn’t answer all of your question, however it is a good start from cultural change perspective.

    What can give you some more insight in proper execution of transformation, is my research in over 75 strategy execution articles and 7 strategy execution frameworks, from which I distilled 5 key themes to get strategy execution right. Have a look here: https://supplychaintrend.com/2016/05/09/how-to-get-ready-to-execute-your-company-strategy/

    From the researched facts in the articles on what makes strategy execution work or not, I created 40 questions which can help a business assess if they are ready to execute their strategy. More important, the survey can assess where the leadership team is not aligned across the 5 key strategy execution themes.

    I think execution always has to be owned by the business. Consultants can make life easier, faster, better structured and give extra knowledge and hands. Consultants can never really OWN the execution.

    Let me know what you think about it.
    If you’re interested, I can share some of the strategy execution survey with you

    cheers,
    Niels

  9. Rob (Jones), Thanks for your comments about change management and sustainability. In addition to Niels comments above, in my individual commentary about S&OP (Part 1 of the multi-part series), I did comment about both of your call-outs, change management and sustainability, we are in total alignment here, here is a link to my contribution where I touch on both change management and sustainability of the process, Sincerely, Jim Biel, The link: https://supplychaintrend.com/2016/11/01/sop-a-vision-for-the-future-the-expert-interview-series-1/

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