In this short video, Steven Thacker and Rob O’Byrne explain what Sales & Operations Planning (S&OP) is all about.
They answer key questions:
- What IS Sales and Operations Planning?
- What is it NOT?
- Why do it?
- What are the benefits of S&OP?
- How do you know if you need S&OP?
Rob O’Byrne and Steven Thacker explain in this VIDEO what S&OP (Sales and Operations Planning) really is, and is not!
Rob: You know one of the things that you can do with Supply Chain Management to get the greatest benefit, if you’re not already doing, it is implementing sales and operations planning, also known as S&OP. Hi, this is Rob O’Byrne and today I’ve got one of our gurus on sales and operations planning, Steven Thacker, so thanks for coming along.
Steven: Rob, my pleasure.
Rob: And I thought I’d get Steven along for a bit of an interview and to really ask the question what really S&OP all about, and really just you know in a very short video, give us the essence of what it is. So I mean one of the first questions is, obviously, what is S&OP?
Steven: Very good. Thank you Rob. One of the key dramas with S&OP is that there’s too much confusion about what people think that it is. Some may think that it might be software or it might be something quite convoluted and complex, its structured and it’s rigid but in essence, S&OP is just a process, it’s a very clever process, and it’s a well proven process but it’s a process by which organizations govern and more particularly, plan their future.
Rob: Okay that’s good, I mean I often say to people it’s almost a communication process because it’s really cross functional isn’t it.
Steven: It’s absolutely cross functional you can’t assumed that S&OP is a supply chain issue, it’s not driven by supply chain, it’s a whole business where everybody effectively gets on the same page with one set of numbers and drives the business forward with an agreed plan that everybody’s sticking to, marketing, sales, procurement, everybody in the entire business is all in the one page.
Rob: Okay so if that’s what it is. What isn’t it?
Steven: Very good. So very often people think that it’s about software or it’s about something else to do with supporting infrastructure and it’s just simply not. The key essence of it is designing a process by which everybody in the business contributes to a single plan which escalates through the business to the CEO, so in essence its bottom driven and driven up, its not the top driven down. It’s a plan by which the CEO can guide his business, not something that everybody’s messing around with them working on their own plans.
Rob: Okay so I mean if people are watching us and thinking do we need to do S&OP. Why do businesses do it?
Steven: The reason businesses do it is because in order to get to a certain destination, the analogy is like jumping on a jumbo jet and charting a course to a certain destination, everybody’s got to be agreed on what destination is but the pilot is the one that’s charged with getting the whole plane in safely the passengers there and supporting him or a whole team of other people. But unless they’re all on the same page and making changes along the way as winds change, as weather change, as traffic congestion changes, sometimes you can end up with everybody think your winning up in different locations and that happens in business. If you’re going to surveys of business executives and you are asking about the destination of the business and how to get there, you’ll get all kinds of different ideas. S&OP aggregates those and consolidates those one plan, everybody on the same plan.
Rob: Yeah, I like that airplane analogy so if that’s why we should be doing it what are some of the key benefits that you’ve seen?
Steven: So the real key benefits in an organization are almost text book in my a “Reduction of the inventory,” coupled with their customer service, and better customer service usually means an increased growth, so there’s an association there, and the other thing which is kind of intangible so those you can measure, but the intangible benefit is that the working environment is significantly different, there’s no much tension there’s no much stress, people are working together more evenly in the business and that’s noticeable.
Rob: Other some symptoms that people could look out for? You know the typical signs that would indicate S&OP as a requirement?
Steven: Typically yes, you will find things like high inventory or poor customer service or departments not working together and departments working off their own spreadsheet out in the corner somewhere, not an integrated plan and a business is finding it difficult to be responsive to a dynamic environment within to change it very quickly are usually symptoms that you will notice.
Rob: I know I’ve work with a lot of businesses over the years where they have you know inventories blowing out, they’ve got a lot of slow and obsolete moving stock. Is that a fairly typical symptom?
Steven: Yeah very much so, very much so.
Rob: So what do you think are some of the critical success factors for getting that right?
Steven: So there are a couple and there are two fundamentals and number one from our experience and from lots of others throughout the world that issue material on this stuff, the number one’s key success factor is getting the head of the business to agree that this is the way that the business needs to be run and the second one that runs along with that is having, I keep on saying this, but one set of numbers everybody is agreed that this is how we are going to do business they’re the top two.
Rob: So if people are watching these and are thinking, well, you know maybe we ought to embark on the S&OP programme. Well what’s involved in doing that? Do they just jump in and buy a system or it’s not about system is it?
Steven: And that’s the key message it’s not about systems, it’s about understanding that it’s a process. You know what Rob not every business is ready for it today, and too many think that its flavour of the month or somebody else is doing it and we should, and we should launch into it and inevitably it fails and the reason that it fails is that they don’t understand the quite significant time and effort that’s required to do this properly so before you embark on this, for goodness I get somebody to assess whether you’re ready and to tailor a plan to make it work for the peculiarities of your business.
Rob: Okay, and does it suite any particular size of business? I mean is this something that’s really just for big businesses, you know 500 million plus turn over or is it something that small businesses should do as well?
Steven: This is for every business in terms of size and it doesn’t matter whether you are a distributor, or a manufacturer or an importer or even a service business, it still works.
Rob: Okay. Well that was S&OP in a nutshell. I think we need to talk a lot more about this and we’ll maybe produce some more material and videos cause it’s quiet an in-depth topic certainly, but hopefully that’s given you an insight into what it is so Steven thanks for your time for explaining it.
Steven: No problem, pleasure. Thanks Rob.”
For more about how we can help you with S&OP, just go here: Benchmarking Success – Sales & Operations Planning
Or Contact Steven directly: Email or +61 408 120 758.