Four tips for successful S&OP implementation

It remains difficult to set up an effective Sales & Operations Planning (S&OP) process. Above all, companies struggle to gain crossdisciplinary support.

By Marcel te Lindert

At the international S&OP conference organized by Marcus Evans from 8-10 February at Hotel Radisson Blu in Amsterdam, European experts shared numerous practical tips for achieving cross-disciplinary engagement. Four of those tips are outlined below.

Tip 1: Secure sponsorship at board level

Without the support of senior executives it will be difficult to implement S&OP successfully. According to Neil James, who up until recently was responsible for S&OP at GlaxoSmithKline (GSK), active support is often limited to just one board member. At GSK, however, he benefited from the support of two: the supply chain director and the financial director. “After all, S&OP is relevant for the whole company, not just the supply chain. As an added advantage, the two board members are role models for the rest of the organization. The way they work together sets a good example for everyone else involved.”

It is important that board-level sponsors also invest some of their own time in the S&OP process rather than merely turning up at the S&OP meeting at the end of each monthly cycle. “We included our board members in our training programme. They too need to discover how they can benefit from the process, and that’s only possible if they know how it works,” says James.

Tip 2: Give someone from Sales the project manager’s role

GSK made several earlier attempts to implement S&OP, without success. “On all the previous occasions, we approached S&OP too much as a supply chain project rather than a companywide one. For us, the key to success was making a commercial manager responsible for the implementation project. And even the name itself can affect the outcome. We didn’t talk about S&OP, but rather the ‘core commercial cycle’,” explains James, who was in fact the project manager with a sales background.

What also helped at GSK was the fact that it had become more difficult to sell. “We had enjoyed a time of very high margins and very high inventories, so as the commercial team we could cope with a weak process. It wasn’t until things got tougher that we realized how essential it was to make fundamental changes,” states James.

Tip 3: Keep forecasting simple

85 percent of all CEOs demand better forecasting, according to Thomas Holm from the Danish consultancy firm Implement Consulting Group. “In most cases, it’s an illusion that the accuracy of the forecast can be further improved. As a result, companies invest a lot of energy in something that doesn’t add any value. That’s why you should keep the forecast simple, to reduce the workload.”

In Holm’s experience, the Supply Chain department tends to make models as complex as possible. Ideally, they want forecasts at item, customer and country level. “Everyone likes simple forecasts, apart from Supply Chain. It often makes much more sense to forecast at a higher aggregation level than at the very lowest level of detail. The outcome is often the same with a lot less work involved. Furthermore, scientific research has revealed that complex models often don’t deliver that much extra, plus they have a key downside: no one can explain them, which makes it difficult to gain trust and commitment within the company.”

Tip 4: Keep the workforce informed

How do you keep everyone engaged with the S&OP process? The answer: by informing them about its results. GrandVision organizes an hour-long ‘town hall meeting’ for all employees during each S&OP cycle to update them on the latest developments. What is the current performance? Are expectations being met? And is the company still on track to award the end-of-year bonus to all employees? “You shouldn’t be afraid to share bad news too,” advises Marloes Jonker, Global S&OP Lead at GrandVision. A town hall meeting shouldn’t last more than an hour. People who can’t attend it in person can listen in via Skype. “Make sure that a different member of the management team leads the meeting each month – so not just from Supply Chain or Sales, but also from Human Resources for example. That’s a good way to show everyone how important it is to tackle this together.”