S&OP quite often the wrong horse

You won’t have missed it: S&OP is a trending topic. There’s no escaping it. If you’re not in, then you’re out! Right? Well, I would be the last person to deny that effective S&OP is essential to successful business. The question, however, is whether you are ready for it. Does your company meet the conditions of effective S&OP?

Preventing surprises
Regularly I come across companies where grip on the primary process leaves is lacking. Customer delivery reliability is far from perfect, while inventories are still increasing and Operations works overtime. Meanwhile Operations reproaches Sales with an unreliable forecast, while Sales in her turn accuses Operations of being unreliable and rigid. In short, not a very constructive situation. Then the escape to S&OP is made easily. For in her simplest form S&OP promises to prevent such surprises by monthly coordination between Sales and Operations. A safe bet, isn’t it?

Life is what happens while you’re busy planning
Sometimes it is. But not always. Experience teaches us that regularly the primary process actually appears to be out of control. In one case the push/pull point has been chosen unfortunately. In another case the bottleneck lacks a time buffer or demand variation is admitted to production unfiltered or even amplified, thanks to our much trusted supply models. More control, for example by means of S&OP, irrevocably leads to disappointing results in such cases. For you cannot control a process which is out of control. To be able to control a process it first has to be controllable.

Ferrari in reverse
Imagine enterprising as a winding mountain road and your company as a Ferrari in reverse. You have two options: 1. a passenger to inform you of coming bends or 2. first to turn the Ferrari in the right direction. No doubt you will choose option 2. In reality, however, many organisations will choose option 1. They leave the existing “out of control” process undisturbed and choose extra control. Instead of reviewing their control concept they choose S&OP. That way they bet on the wrong horse with disappointing consequences.

Control first
S&OP may have proven itself to be an essential part of successful enterprising, but before you give in to it, it is worth the trouble of wondering whether your company meets the conditions of effective S&OP. In other words: is your primary process controllable and are the symptoms mentioned in the second paragraph unknown to your? If so, put all your stakes at S&OP. If not, make sure that your primary process is truly controllable before you try to control it.

Alex Tjalsma is partner with Involvation, supply chain consultancy