Bursa: Dan, with an audience of nearly 40,000 subscribers at Supply Chain Digest, you’re in a unique position to really take the pulse of a wide and influential group of industry experts. Why do you think Sales and Operations Planning has taken on such a high priority?

Gilmore: Well, the number one reason is simply results. You can read study after study, case study after case study, and attend conferences and other venues and the results from a good and effective S&OP process has a big impact on so many supply chain metrics, including customer service levels, inventory levels, and fill rates, as well as a number of financial metrics. The results just speak for themselves. Beyond this, there is a growing recognition that what makes the best supply chains are those whose goals and objectives are the most aligned across the company. Certainly S&OP plays the critical role in making that alignment happen.

And, I also think there is a growing recognition that the companies with supply chains that can respond the fastest to both long and short term opportunities also have a real competitive advantage in the marketplace. Again, S&OP plays a key role in that process. Finally, today with the hyper-competitive market we have and the still challenging economic scenario, there is just so little room for error in how we manage our companies and our supply chains. You are never going to get rid of all the error but S&OP certainly does a good job of getting rid of a lot it. So, for all of those reasons and more, S&OP continues to be a high priority for many, many supply chains.

Bursa: You know Dan, one of the first things you said about aligning those operational plans and activities with the corporate strategic goals…really deserves a minute of discussion. When the executive team gets together they chart out the goals for the coming 2, 3, 5 years and then each of these executives goes back to their teams and rolls out the plans to meet those goals. In this example, let’s say the corporate goal is to increase revenue by 8 percent over the next year.

The next logical question becomes, “how are we going to do that?” What new products, what new markets and how do we marshal the organization in that same consistent direction? I really think S&OP has become the business process that helps companies formalize this ongoing effort and execute this synchronization. It really ties the tactics to the goals and sets a regular monthly checkpoint to measure progress. The net result is better accountability. Are you seeing that as it ripples through the operations team and really on to new customers and markets?

Gilmore: Well, sure. I think the reality of it is that most companies, until very recently and certainly those without S&OP, tend to operate in silos and I think the whole process itself holds objectives, that, as you said yourself, do hold people accountable in a more visible way than I think you are going to be able to achieve without S&OP.

Bursa: With that said Dan…what are some of the keys to a successful S&OP process?

Gilmore: For some companies just getting different functional executives in the same room to talk about issues and problems on a consistent basis is a big step forward. Beyond that getting to a one number forecast that is going to drive all of the operational and sales activities moving forward is key. If you are operating with multiple forecasts, getting to that one number forecast can have a profound effect on your supply chain and company operations.

After that you’ve got to recognize this is a long, on-going process to get from the beginning steps to excellent. The key there is to not declare victory too early in the process. You have to continually improve, you have to look internally and look externally as well. Conduct benchmarking, talk with other customers...to continue to tune your process both in where you start and how you roll this process out across the rest of the organization. The latter point is another key factor, particularly for global or multi-division companies. Just because it worked in one division doesn’t meat if you start to go to Europe or Latin America it won’t start to falter. Don’t rest on your laurels; it is going to take several phases to reach a level of excellence that your competitors might achieve and you have to keep focused on that and not move on to other priorities.

Bursa: That is a great point. We’ve worked with numerous companies around their S&OP process and one of the things I’ve seen in the early stages of an S&OP process is that most companies are highly reactive. They are reacting to things that have happened in the marketplace or to shortages or they are reacting to a customer concern. They are spending a lot of time in the S&OP meetings fire fighting. As companies evolve and get better and smarter, and their data improves, those meetings become much more proactive and more focused on the future horizon. The plans become more aggressive about market opportunity versus addressing issues and firefighting. This is a really exciting transition to see take place.