One reason why so many companies today are implementing S&OP concerns the benefits it provides. When companies get excellent results from S&OP, people feel good about it. They tell their friends in other companies; the word gets around.
Executives who use it become true believers in the process. As they move from one division to another or from one company to another, they take S&OP with them. They believe it’s too good not to use.
Let’s look first at hard, quantifiable benefits, which include:
- higher customer service
- lower finished goods inventories
- shorter customer order backlogs, hence shorter lead times
- more stable production rates, hence higher productivity
- shorter supplier lead times
- reduced obsolescence
- reduced premium freight costs
Just for the record: these are real world results, not blue sky. I’m currently working on a new book, Sales & Operations Planning: Best Practices, due out in about six months. It’s a compilation of the actual experiences of over a dozen companies that are leading edge users of S&OP, and they are reporting the benefits cited above.
One of the soft (non-quantifiable) benefits is better teamwork. If you implement S&OP in your company – and do it right – you will experience enhanced teamwork at both the executive level and with operating management. The increased teamwork results from the holistic view of the business provided by S&OP. Here’s a quote from the president of a major U.S. based pharmaceutical company: “This process enables my staff to see the business through my glasses.”
Another soft benefit: greater control of the business. A vice president/category general manager in a leading consumer packaged goods company stated: “Before we had S&OP, I used to spend lots of time turning knobs that weren’t connected to anything.” What he meant was that the decisions he made at his level may or may not get translated down to the real world: the plant floor, the customer order department, the shipping dock, and so forth. This gentleman went on to say: “It’s a lot better now; S&OP connects the knobs.”
And another soft benefit: S&OP provides a window into the future and thus enhanced decision making. It’s uncanny, but executives and managers in companies with S&OP can see future changes in demand sooner than they could before. The have more time to respond and thus can manage more proactively. A CEO, at the conclusion of a pivotal Executive S&OP meeting where some very major decisions were made, turned and said to me: “Tom, when I think back to a year ago, before we had S&OP, I wonder how we were able to run the business without it.”
Coming up in the next issue of Supply Chain Digest: the future of S&OP. What will it look like in five years or so?
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