Writing last month in Chief Supply Chain Officer magazine, SCDigest editor Dan Gilmore highlight some of the barriers to effective sales and operations planning (S&OP).

“If a company can’t effectively link supply and demand plans, the vision of an “integrated supply chain” is simply unattainable, “Gilmore noted. “Given that the need for effective sales and operation planning is so widely understood, what are the barriers to doing it well?”

Barriers include:

• Forecast silos: Some companies still have simply not embraced even nominally the S&OP model. In these companies, multiple groups (such as sales, marketing, supply chain, and finance) will each have their own forecasts that are barely reconciled.
• Lack of sales participation: This is perhaps the most common complaint among companies that have formal but ineffective S&OP processes, especially if S&OP is driven by the supply chain organization.
• No real incentives and penalties to drive effectiveness: This is a euphemism for “lack of senior executive/CEO support,” but since that concept is so overused, it’s better to think of the issue in terms of whether there are effective “carrots and sticks” that have been put in place to drive cooperation and results in the S&OP processes.
• Lack of the right supporting information and technology support: S&OP at one level is not at all about technology. Companies often can and should begin the process with very basic tools (spreadsheets and the like.) However, to ultimately manage the process effectively, quality information from multiple sources needs to be integrated, and this usually means having baseline statistical forecasts from a demand planning system, a constrained supply plan, and a range of company budgets and financials data, all of which can be combined to understand the implications of various scenarios and trade-offs.

Gilmore adds: “Nearly every chief supply chain officer I’ve ever met has understood the importance of effective S&OP. It is less well understood by senior sales, marketing, and finance executives, and rarely understood by CEOs. Many Chief Supply Chain Officers need to be more active in educating their companies in the value of getting S&OP right, and serving as the champion for integrated and effective S&OP to both their peers in other functions and their CEOs.”

What do you believe are the barriers to effective S&OP? Let us know your thoughts.