Idiom – A Tough Nut to Crack: A problem that is very difficult to solve. Cambridge Dictionary
Sales and Operations Planning (S&OP) is over 30 years old. I have been studying it as a researcher for 15 years. With the rise of the global multinational, S&OP increased in importance as a way to align and drive organizational balance. In parallel, as shown in the attached infographic, challenges to do it well increased.
Companies struggle to do it well. The lack of skilled resources is an issue, but executive understanding is a more pressing and fundamental issue. Too few companies understand that the supply chain as a complex system with finite and nonlinear relationships between the metrics. Companies also struggle to get to data. The average company has three to five Enterprise Resource Planning (ERP) systems and two to three Advanced Planning Systems (APS), data access is an ongoing challenge.
While many companies have implemented solutions for demand and supply planning, the ability to visualize executive decisions and to evaluate alternative, or “what-if” scenarios, is an issue for 76% of companies. Today, companies do not have one S&OP solution. Instead, they average four processes with many companies having more than ten discrete processes.
S&OP improves organizational alignment and drives agility. Improvements happen faster when there is organizational balance between commercial and operations teams, and the process reports to a profit center manager. Roughly one in two companies is out of balance, and the organizational functional gaps are the largest between commercial and operational teams. Last month, I interviewed Fran O’Sullivan, General Manager of IBM. Fran believes that the gap between sales and operations closes faster when organizations create “T-shape managers.” Fran defines a T-shaped manager as a person that has excelled within a function, but also has cross-functional experience. Fran believes there is no substitute for cross-functional experience. I agree.
This organizational and functional barrier is tough to overcome. It is even worse when the organization lacks an executive team that understands how to drive cross-functional process improvement.
A second and fundamental issue is the lack of technology to model the supply chain.
The use of technologies to model a feasible plan is not as common as most people would like to believe. Many organizations still rely on spreadsheets with no understanding that a complex supply chain cannot be adequately modeled using a spreadsheet.
So, in a nutshell, S&OP takes time and a focused effort to perfect. It happens over many years. Start by actively tackling the issues. While it cannot be a technology project, companies cannot achieve S&OP maturity without technology modeling.
What do you think? We would love to hear from you. The Infographic is based on insights from four years of research studies. Have we missed anything?
Our journey to better understand S&OP continues. This month, we will publish our 2015 Handbook on S&OP Technologies in our monthly newsletter. In addition, we are continuing to study effective S&OP processes through our quantitative studies. We want to understand the differences between an effective and a non-effective processes. We would love to get your input. If you answer our S&OP survey, we will share the aggregate results with you and your team.
Life is busy at Supply Chain Insights. We are working on the completion of our new game—SCI Impact!—for the public training in Philadelphia in August and the content for the Supply Chain Insights Global Summit in September. Our goal is to help supply chain visionaries, around the world, break the mold and drive higher levels of financial improvement. The conference will feature case studies on supply chain transformation, digital transformation and insights from supply chain leaders on the Supply Chain to Admire analysis. We find that companies that have reached better alignment with their financial teams have higher levels of financial results.
About the Author:
Lora Cecere is the Founder of Supply Chain Insights. She is trying to redefine the industry analyst model to make it friendlier and more useful for supply chain leaders. Lora has written the books Supply Chain Metrics That Matter and Bricks Matter, and is currently working on her third book, Leadership Matters. She also actively blogs on her Supply Chain Insights website, at the Supply Chain Shaman blog, and for Forbes. When not writing or running her company, Lora is training for a triathlon, taking classes for her DBA degree in research, knitting and quilting for her new granddaughter, and doing tendu (s) and Dégagé (s) to dome her feet for pointe work at the ballet barre. Lora thinks that we are never too old to learn or to push an organization harder to improve performance.