A formalized approach to Sales and Operations Planning (S&OP) can raise the success of an organization. It ties together front-line sales and marketing plans with back-end supply and operations plans. As such, S&OP is sometimes referred to as aggregate planning, with the goal of improving interdepartmental coordination, policy optimization, operating efficiency, and profitability. All of this is possible, but it requires that department heads meet regularly to develop integrated policies, plans, and decision processes to optimize overall organizational performance. Herein lies the problem; most organizations don’t do this, or at least not wholeheartedly.
The Gartner four-stage S&OP maturity model
A few years ago, Gartner developed a helpful four-stage S&OP maturity model to help organizations gauge their S&OP maturity and framework. Researchers found that 67 percent of firms struggled to get beyond the second stage of S&OP maturity. The stages of the model are as follows:
- Laggard (Gaps and Inadequate Systems)
- Lack of clarity throughout the organization with little to no functional alignment.
- Inadequate systems, insufficient supplies, and latency in reporting and planning.
- Fundamental (Minimally Integrated)
- Demand forecasting may be in place, but not sufficiently integrated for effective front-end/back-end execution.
- Decent system integrity, but analytical and reporting capabilities are inadequate or inconsistent.
- Established (Consistent and Aligned)
- Planning process is consistent and reliable.
- Demand forecasts are used effectively to reconcile supply and demand.
- Senior managers are engaged in the S&OP process, and performance metrics are aligned to achieve the best total value.
- Scoreboards detail results, supply and demand plans can connect on a single system that integrates with ERP.
- Leader (Fully Integrated in Real Time)
- Demand planning excellence stems from internally and externally reconciled supply and demand plans.
- S&OP culture is standard among executives and management teams.
- Best-of-breed planning modules offer real-time alerts for accurate reports and better, faster decision making.
How everyone benefits from S&OP excellence
“…even companies that have been using S&OP for years may not be reaping all the benefits it can offer.” PWC
S&OP excellence can benefit the entire organization and beyond, including employees, senior management, investors, supply chain partners, and customers. Effective S&OP helps organizations minimize errors and inefficiencies, align goals and objectives, spot new opportunities, and respond more quickly to changing market conditions.
To maximize S&OP effectiveness, organizations should take care to ensure the following:
- Break down silos.
- Integrate disparate data sources.
- Collaborate across functional departments.
- Engage what-if testing and scenario planning to optimize supply and demand planning.
These steps help management get a clearer picture (in real time) of internal ops, and of the supply chain as a whole. Supply chain managers cut downtime, speed throughput, and improve operating efficiencies. There is less time wasted on data entry and system latency, and more confidence in knowing that informed decisions come without delay or disruption, leading to optimized inventory, improved fill rates, happier customers, and a potentially substantial ROI.
To manage growth profitably, organizations need to invest time and resources in S&OP to improve inventory levels, lower operating costs, and improve cash flow and profitability.
About Vanguard Software
Vanguard Software introduced its first product for decision support analysis in 1995. Today, companies across every major industry and more than 60 countries rely on Vanguard Software’s Integrated Business Planning (IBP), forecasting, and advanced analytic cloud platform. Vanguard Software is based in Cary, North Carolina.