From the Diary of a Supply Chain consultant
by Ian Pilkington and Blanca Perez
Like any business process, during implementation there can be many pitfalls that can hinder progress and many times cause key stakeholders to believe this is not the process that they need. This will cause failure of the process and many missed opportunities that S&OP can deliver any organisation and their supply chain.
Below we have turned the lessons learned into positives when talking about the potential pitfalls in the S&OP implementation. Here the 7 most common to avoid:
1. Setting S&OP as the objective itself
We have seen this time after time in different size organisations - S&OP as a key objective to achieve on a company’s strategic plan.
S&OP is a means in order to achieve different objectives, such as growth, Inventory optimisation, improved customer service and others, it’s a means to an end, not an objective in itself.
When companies set the broad objective of deploying S&OP, it drives them to ask the question: has an objective that benefits the business been made clear? Do we know what this process implementation will deliver? It’s really important to understand what S&OP will be able to deliver, it can’t be seen as a “silver bullet” that will magically fix all your business issues, however there has to be a real business urgency/gap that S&OP will fix. How else can we determine whether the implementation is successful? And how else can we expect functional support in buying into the idea without understanding the benefits it will drive? To drive success we need to define what success looks like.
2. Not trusting the process
S&OP is a process that requires development and maturity, although the steps are very standard for implementation each company has to adapt the process to their own business model in order to be successful. The beginning of S&OP deployment is rarely smooth there are several cycles that need to run in order for the process to mature and to be able to identify the potential flaws in the process in order to improve. Some companies do not let the process breathe, first cycle is not perfect – the assumption is that the process is not working. S&OP implementation is like water - as you work on it, develop and engage your process will find it’s own level, so trust the process, let it breathe, work on development and mature it, the process will find it’s level.
3. Not Establishing KPI’s dashboard
This third pitfall is linked to previous two pitfalls, once you have defined what success means, then having the ability to measure and define the right KPI’s (key performance indicators) will be crucial. Something that we always suggest to our clients is to ensure the KPI means something to the business and provides information, value and drives improvement. I remember in the past working with an organisation that had at least 50 KPI’s for the S&OP process, how is this sustainable? Not only did the metrics clog the process and did not drive improvement but also the work required to report this amount of metrics was unsustainable and made the S&OP process a failure.
Having a KPI dashboard that is aligned with the key metrics that drive results at each stage of the process will make your process more meaningful and streamlined. KPI’s need to drive performance and improvement and be forward looking, if your KPI’s are looking to the past then you will always be late to take appropriate action.
4. Assuming S&OP is a Supply Chain only process
Time and again I have come across an S&OP deployment in which Supply Chain is assumed to be the lead. This is not a wrong assumption as Supply Chain plays an essential role in the process. However too much of supply chain can hinder the collaboration of other functions. S&OP is a collaborative process by nature. S&OP is a forward looking process, that will drive decision making, however if you only have one view of the process from the perspective of supply chain only, then the focus will be based on the past and looking at service failures. Instead of limiting S&OP process to one function, focus on engagement through building a process structure that aids structured learning and functional collaboration.
5. Setting too short of a Horizon
Previously we discussed how S&OP is a forward looking process, there are several planning horizons taken into consideration when deploying S&OP and setting goals. Planning levels are related to S&OP maturity. If the focus of the process is focused on short horizon, the decisions that this will drive will be very tactical and reactive in nature. When horizons are that short the business will not be able to influence demand, the ability to make decisions limits as you may be missing red flags and opportunities later on your timeline.
6. Not driving decision making
The beauty of the S&OP process is the ability it provides to make decisions in a timely manner. Do I need capital expenditure to buy more machines? Should I bring in more people? When should I bring them? Will suppliers have the ability to keep up with my future demand? Should I develop an additional supply source? Is there opportunity to grow in a different market? A Good functioning S&OP is like having a “Magic 8 Ball” as it will allow the stakeholders to make informed decision making.
The nature of this process is to drive Sales Opportunity prioritisation, closure actions identifying Supply risk mitigation actions and therefore drive decisions to close the gap between these two. When this is not understood by organisations then S&OP becomes just another meeting and it will undoubtedly fail.
People often underestimate the importance of the “pre- S&OP” meeting or reconciliation meeting. This is one of the keys stages as it is this point when the team gets together to decide in a collaborative manner what scenario/ solution to present at the executive level that will drive decision making and enable actions.
7. Lack of preparation.
S&OP as a process is simple but not easy. As we mentioned at the beginning stages a lot of work is required. From having the appropriate training at the right level, to establishing milestones for success and defining roles and responsibilities. Once the process is launched, each stage of the process requires a degree of preparation. One common mistake of the S&OP leader we have seen in industry, is the expectation that “nothing” needs to be done in between each of the stages. Things don’t magically happen, the role of the S&OP leader is to facilitate the process and additionally to ensure the tasks between stages are completed and there is value at each meeting. Is not about creating never ending slides packs but sticking to the process and ensuring it will deliver value. As with every process in life it’s all about 80% preparation 20% perspiration.
Hope this tips are useful, good luck in your journey. If you want to learn more you can contact us:
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