Build a more effective S&OP process
Updated: Sep 2
For DIAGMA, S&OP (Sales and Operations Planning) is a process for steering and accelerating companies' growth, as well as their profitability. We have developed an original, customizable S&OP approach built around 5 pillars, ranging from defining Supply Chain strategies and objectives to the rapid implementation of the process. Here is the second aspect of our approach, on the effectiveness of the S&OP process itself.
HOW TO MAKE YOUR S&OP MORE EFFECTIVE?
In another article on the Strategy pillar, DIAGMA emphasized the alignment between business strategy and Supply Chain strategy. The associated KPIs (revenue, EBITDA, cash, service level, etc.) thus become the targets to be achieved through the S&OP process.
In the following lines, we will dive deeper into the pillar related to the S&OP process itself and how to make it more effective.
FROM THE 5 STAGES OF THE "STANDARD" S&OP PROCESS...
S&OP is a process based on cross-functional collaboration (in other words, multifunctional). It is robust, structured, and sequenced around 5 monthly sessions:
Product Portfolio Review
Demand Review
Supply Review
Pre-Executive Review
Executive Review
This process allows you to project yourself against the budget and objectives. But more importantly, you develop business-accelerating scenarios, with an environmental component if desired, and compare them to choose the most suitable ones. The goal is to boost your results and reach, or even exceed, your objectives and/or your budget.
... TO AN S&OP PROCESS ADAPTED TO YOUR COMPANY
Many works detail the S&OP process and how to implement it. However, to move from theory to practice, this process needs to be adapted to your company's needs.
Making your S&OP effective requires a detailed observation and understanding of several aspects:
Business and Supply Chain Governance,
Industrial and logistics footprint,
Role organization charts,
Company culture.
Only this analysis makes it possible to define an S&OP suited to your needs. We also recommend incorporating insights from a benchmarking exercise on the practices of the most effective companies in S&OP.
EXAMPLE OF S&OP PROCESS ADAPTATION
How should the Executive Meeting be structured in a company where the Regional Division (rather than each country) is responsible for the P&L? One solution is to sequence 3 distinct and complementary sessions:
An Executive Review at the country level.
A 45-minute exchange session between each country and the Regional Division. The goal is to take stock of the country's business health. It is also an opportunity to share with the Regional Division any potential needs for additional funding to accelerate the business. Remember that it is the Regional Division that holds the financial resources.
An Executive Review at the Regional Division level, which consolidates all the countries' needs and quickly selects the best actions to fund.
A PROCESS LIGHTER THAN IT SEEMS
Is the S&OP process heavy and resource-consuming? Quite the opposite. It helps make the company more efficient!
In fact, when well adapted and organized, S&OP eliminates many formal and informal alignment meetings between different functions in the countries and in the Regional Division. Likewise, it eliminates impromptu one-on-one interactions held in hallway conversations (or on online platforms) or over coffee (a real-life experience!), which are never accounted for.
As a result, at a lower operational cost for the organization, S&OP brings the best business scenarios to light. It also facilitates informed and transparent decision-making by the Steering Committees responsible for the financial result (P&L).
A UNIFYING, STRUCTURING, AND MOBILIZING PROCESS
S&OP is a unifying, structuring, and mobilizing process for the entire organization when teams bring forward the best business ideas and, in return, the Steering Committee is accountable to the teams for its decisions, encouraging action and implementation.
In the next article, we will discuss the importance of robust business processes.
And you — how is your business management process structured? Is your S&OP process effective?
We would be happy to discuss this topic with you!
GET IN TOUCH!
Note: this article was originally published by Diagma at: https://diagma.com/construisez-un-processus-sop-performant/
