As a result of increasing volatility in demand many companies are busy implementing Sales & Operations Planning. They try to get beyond balan- cing forecasted demand and manufac- turing volumes and incorporate finan- cial budgets and business scenario. What should companies consider to get to a next level in S&OP? Supply chain consultancy Involvation and Supply Chain Movement created a compre- hensive mindmap to give a practical overview of all the aspects to consider for improving S&OP. Mindmap S&OP MINDMAP MANUAL Industry Main driver Type Complexity S&OP maturity Data gathering Demand planning Supply planning Pre-meeting Executive meeting Current Ambition Assessment COMPANY PROCESS 1 4 # Supply # Sales # Finished Products # Components Central Decentral Develop Operational plan Demand/supply matching Profitability Business orchestration Long Term Mid Term Short Term 1. Update files 2. Generate data 3. Analysis of data 4. Disseminate data Make To Order Make To Stock Hybrid Oliver Wight Involvation others Baseline Events Internal External 1. Demand sensing 2. Demand shaping 3. Demand shifting Utilization Flexibility Skills/competencies Shift schedules Performance (OEE) Other production facilities Contract manufacturing Bottleneck materials High Middle Low Volume impacts Value impacts GAP analysis vs. business plans Unconstrained Constrained Identify issues Develop scenarios Internal External Customer orders Customer forecast Bussiness assumptions Push/Pull point Components Forecasting Bussiness assumptions Capacity Scenarios Internal Experts Converging Diverging Pipeline Variants Risks Complexity level Review pre-meeting decisions Continuous improvement Decide on issues KPI’s Accountability Summarize actions Disseminate actions Matching demand and supply Set agenda for executive meeting Mindmap creators: ses, we observe that the step from level 2 (demand-supply matching) to level 3 (profitability) is the most dif- ficult one. Many companies stumble and S&OP remains a supply chain driven process with non-committed stakeholders and non-binding agree- ments. Valuable but not optimal. Why is getting to level 3 so difficult? Firstly, the owner needs to change from supply chain to the P&L owner. Supply chain has to “let go” and the P&L owner must take accountability. Secondly, the focus has to shift from volume to value and to financial business drivers. Finance must be involved and should claim a key role. Good preparations and finding the right allies can reduce the jump from 2 to 3 to a feasible step… The critical resource: people… Do we need new tools? Maybe. Very often however, there is already a gap between the systems in place and the people using them. Advanced tools can create extra problems instead of solving them, unless people are brought up to the challenge. Only the right balance between implementing advanced tools and developing professional people will give real added value by reaching the next S&OP maturity level. Sponsor Owner Coordinator Non-compliance or apathy Grudging compliance Compliance Commitment Participants Calendar Frequency Format agenda Documented Availability Consistency Hierarchy Internal Training External Training Consultancy The Fresh Connection Oliver Wight Definition Easily accessible No ERP One ERP Multiple ERP Short term forecast tools Long Term forecast tools Scenario support Production planning Scheduling Volume/value conversion Online scenario capabilities ERP Demand Planning Supply Planning Executive tools Business Intelligence tools INFORMATION ORGANISATION 2 3 # Sales/Supply units # SKU’s # Bill to customers Footprint Management type Ownership Commitment Competencies Data Systems Meeting structure S&OP to the next level The central questions are whether and how to bring S&OP within your organisation to the next level. An S&OP journey can be triggered by significant internal or external changes or by increased pressure and performance requirements. We believe in a growth model where the necessity of the next step is always driven by the added value of the next maturity level. S&OP as a mindset Why is S&OP so popular at the moment? Is it a hype? S&OP is not new, but there are valid reasons for the increased interest for it. E.g., the financial crisis put more pressure on working capital. Many companies found out though, that aligning activities for structurally freeing up capital proved much more difficult than expected. Is S&OP the solution? Partly, because it drives the required alignment within your company. A solid S&OP process is therefore an ongoing requirement. The right process, data and tools therefore are important, but the overriding prerequisite is an S&OP mindset. Once S&OP is a common and shared mindset, you will have created fertile ground for sustainable and cross-functional alignment. Biggest challenge in S&OP maturity Why are so many companies strug- gling with S&OP? Looking at the different maturity pha- Supply Chain Mindmapping One set of numbers Reliable Standard reports Reproducibility Product Geography Customers Time SUPPLY CHAIN MOVEMENT, No. 1, Q1 2012 32 SUPPLY CHAIN MOVEMENT, No. 1, Q1 2012 33 next level S&OP