The ability to adapt quickly to disruption separates the most successful businesses from the rest of the pack. To seize this competitive advantage, you need a business-wide game plan and visibility to let your entire team work from a single version of the truth. That’s where sales and operations planning (S&OP) comes in.
Effective S&OP enables you to balance supply and demand by bringing together key functions from across your business and synchronising forecasts or plans. With the right S&OP procedures in place, sales, marketing, operations, and finance teams can work together far more effectively to optimise inventory levels and processes. The end results are better cash flow and reduced inventory costs, fewer stockouts and lost sales, shorter lead times and more satisfied customers.
But, how can you harness these benefits and avoid the pitfalls of an S&OP deployment gone wrong? Read on for our best practices for implementing S&OP and enabling continuous improvement that will keep your business agile and adaptable.
1. Lead from the top
Implementing S&OP means a big operational and even cultural change for your business, so prepare for resistance. Bringing your team along on this journey requires you to lead by example from day one. Senior management should be actively involved to sell the strategy and cascade the right mindset and behaviours down through the business. We recommend you:
- Select an executive sponsor to drive the process,
- Clearly communicate why S&OP is a business imperative,
- Model the right behaviours, such as regularly joining S&OP meetings,
- Incentivise and reward behaviours you want to see in your teams,
- Invest in training to ensure employees understand their roles and build the required skills.
Because S&OP touches on so many areas of your business, complexity can quickly spiral out of control. Don’t try to do everything at once. Your executive sponsor might want to start by narrowing your initial focus to top-selling products, largest suppliers, or biggest customers.
Effective S&OP should also be a continuous improvement process, so it’s vital to focus on the long-term — measuring and managing as you go to fine-tune your approach. Encourage ongoing feedback from everyone involved and build a process for incorporating it into your S&OP plan.
2. Establish cross-functional teams
To reap the benefits of S&OP, you need to bring together leaders from across your business. This cross-functional team should meet regularly — at least once a month — to review forecasts, inventory levels, supply chain issues, and customer demand. It’s essential to avoid any empty seats at the table. Absences can lead to missed information, such as upcoming product promotions or recently lost customers, which can throw off forecasts and impact performance.
As the old saying goes “if you aren’t measuring, you aren’t managing”, so it’s also vital to agree on the right key performance indicators (KPIs) to track and judge your progress at these meetings. Key metrics to monitor include:
- Inventory turnover ratio,
- Demand forecast accuracy,
- Stockouts and overstocks,
- Supplier performance,
- Service levels,
- Product discounts or write-offs.
You can make sure all your teams are working towards common goals and that decisions are made with a comprehensive understanding of their impact across the business with regular meetings. The process of continuous review also allows for quick responses to market changes, supply chain disruptions, or shifts in business strategy.
3. Ensure accurate data
Accurate and up-to-date information is the backbone of effective S&OP. To enable precise forecasting and data-driven decisions, S&OP should bridge the flow of information across your business and break down silos with one set of data.
Share data across departments so everyone in the S&OP process is working from the same page and can make better-informed decisions. Access to high quality data also enables you to focus S&OP discussions on facts, not myths, driving transparency and accountability.
While this is a complex area, begin by considering your approach to:
- Data management: To ensure S&OP is driven by the latest information, you need to collect, process, and store data efficiently and accurately. Aim for centralised data storage, a strict governance framework, and automatic validation processes.
- Data-driven forecasting and planning: Make forecasts more accurate with advanced analytics tools that provide immediate insights and the ability to simulate different business outcomes.
- Data refreshes: Establish automated processes and monitoring mechanisms to keep information up to date.
4. Invest in new tools
Effective S&OP stands on three pillars: people, processes, and technology. The whole endeavour will collapse if any of these pillars is missing or off-balance.
We wouldn’t recommend focusing on technology first, since even simple tools like shared spreadsheets or basic enterprise resource planning (ERP) systems can be used to good effect if you have the right people and processes involved. That said, a patchwork of S&OP spreadsheets and systems can become a liability for bigger businesses. If your team is spending a large amount of time gathering and checking data from across departments, then consider more advanced tools that can help you enhance and streamline the S&OP process.
There’s no one-size-fits-all approach to S&OP tools. It’s vital for any solution to suit the unique needs of your business operations. Don’t opt for solutions that need to be forced into your existing processes, or huge deployments that go far beyond the scope your business requires. Ultimately, technology and automation should make your operations quicker and easier — not more complicated.
Consider simplicity as well. Don’t opt for a solution that will suck up more of your IT team’s scarce time or require your staff to go through a long period of training. Target easy-to-use solutions that can be quickly deployed in weeks and days, not months or years. To ensure teams engage with and use your S&OP tool, ongoing adjustments should be equally quick and simple to do. Keep an eye out for the ability to integrate seamlessly with your existing ERP system. Cloud-based solutions can also reduce the demand on your IT management, while enabling real-time data from across your business to be combined more easily.
We can help!
Fast to implement, easy-to-use and highly scalable, our cloud-based inventory management software wraps in powerful S&OP capabilities that many competitors only offer as a costly extra. Our S&OP tool can easily adjust to your business processes, helping you drive real-time visibility across the supply chain and twist data in many different ways to make the most informed decisions possible.
As well as offering cutting-edge capabilities in one risk-free subscription, our software-as-a-service solution requires no infrastructure investment and frees you from additional IT management headaches. A dedicated customer success manager will also be on hand to help you reach your long-term goals with the right guidance and training.
Learn more about how we can help or book a personalised demo.
