In our Tuesday blog post summarizing our conversation with Sales & Operations Planning (S&OP) expert Donald McNaughton of Oliver Wight, we shared his thoughts on industry adoption, the process stages and maturity levels of S&OP, and the advantages companies have realized from doing S&OP well. In the second installment of our conversation on “S&OP done well” McNaughton offers insights on the potential impact of cloud computing, how to get started on an S&OP process and what stumbling blocks to avoid.
SCN: For those companies who have a formalized S&OP process in place, how many are using S&OP software to automate the process? Are their results appreciably better than for those companies doing it manually or with spreadsheets?
McNaughton: About 50 percent of companies with formal S&OP programs use purpose-built S&OP software, with most of the rest using spreadsheets. Those without S&OP software report spending the majority of their preparation time manipulating data rather than being able to do value-added analysis and scenario planning. This becomes an invisible barrier to higher level deployment. They tend to be unable to go beyond the capable / problem solving level of maturity. This impacts the effectiveness of the S&OP process and the quality of the results derived.
In comparison, those companies who have deployed purpose-built S&OP software and have effectively integrated people and behaviors, as well as processes and technology, tend to have more mature S&OP processes characterized by problem prevention and strategic deployment. Use of the software allows them to be more efficient and effective in the S&OP process so they can do the analysis and scenario planning that tends to yield better business results.
SCN: How will the advent of cloud computing impact S&OP?
McNaughton: There is a direct correlation between technology and the speed to maturity of the S&OP process. As we discussed previously, the objective is to move through the five stages of S&OP maturity as quickly as possible because it is at the problem prevention and strategic deployment phases where differentiation and competitive advantage are achieved. (See the time-to-value chart below)
Historically, deploying an S&OP process required a great deal of time, resources and capabilities. This slows down the progression through the maturity curve and often bumps up against the invisible barrier I mentioned before. This is especially true when deploying S&OP across multiple regions, divisions or business units.
In fact, most S&OP deployments tend to be global with companies wanting to align and synchronize their operations across their extended enterprise. A cloud computing infrastructure would allow them to more quickly and easily make changes in standards and update practices across the enterprise. You have to remember the objective is to evolve and adjust processes in order to move to more advanced S&OP processes where the real benefits are achieved. Cloud computing will facilitate this process.
Time to Value – An S&OP Maturity Journey
SCN: For those companies who are not yet doing S&OP in an organized program, how would you recommend they get started? What stumbling blocks should they be looking out for?
McNaughton: The founder of our company, Oliver Wight, always stressed that “commitment without understanding is a liability.” Therefore, the biggest stumbling block for S&OP deployment is a lack of understanding of what “it” is. Senior management may hear that S&OP is a hot topic among their peers, so they tell their staff to go and deploy “it.” But S&OP is not something that staff or lower level project teams can deploy and get any benefits from. It is an ongoing process by which senior management manages the business. Thus, senior management must be in charge of and run the S&OP process.
It follows that the first step in S&OP deployment is educating senior management on what S&OP is and what best practices are for running an S&OP process. As with most corporate initiatives, management commitment is critical to success. But going back to “commitment without understanding is a liability,” senior management must understand what they are committing to and that takes education. There are plenty of outside resources available to help educate senior management on the S&OP process and what the best practices are.
Once senior management understands the S&OP process and best practices, S&OP becomes the monthly process they use to manage the business across the extended enterprise. Typically they will begin with one region or business unit and as they become more experienced and move up the maturity curve, expand usage across the enterprise.
But again, I want to stress that each new deployment should begin with the proper education of senior management and their commitment to the process. Because done well, S&OP enables companies to significantly improve internal alignment, trading partner collaboration and corporate financial results, but without senior management understanding and commitment, it will be a lot of work with little gain.
To read our previous JDA Expert Insights interview with Donald McNaughton, click here.
JDA Software Senior Vice Presidents of Manufacturing, Distribution & Retail, David Johnston and Wayne Usie, invite you to the upcoming JDA Innovation Forum’s in Chicago, New York and Santa Clara.