Sales and operations planning – commonly known as S&OP – is an integrated management process that seeks to optimally align and synchronize demand with supply (i.e., maximize revenue while sustainably managing costs). Developed in the 1980s, the business value from a successful S&OP implementation has been known to include improved profitability (2% or more), lower inventory (up to 15%), and more timely and effective new product launch cycles. In spite of its positive potential, we often hear that the road to full benefits is strewn with unforeseen obstacles. These include lack of strategic direction and/or little active participation from senior management, insufficient collaboration among the functional participants, and cries for shared accountability.
Historically, achieving S&OP benefits has been a continuous process journey, and for many supply chain professionals, there has been a tendency to focus on the data, the systems, and the processes in order to improve. Although these components are critical enablers of effective S&OP, they do little to describe the way people actually make decisions and successfully enable and sustain change. With this in mind, perhaps it’s the “soft stuff”– credibility, WIIFM (What’s In It For Me?), or organizational engagement, and ownership – that enables optimal results.
It Starts with Credibility
Credibility is comprised of two components: trustworthiness and expertise. In the context of S&OP, credibility begins with the S&OP leader. Credible leaders are shining examples of trustworthiness and applied expertise in action. When things go wrong, they see issues as opportunities to improve, instead of reasons for blame. When the team is met with seemingly insurmountable obstacles, they often have a ready-made suggestion on how to move forward. Through the power of their people skills and their understanding that the “soft stuff” is just as important as the process and technology, they lead by influencing outcomes, as opposed to wielding direct authority. Finally, their expertise is broadly recognized, routinely sought after, and openly shared.
We’ve all seen credible leaders in action, but how often do we screen the S&OP leadership role against these criteria? Best practices suggest that S&OP should report to the CEO, supply chain, or a profit center, yet complaints regarding process outcomes persist. Although there may be a correlation between successful S&OP and reporting structure, we seldom find the organizational chart reflects how people actually behave. In our experience, we have found that establishing an environment for successful S&OP outcomes has much more to do with credible leadership than the team members’ reporting structure.