Without the right approach and structure, sales and operations planning (S&OP) can quickly become more of a burden than an asset.
We’ve put together seven tips to improve your sales and operations planning process so you can avoid common pitfalls, improve ROIs, and develop responsive solutions in real-time.
Identify Your Key Metrics for Individual Segments
What are the most important indicators for your company and industry? Rather than relying on generalized metrics, your team needs to pinpoint the most relevant KPIs for your organization. You need KPIs that echo your company’s objectives and show that you’re on track to success.
Any S&OP process without the appropriate KPIs in place to guide it is likely to produce oversights and lead to inaccurate forecasting.
The right metrics ensure you stay aligned with your goal and bring cohesiveness to your S&OP, so everyone’s on the same page, regardless of their position or responsibilities.
Adopt a Total-Systems Mentality
Every member of the S&OP team should be aware of how KPIs and business metrics are being analyzed and interpreted. Cost-benefit analyses should never just focus on the numbers themselves. You need to understand how each number came to be and how each number affects the rest of the organization.
KPIs guide the sales and operations planning process, but they’ll vary depending on the quarter, manufacturer, or even the individual product line. Adopt a total-systems mentality, and make sure you’re looking at the big picture.
Define an S&OP Hierarchy
Effective S&OP requires proper prioritization and a clear structure. Make sure the executive office is fully informed and on-board with all sales and operations plans before they’re implemented. This will cut down on disruptions and last-minute changes that can slow the entire process.
Ideally, your CEO should be at the top of the strategy, with elected managers below him as designated points of contact for the different teams. Use organizational mapping to delegate core responsibilities and ensure accurate reporting.
While structure is important, keep some flexibility built in. You need this to respond to changes quickly and efficiently.
When establishing roles in your S&OP structure, do your best to maintain alignment across divisions.
Make sure each individual feels like they’re part of one team. Weekly or bi-weekly meetings can help create this. Encourage things that connect people outside of their work.
Failing to establish a team mentality can reinforce silos and lead to great ideas being withheld or unnoticed.
Consider New Product Introductions and End of Life Forecasts
New product introduction (NPI) and end-of-life (EOL) forecasting play important roles in the accuracy of a business’s sales and operations planning. And good forecasting has to take both into account.
If analysts fail to determine the duration and impact a new or ending product will have on your supply chain and revenue, productivity can come to a standstill.
Incorporating NPI and EOL forecasts into your day to day planning strategy does more than just prevent oversights and loss, though. It allows you to predict which products your consumers are most likely to buy and which factors make your top-sellers so successful.
Use Collaborative Technology
Communication is key for a successful S&OP process. Stay in touch with every individual on the team with cloud-based platforms like Google Suite and Microsoft SharePoint. Platforms like these make it easier to share ideas, give important updates, and discuss potential changes from anywhere.
Collaborative S&OP software enables you and your team to create content, manage documents, and communicate with team members all in one place.
This kind of team alignment makes it easy to integrate your plan across the company. It also allows the different departments to give you immediate and constant feedback.
Stakeholders are counting on you to be one step ahead of the market. The best way to make accurate predictions and develop effective solutions is to always have the latest data and inside information.
Keep Data Synchronized
Don’t let your teams draw conclusions and make decisions based on out-of-date or inaccurate data. Ensure your data is accurate and keep mistakes and delayed responses to a minimum by making sure your data is easily accessible and updated in real-time.
Operational silos are your biggest enemy here. And unfortunately, they can arise unintentionally. This is why collaboration and communication are crucial to any successful S&OP plan.
Luckily, technology makes it easy to have open communication across departments and roles, reducing the negative effects of silo mentalities. Connect your CRM to a reliable S&OP software to keep everyone in the loop.
Keep Operational and Financial KPIs Separate but Aligned
Your supply chain and revenue are connected — inventory and products supply customers, which in turn allow you to turn a profit — but you shouldn’t lump them together in your S&OP plan.
The factors that influence operations are often different than the ones impacting your company’s profits.
Consider the impact each one has on the other, but make sure you measure your expenses, returns, and income separately from your operational metrics.
This will help you track progress more accurately and identify risks more easily.
Bringing It All Together
The tactical nature of sales & operations planning provides an opportunity to forecast costs, establish clear profit objectives, and make informed decisions to make those goals a reality.
It can be difficult to master initially, but once you develop a sales & operations planning process that works for your business, you’ll be amazed at how much it benefits your company.
At its core, a good S&OP plan is a powerful tool that can unite a business’s many departments and orient all its divisions around a common goal and a shared vision.
Collaboration and communication will always be the two most influential factors in a company’s S&OP success. By following these tips and taking a closer look at your current operations management, you’ll identify your strengths while also discovering and fixing the areas that need more attention.