Anyone who has tried to take an organization through a change knows how difficult and time-consuming it can be. A change that deals with implementing technology or changing the way the transactions are done are still easier compared to one that deals with changing the way the future of the company is planned. Implementation of Sales and Operations planning is usually a difficult task for this reason; there are many readily available horror-stories out there. It is also extremely difficult to convince the powers that be to invest money into making such a change. Let us explore how one can go about making the business case for a proposed S&OP project.
Here is the definition of S&OP from Wikipedia: Sales and operations planning (S&OP) is an integrated business management process through which the executive/leadership team continually achieves focus, alignment, and synchronization among all functions of the organization.
Notice the words focus, alignment, and synchronization in the definition. That essentially means that there are many departments involved in S&OP, many of them with conflicting objectives. There are many people involved with different personalities, attitudes, working styles, and compensation structures. There is often, if not always, an inherent conflict between near-term good and short-term good.
Now notice the word integrated in the definition. This implies that the S&OP process needs to bring these different people, attitudes, objectives, and somehow align them so that the entire organization is rowing together in harmony, and presumably in the same direction. This is not an easy task by any means.
The word alignment is key in all this. Align with what: the core purpose of the business, the business strategies, etc. This allows a framework to simplify this complex definition. S&OP process provides a way for this alignment as well as to measure the success with reference to the overall business strategy that the leadership has set for the company. Now let us acknowledge that at some level, the raison d’etre of any business is to make money by providing value to the customer at the lowest possible cost. A business is always trying to balance the supply chain triangle of cash, cost, and service. If the business strategy is to be service-driven towards the customer, then the emphasis on the cost needs to typically be moderated. If, on the other hand, the emphasis is on being the lowest cost provider, then one might have to sacrifice some service. And of course, like any well-run business, one would want to balance these competing objectives in a way that is optimal for the whole, not just the parts.
Once the alignment is achieved, then the task of monetizing the benefits can begin such that any improvement can be weighed objectively. If there are benefits that cannot be monetized, they probably can still be mentioned to capture the essence of the benefit. Depending on the business one is in, one might have to use appropriate methodologies such as discounted cash flow or payback period.
Last but not least would be the question of presenting this information to the powers that be. Some companies have specific forms that they want to see being used; others may use a balanced scorecard approach. One needs to use the appropriate form which increases the odds of final approval.
In our upcoming webinar, on the topic of building the business case for S&OP transformation journey, Dr. Bram Desmet will present some of these ideas. That will be followed by some discussion between Bram and I and we will end by taking your questions. Hope to see you there.