Key Point: A Sales and Operation Planning (S&OP) meeting is a meeting to design the future course of a business. Yet, too many companies spend too much time talking about the past or the current period. I recommend using about 60-70% of the time discussing the future.
The (S&OP) process consists of a lot of leg work to support the three main meetings: Pre S&OP Demand, Pre S&OP Supply, and the S&OP meeting itself. (OK, some companies have a fourth one: The Executive S&OP meeting). The whole process is designed to allow a company to make the best possible plan for the future based on current estimates, as well as prepare for certain contingencies via what-if scenario planning. However, things do not always turn out this way.
I was in the S&OP meeting of a prospective client as an observer a few months ago. At the outset, I was introduced as the outside party and a remark was made to remind everyone to “behave themselves”. The meeting started quite serenely; an agenda for the next 90 minutes was presented by the coordinator and the next 20 minutes were spent discussing some of the key metrics over the last 3 months. At this point, we turned our attention to the current period. Immediately, the VP of sales made a comment about how unhappy he was with the amount of order promise to one of the customers. It was never said, but I had to assume this was one of the more important customers (Either that, or it was the favorite customer of that particular executive.) Regardless, the VP of Operations defended this decision from his team and pointed out that the forecast that was provided earlier in the month forced this decision. At this point, a comment was made which implied this had been done before to this particular customer and it was not fair. At which point a counter-comment was made that suggested what was not fair was that the sales teams had not provided the right forecast.
At this point, someone reminded the room of my presence as the observer. A few quick glances were thrown at me and then the meeting resumed. But 5 minutes later, we were back discussing the same issue albeit about a different customer. And then a point was raised regarding the business not holding enough inventory to support the demand. This was answered with a polite pointing out of the inventory and cost targets as set by the top management.
On and on we went until we had no more than 20 minutes left for the meeting at which point someone decided to make the move to discuss the future plans. We spent a few rushed minutes looking at a few slides and then we called the meeting done.
Upon reflection, this was not the worst S&OP meeting I have attended. Even though Arkieva is in the software business, I have had the good fortune of being invited to consult on many S&OP processes. And this is what I invariably see: the time allocated to discuss the future plans is less than a third, and in some cases, less than a fifth of the total time allocated. In the absolute worst case I witnessed, the meeting ended in a chaos without even opening the discussion on the future.
I know these are bad examples and I surely hope that most S&OP meetings are not run this way. I think an allocation of 20% or even 33% of time to discussing the future in an S&OP meeting is just not enough. I think most of the time should be allocated to the future. What is most? Well, technically 51% gets us to that definition. However, I feel the time devoted to discussing the future during an S&OP meeting should be in the 60-70% range.
Start the meeting with a quick review of the key KPIs on the past. When I say key KPIs, I also mean select a few. Focus is all about deciding what not to do, and excluding certain KPIs provides that focus. Once done with the past, load the key KPIs about the current state. Ideally, you have taken no more than 30% of the time discussing these two items. At which point, spend about 50% of the time explaining the most likely plan, followed by about 20% of the time explaining the what-if plans. Take questions throughout the meeting so they can be answered within the context of that moment’s discussion.
If you spend too much time on the past and the present, you will end up with a very ineffective S&OP process. In the words of the famous bard, that way madness lies.
How is your S&OP meeting time spent? I am interested in hearing from you.