In Monday’s post, we presented JDA and Oliver Wight’s 10 myths of S&OP planning, as laid out in recent white paper. Tuesday, we presented their 10 realities of S&OP planning. Yesterday we reviewed the first five myths and realities and offered our own verdict. Today we tackle the final five.

1. Myth: S&OP is just another executive meeting.

   Reality: When executives take control of the process, they define the information that they need. Graphical views of aggregate information (both qualitative and quantitative) are crucial to an effective S&OP process.

   Verdict: Yes and no. Graphical views of aggregate information are crucial to identify overall trends, historical and projected future, and to quickly identify where reality is diverging from prediction, but hard numbers are going to be needed when it comes time to determine how much a plan is off and how much it needs to be corrected. And executives will define what they want to see, not necessarily what they need to make a good decision. That’s why supply chain needs to lead the process, and why supply chain analysts need to dive in and figure out how to present the executives not only with what they want, but the critical information that is needed to make a good decision.

2. Myth: S&OP relies on a fixed demand plan or statistical forecast.

   Reality: Demand-shaping strategies and scenarios are evaluated through the monthly S&OP cycle. Executives need to evaluate different scenarios to identify and compare
   the effects on Key Performance Indicators (KPIs).

   Verdict: This is dead-on. Good S&OP uses good modelling and analysis tools to come up with good projections and good plans for presentation, discussion, nudging, and acceptance.

3. Myth: S&OP processes are too complex and difficult to manage.

   Reality: Winning companies are collaborating with their trading partners.

   Verdict: Yes, but it’s not trading partner data, but POS data that is the most critical. This gives the most accurate view of historical and current demand that can be used to analyze the current plan. It’s only relevant that your supplier can only supply 30,000 units if you actually need 50,000. If you only need 20,000, your need can be met, and how many more units your supplier can supply is irrelevant.

4. Myth: The finance team is just going to override any S&OP plan that we create.

   Reality: The new paradigm for S&OP incorporates financial analysis into each key step.

   Verdict: Not sure where this myth came from, as it’s usually marketing, sales or manufacturing that tries to override the number. Finance just wants a seat at the table. They will accept whatever plan is accurate, as that will allow cash flow to be optimized in such a way that the greatest benefit to the company is achieved.

5. Myth: S&OP can be solved with the implementation of a tool.

   Reality: S&OP must have a combination of people, processes and tools working collectively.

   Verdict: Correctemundo.

So what’s the final verdict? Three realities were dead-on. Two were completely whacked. SI couldn’t make sense of one. Three more were only half right. And the last one was ok. SI gives it a C-. While there was obviously some thought and effort put into this paper, and it is worth a read, it would appear that it fails to remember that supply chain is central to successful S&OP (execution), data- and numbers-based analysis is critical to success, and one-size does not fit all, especially for certain categories of fast-moving consumer goods.

In Monday’s post, we presented JDA and Oliver Wight’s 10 myths of S&OP planning, as laid out in recent white paper. Yesterday, we presented their 10 realities of S&OP planning. Today we review the myths vs. realities and offer our own verdict on the first five myths and realities.

1. Myth: S&OP process should be owned by Supply Chain.

   Reality: S&OP is an executive process that must be executive-owned and led.

   Verdict: It definitely must be executive owned, but it should be CPO/CSCO led. Supply Chain has to get the goods in and ensure they are pushed out to where sales and marketing needs them, when they need them. And Supply Chain has the most to lose by not ensuring the process goes smooth. The CEO won’t have the time, the CFO will focus on cost, and the end result could be that no department will have their needs met. The CMO will be overconfident and / or overly risk averse and build up too much inventory. The COO (Product Management) will be overly focussed on product quality and not product delivery. And so on.

2. Myth: S&OP is a tactical real-time process.

   Reality: Advanced S&OP is an aggregate planning process that occurs monthly.

   Verdict: S&OP must look at the aggregate, must look out into the future, and must be strategic, but it must also look at the high-volume items, must treat the short-term and long-term differently, and must adapt in near real time if need be. And monthly is not appropriate for fast moving / short life span consumer goods such as seasonal apparel, cell phones, and trend-based products. S&OP for fashion must be done weekly, over a three to four month sales window. Cell phones must be done weekly, especially just after launch, over a three to six month window. Etc. And if a major campaign is launched, or a competitor releases a brand new product that goes head-to-head with yours, the plan will need to be immediately revisited.

3. Myth: S&OP doesn’t dive into the details.

   Reality: Aggregate plans from S&OP are translated as necessary into detailed product management plans.

   Verdict: This is correct. For low-volume items, or items with steady, level, sales, plans will not need to be revised or detailed often. But for fast-moving consumer goods, detailed plans will be required. This reality is on target.

4. Myth: S&OP is really just a review of historical data.

   Reality: S&OP is a fact- and assumption-driven process, not a numbers-driven process.

   Verdict: WTF? Are they serious? Not a numbers driven process? The facts must be numbers based (such as, we have historically sold 100K cans of paste a month and we expect this new marketing campaign to increase sales 20%). Facts are based on data, and data is numbers — not gut feelings. And assumptions are based on upcoming actions, that are expected to impact sales — a number — in a definitive way. Plus, you NEVER ignore historical data. It’s your baseline. If nothing were to change, your sales would stay the same. This reality is from another dimension.

5. Myth: S&OP is limited to quantitative views of supply, demand and financial plans.

   Reality: Fact and assumption management and the qualitative aspects of S&OP are more important than the quantitative aspects.

   Verdict: Again, WTF? I don’t get it. The whole point of S&OP is to come up with a sales plan that dictates expected demand over time to allow supply chain to define detailed volume and delivery timelines. This is extremely quantitative. And assumptions might need to be altered over time, so a baseline is needed to test what the impacts of an alteration would be. This reality is also from another dimension.

Tomorrow’s post will tackle the last five myths and realities.

In yesterday’s post, we stated the top 10 myths of S&OP as defined by JDA and Oliver Wight in a recent white paper. Today we define the top 10 realities of S&OP planning. Tomorrow we will review the myths vs. realities and decide what is myth, what is reality, and what is the real deal. But first, here are the:

Realities

1. S&OP is an executive process employed to plan and manage the business that must be executive-owned and led.
2. Advanced
   S&OP is an aggregate planning process that occurs monthly to ensure all company plans and strategies are aligned over at least a 24-month rolling planning horizon.
3. Aggregate plans from S&OP are translated as necessary into detailed product management plans, detailed demand and replenishment plans, and item-level supply chain and production plans over the planning horizon.
4. The focus of the S&OP process is on the future: the rolling 24-plus month planning horizon. S&OP is a fact- and assumption-driven process, not a numbers-driven process.
5. Fact and assumption management and the qualitative aspects of S&OP are more important than the quantitative aspects of the business plans.
6. When executives take control of the process, they define the information that they need and how they need to see it to make smart decisions.
7. Demand-shaping strategies and scenarios are evaluated through the monthly S&OP cycle.
8. Winning companies are collaborating with their trading partners more closely than ever before.
9. The new paradigm for S&OP incorporates financial analysis into each key step of the S&OP process.
10. S&OP must have a combination of people, processes and
    tools working collectively.

Now some of these are obviously realities. But are all of them realities? Or are some of them perceived realities through rose coloured glasses which look a lot different with the rose coloured glasses off? We’ll provide our take on the myths vs. realities in our next two posts.

A recent white paper by JDA and Oliver Wight attempted to set out the top 10 myths and realities of Sales & Operation Planning. According to the authors, these are the

Myths

1. The S&OP process should be owned or sponsored by the demand planning or supply chain function.
2. S&OP is a tactical, real-time process that enables the quick identification and response to problems as they arise.
3. S&OP deals with product families and a fixed hierarchy.
   The devil is the details and S&OP doesn’t go there. So that doesn’t really help us.
4. S&OP is really just a review of historical data. There is no ability within the process to do any simulation of suggested changes, let alone compare a differing scenario to the optimal plan.
5. S&OP is limited to quantitative views of supply, demand and financial plans. Just look at the numbers and you’ve got what you need to support decisions.
6. S&OP is just another executive meeting; nothing really ever comes out of it. Decisions made in the meeting stay in the meeting and rarely get executed.
7. S&OP relies on a fixed demand plan or statistical forecast. It doesn’t emphasize how we may need to shape demand up or down to meet business objectives.
8. S&OP processes are too complex and difficult to manage — especially when trying to systematically incorporate external trading partner feedback into the internal consensus demand and supply plans.
9. We spend so much time striving to create a perfectly balanced supply and demand plan, yet too often it’s a futile exercise. The finance team is just going to override any S&OP plan that we create, so why bother?
10. S&OP can be solved with the implementation of a tool. Just configure the software and turn on the “black box”.

Now some of these are obviously myths. But are all of them myths? We’ll review the crux of the realities in the next post as a first step in our effort to understand to what extent these are myths and to what extent they are just minor misunderstandings.