Joe Shedlawski of JSF Associates says there are two key capabilities needed for a company to become more demand driven: more accurate demand signals and shorter cycle times. A well-run sales and operations planning process can help accomplish both, he says.
"S&OP gets companies thinking ahead and longer term, rather than being stuck in the daily 'burning crisis' issues," Shedlawski says. "It gets them looking at trends in demand patterns so they can project future imbalances in supply and demand, analyze gaps and take proactive measures to solve problems before they become acute." Companies with a longer-term view will have time to make other contractual arrangements or to add capacity and manpower if problems arise, he says. Those caught in short-term thinking will have problems sneak up on them, "and then the only way to fix them is the expensive way."
Unfortunately, many companies execute S&OP incorrectly and, as a result, they fail to reap these benefits, Shedlawski says. "Often companies view S&OP as a way to get incremental change, but that is not its purpose at all. Its purpose is to change culture and processes and, to a smaller degree, to change technology."
Rather than focusing on incremental change using existing processes, top management needs to create aspirational goals that the company is not yet able to achieve, then employ S&OP to remove barriers that stand in the way of achieving those goals, says Shedlawski.
The prevailing idea that S&OP is just too difficult and time consuming is a myth, he says. "Once established, an S&OP process actually saves time. The monthly review and update of demand and supply and of projected revenues and balances will prevent the company from having to go through an extensive annual budgetary process, because the work will be done and maintained on a monthly basis," he says. These meetings do not require top management to review every piece of data, Shedlawski notes. "Top management needs only to look at problems that are not resolved at a series of lower level meetings. By the time top management gets an issue, their decision-making will be supported with facts and alternatives that have come from these previous meetings."
