A report by Gartner revealed that two-thirds of businesses do not progress beyond the first two stages of the four-stage maturity model for adopting sales and operations planning (S&OP) capability. The reason, says Trevor Miles, director of thought leadership with Kinaxis, has something to do with the multi-functional nature of S&OP. "Most people find it difficult to span across those functions and share information," he says. "Most analysts will tell you that it's 70 percent process, 20 percent people and 10 percent technology."
Miles describes the effort to transcend traditional corporate divisions as "crossing the Grand Canyon." Individuals find themselves struggling to "force-fit the sharing of information by spreadsheet." The fact that so much of that data is out of synch contributes to the distress that accompanies its sharing. "People don't trust the information from other functions," Miles says, "and therefore are less willing to share. That is the big barrier."
Companies further find it difficult to implement S&OP because they have yet to define basic terms like "sales" and "operations" as they relate to the organization. Things get even more complicated where external partners are involved, a common scenario given the popularity of outsourcing.
Managers need to understand the nature of an operational forecast. Miles says the term involves collaboration between market-driven and operations-driven organizations, including the understanding of disparate incentives. They don't have to be identical across departments - procurement might still need to focus on long-term contract pricing, while manufacturing is concerned with maximizing asset utilization. The key, says Miles, is to have in place a "mechanism for understanding the consequences" of an accurate forecast. "Let's understand how all those interact."
To achieve that goal, companies must consider a number of "what-if" scenarios, not to mention classic chaos theory and the so-called "butterfly effect" - the notion that a tiny change in one place has enormous impact throughout the system.
