J O U R N A L O F

BUSINESS FORECASTING
2 0 1 0 | F A L L V O L U M E 2 9 | I S S U E 3

4 Revitalize Your S&OP

Eric J. Tinker

13 Executive Sales & 18 Supporting Complexity 20 Next Generation of

Operations Planning: Cost and Risk S&OP: Scenario Planning
And Benefit Analysis Larry Lapide with Predictive Analytics
Tom Wallace & Digital Modeling
Gregory L. Schlegel and Peter Murray

Journal of Business Forecasting | Fall 2010 1

Revitalize Your S&OP
By Eric J. Tinker
E X E C U T I V E S U M M A R Y | The article provides an overview of S&OP, where it fits in the overall business planning
process, and discusses seven specific levers that the readers can act on to improve their S&OP process right away. The article also
describes tips and techniques that can be used to track S&OP improvement in an organization.

E R I C J. T I N K E R | Mr. Tinker is the Principal at Nexview Consulting and helps organizations in the
implementation and improvement of Sales & Operations Planning. In a consulting capacity over the last 15
years, in addition to S&OP, he has helped many organizations in areas of demand planning and forecasting.

4 Journal of Business Forecasting | Fall 2010

Y ou may vividly remember the hard
work that went into implementing
your Sales and Operations Planning
family level over a rolling planning
horizon, which is typically 12 to 24 months
(in some cases even longer). The length
process—consensus building, designing, of the planning horizon is driven by the
report writing, and/or training. Perhaps longest lead time item and the horizon
you also remember the time you spent required for financial planning at the
fixing the S&OP process you inherited. product family level. Some characteristics
Despite all that effort, people are losing and benefits of S&OP include:
interest in the process, or are finding that
• The same plans are used throughout
it is just not delivering to expectations.
the organization;
What can you do about it?

We all know that improving S&OP is • A structured collaborative framework

a continuous process. The definitions provides clear accountability for the
and versions of S&OP have varied various components, and the results of
widely across the organizations that underlying planning processes;
I have consulted with. Those at the • Senior Management leads the
forefront have tightly defined the process;
process that includes a calendar-driven
series of product-family level meetings • Discussions are exception based;
that integrate medium- to longer- • Financial gaps are managed while
term operational, sales, and financial there is still time to do something
planning. These S&OP meetings link about them;
the business plan on one end with the
more detailed supply chain planning • Discussions and decisions are
processes and subsequent execution on aligned across functions and fit
the other. Some mistakenly call anything with the strategic direction of the
having to do with supply chain planning company;
S&OP. To avoid this confusion, the term
• Business performance is managed
“Executive S&OP” is emerging (perhaps
across the enterprise;
introducing some confusion with the
Executive S&OP meeting), others are • Results are typically delivered by
branding new terms such as “Integrated focusing on the underlying planning
Business Planning”. processes or supply chain execution;

• Provides a platform for continuous

OVERVIEW OF improvement; and

S&OP • Cultivates leaders and enhances

team work.
An extended discussion of the S&OP
process and its components is not the While each situation is different,
subject of this article; however, I will implementing or improving an S&OP
provide a brief overview. S&OP is a series process can produce improvements
of meetings, typically held monthly, of 5% to 25% in such areas as working
that bring together the sales, operating, capital reduction, reduction of obsolete
and financial plans and functions of the inventory, transportation, production
company. These plans and the discussion and material costs, time to market, and
around them should be at a product- sales growth.

Journal of Business Forecasting | Fall 2010 5

 Figure 1
Fig Where S & OP Fits

Executive
Mgmt System

Exec S&OP

The “S&OP Layer” is a series of typically

monthly product family level meetings
in the planning hierarchy that sit
Supply Portfolio between Business or Strategic Planning,
Consensus Pre-S&OP Review and the more detailed planning and
execution processes.

Demand
Consensus

Detailed Supply Chain Planning Processes and Execution

The monthly S&OP cycle typically • Supply Consensus (or Review): company (or division management
comprises the following components This review uses the unconstrained in larger companies). This meeting
(See Figure 1): demand plan from the Demand reviews and confirms the overall plan
Review and confirms that the supply proposed by the Pre-S&OP team, and
• Portfolio Review: This is especially
plan meets demand, or if not, identifies is often rolled up to the company or
important for those companies with
constraints. These constraints are held division level. It also addresses decisions
many SKUs or rapidly changing product
as exceptions to be discussed in Pre- that require executive approval due to
portfolios. The objectives here are to
S&OP. A Vice President of Operations their nature or financial implications.
examine the fit of the product portfolio
often owns this meeting. The meeting is owned by the CEO or
with company goals and to ensure
changes to the product portfolio are • Pre-S&OP: This is the meeting where General Manager and is often worked
coordinated with demand management the rolling 12 to 24+ month operating into a monthly executive meeting.
and throughout the supply chain. plan comes together and exceptions Today, many companies have
Concerns are recorded and discussed are resolved across functions. implemented some form of S&OP, but
later in the S&OP process. A Vice President The operating plan is usually a
few can say that their S&OP process is
of Marketing often owns this review. consolidated view of sales, production,
functioning as effectively as they’d like.
and inventory by month on a volume
• Demand Consensus (or Review): Nexview Consulting conducted a survey
and dollar/currency basis. Analysis of
This is a confirmation of unconstrained of companies varying in size across
exceptions, alternatives, scenarios, and
demand at the product-family level and manufacturing industries (Consumer
financial implications is completed
a meeting that identifies and discusses Products, Life Sciences, Automotive,
prior to this meeting, so that the issues
plans to close sales gaps relative to High Tech, Chemicals, and Other
can be dealt with effectively.
financial or budgetary commitments. Manufacturing) and found that meeting
A Vice President of Sales often owns • Executive S&OP: This meeting is effectiveness was the top challenge
this meeting. held with the top management of a across the categories shown in Figure 2.

6 Journal of Business Forecasting | Fall 2010

 KEY LEVERS FOR REVITALIZING THE S&OP PROCESS
A concerted effort to examine a few a vision consisting of statements such as Figure 3 |
Fig

key levers can go a long way in getting the following: Key Levers to Revitalize Your
your process back on track for serving S&OP Process
• We understand that S&OP is an
as your company’s primary platform
aggregated and coordinated planning
for integrated business planning and Vision
layer above the detailed supply chain
continuous improvement. The levers we’ll KPI Use Sponsorship
planning processes. We will identify
examine are shown in Figure 3.
several key gaps in the underlying
processes, but won’t address them as
Vision part of this project. (This statement
Technology Design

helped us control scope.) Reports & Organizational

Aligning people behind a commonly Tools Alignment

understood vision is a critical component • All business units will participate in

to any improvement effort. As there S&OP.
are many misconceptions about what
• We agree that we will use a consistent
S&OP is and is not, it’s important that
process and set of tools. • We will measure operational KPIs
constituents understand what S&OP can
and cannot deliver. For an S&OP leader, • We agree that we will have a viable (Key Performance Indicators) in the
a clear definition of the vision can help and sustainable way to aggregate data S&OP meetings to drive performance
to manage the scope and expectations at the brand level and will produce a improvement.
of key stakeholders. The vision could be rolling 18-month plan.
I suggest that you also encompass
a carefully worded statement of your
• The S&OP process will be the key input business results within your vision.
desired goals or could be a set of six to ten
into the budgeting process. Creating a vision with statements such
statements that characterize what you
want to achieve with S&OP. In a recent • S&OP will be used to stabilize the as these will help to measure success
project with a major consumer goods organization’s roles and define along the way and define success at the
manufacturer, the project team created accountabilities. endpoint you specify. The vision also

Figure 2 | Nexview Consulting Survey of Top Challenges with S&OP

Fig

Underlying Processes Exec Sponsorship

10.9% 4.4%
KPI Use & Results Participation
13.0% 15.2%
. .
. .
. S&OP Design
S&OP Understanding
10.9%
. 16.2%

Meeting Effectiveness
. . IT Support
4.4%
19.6%

. Meeting Content
6.5%

Journal of Business Forecasting | Fall 2010 7

helps to rally people around a set of A question that often comes up is who VP of Supply Chain: This is certainly a
common goals and outcomes. would be the best executive within an natural choice if your organization has
organization to champion the S&OP this role. Make sure that he/she has the
process. Several could play this role, some necessary influence with the commercial
Sponsorship thoughts are below. side of the business.
An executive sponsor is critical for
CEO, President, or General Manager: VP of Manufacturing / Operations:
a successful S&OP process. Without
Sure, easy to point to and say the CEO A traditional sponsor in many
executive sponsorship, your process will
should be the sponsor. He/she leads the organizational structures, and perhaps
be led by middle management and likely
executive team across the functions, so
will not be the true decision-making a good fit. Remember though that this
it seems logical that this person should
process that drives the business. Your leader will likely already be on board with
champion the process. This is great if the
executive sponsor should: the process, and if you pick someone else,
top leader is inclined to take on this role.
you’ll have at least two strong supporters.
• Help to communicate the vision of the Many times, the top leader will delegate
One caution here is to ensure that S&OP is
S&OP process—what it should be and the official sponsorship of S&OP to
not seen as an “Operations Thing”.
how it will benefit the company; someone on his/her staff, but support it in
the background. If your top leader doesn’t Chief Information Officer: CIOs often
• Ensure S&OP receives executive support S&OP, then it’s probably best have all the business tools to go along
attention and resources throughout to live today and fight the S&OP battle with the technology piece, just make
the company; another day. sure he/she has the influence across the
• Leverage S&OP to clarify accountability; Chief Financial Officer: Often this is business. S&OP can’t be seen as an “IT
a great choice. More and more CFOs Thing”.
• Coach and mentor the S&OP leader/
coordinator and challenge the working are regarded as the CEO’s right-hand
Other Executive (e.g., Engineering): In
team to continually improve the person and are leading cross-functional
rarer cases this could be appropriate on a
process and business results; performance improvement across the
case by case basis if the person has cross-
company. Since S&OP is integrated with
• Help to align with other regions and functional experience and influence
financial planning, the CFO becomes a
aid the flow of the regional information across the business.
good choice.
to the global process (if the process is A person in any of these roles could be a
VP of Sales or Marketing: Often the
an input to the global process); and good fit, provided that he/she has a broad
hardest executive to get on board and
• Coordinate (and/or require) the dedicate time to S&OP. If your leader here experience and a good understanding
integration and promotion of S&OP has a good cross-functional orientation of all aspects of the business, is well
at the regional level (if your process is and is a fit, you’re ahead of many in respected, and has influence across the
the global process). this game. business.

DESIGN AND ORGANIZATIONAL ALIGNMENT

The S&OP process should be aligned to the meetings flow, and who owns them. Executive S&OP?
the organizational and financial reporting
Some key design considerations include: • Is the monthly calendar or time
structure. If you feel some awkwardness between the meetings aligned? It
due to misalignment of your process with • Do we have all the components of can be a challenge to make sure that
these items, or if you have had recent S&OP that are right for our business, the next group in the sequence has
structural changes in your organization, such as Portfolio Review, Demand enough time to incorporate the output
you likely need to revisit your design, how Review, Supply Review, Pre-S&OP, and of the prior meeting.

Journal of Business Forecasting | Fall 2010 9

• Do we have the right people leading topic that is going on in the company. meetings. There isn’t time or tolerance to
the meetings and the right people I don’t mean to turn this into a project work issues on the fly or delve into SKU
participating in each meeting? Does status, but giving someone 5-10 level or order level details. Preparedness
everyone have an active role? You minutes of visibility may be a booster is the key for all the S&OP meetings.
may consider having the facilitator for them and informative for the Exceptions need to be analyzed and
of the next meeting in the room to others, plus there may be integration scenarios developed before the meeting.
give him/her a heads up as to what is points where help is needed
• Examine how well the Executive S&OP
coming. For example, you may want throughout the supply chain. If you
is integrated into the overall executive
to have the meeting facilitator from do this, it must be tightly managed
management system of the company. I
the Supply Review in your Demand (i.e., no working the problem in this
often suggest that Executive S&OP be
Review meeting so that he/she knows meeting).
integrated with the monthly executive
in advance what is coming.
– Have a rotating executive attend staff meeting, where the management
• Should we have a single meeting with this meeting periodically. Perhaps he/ team addresses other topics in addition
multiple divisions or parallel meetings she can give an executive update or to the planning and management of
that deal only with one division? There insight into something the group is the business. While the business may
are pros and cons of both approaches. interested in. This will show executive not always need an S&OP-related
What you don’t want is more than support to your Pre-S&OP team and executive decision, you always have
one meeting sponsor. If production will allow your executive to see more a need to confirm the summary level
facilities support multiple commercial of the process in action. Perhaps operating plan and have a need to
units, you may want to have a demand use it as an “upward educational review the top level KPIs.
review for each commercial unit, but a opportunity” if necessary.
If one thing isn’t working, try something
common supply review. Remember, all the S&OP meetings else; don’t expect a different result by
• Pre-S&OP can often be the most are exception-based and senior-level continuing to do the same thing.
difficult meeting to structure and
execute. There are lots of participants
(often too many), lots of opportunity
to go down the rabbit holes, lots of
opportunity for a long meeting, and
REPORTS
lots of opportunity to lose people.
When reviewing the S&OP process for • Exceptions highlighted, or perhaps
Here are some ideas that may be
areas to improve, take a critical review the full operating plan reports are
appropriate in your organization to
of reports currently used. Many reports only used for back-up and a quick
liven up the Pre-S&OP meeting:
can be overly complex and difficult to view of totals, and a separate report is
– Aside from the core group, invite understand. S&OP best practice reports generated to highlight only exceptions
only those who are needed to address should include: (e.g., imbalances in supply and demand
exceptions. They should come well- such as negative inventory, inventory
• A consolidated view of sales,
prepared to resolve the issues as above a threshold, or deviations from
production (or supply), and inventory
opposed to talking about them in the budget exceeding some programmed
(make to stock environment);
meeting, then wanting more time to threshold)
investigate. • Monthly buckets that cover a
• Volume and currency versions of
reasonable amount of history and the
– Rotate groups in and out of the reports.
rolling planning horizon forward;
meeting so they are only present for
The use of a Meeting Charter and Action
their relevant parts. Rotate business • Product family level and usually one
Log can also make meetings more
units or other delineations that make level higher (such as region, division, or
effective. The Meeting Charter is a simple
sense. company) for Executive S&OP;
written document that specifies such
– Discuss an ad-hoc improvement • A row that shows the original budget; things as meeting objectives, owner,

10 Journal of Business Forecasting | Fall 2010

facilitator, attendees, inputs, outputs, aggregation rather than analysis. This is more cross functional representation.
and a typical agenda. The Action Log, situation is tolerable for an initial period Just as operating plans roll up from
states who is supposed to do what during an implementation, but manual product lines to business unit and then
by when, and could outline the key brute force reporting is not sustainable. to company, so can KPIs. Thus you could
decisions of the meeting. A good Action look at inventory turns by product line
There are several systems out there that
Log gets to the heart of the matter and or business unit in a Pre-S&OP level KPI
are becoming much more cost effective,
can be more effective than pages of scorecard, then look at inventory turns
not only aiding in the aggregation of
minutes that are time consuming to at the company level in Executive S&OP.
data and reporting as described above,
produce and often not read. These are not duplicative, just different
but also in more fully automating the
views for different audiences.
preparation steps between the meetings
Use of Technology and providing additional analytical Secondly, your KPIs should all have a
capabilities. These functions include items “baseline” (perhaps a historical average), a
The basic IT requirements for S&OP
such as electronic workflow and scenario “target” (some value to be reached several
include:
modeling/decision support. months into the future), and a month by
• Capability to report at all levels of month “plan” or stair step to get from your
the product hierarchy and report by baseline to your target. KPIs I see in
Key Performance many organizations often do not have
S&OP meeting structure and financial
reporting structure Indicators a baseline, or a stair step plan that
shows how they will incrementally
• Data of high integrity that people trust Most are using KPIs throughout their reach their target over a defined
S&OP meetings and organizations, period of time.
• Report historical actuals with go-
however, the question becomes how
forward plans on a monthly rolling Lastly, be active in your management of
effective are they? First of all, you might
basis (see reporting section above) variances. Root cause analysis should also
revisit which KPIs are mapped and
• Exception reporting or identification be done offline and summarized during
managed across the S&OP meeting
the KPI review. You should be recording
flow. While you certainly want to assign
• Capability to produce monetized actions that improve KPI performance. I
accountability for KPI performance and
versions of volume plans always advise clients to ask, “When will
manage the KPIs with the individuals that
it be on track?” and “What do we have to
• KPI reporting can impact them, this can sometimes
do to make sure it doesn’t happen again.”
be difficult for KPIs that require cross-
If your team is spending an inordinate Results are what will seal support for this
functional coordination and execution,
amount of time assembling reports process and if you’re not measuring them,
such as on-time-in-full or inventory turns.
for S&OP, your process will be painful then you’re missing a large part of the
These KPIs could be managed at Pre-
and your staff will spend time on data value that S&OP brings to the company.
S&OP and Executive S&OP, where there

S&OP MATURITY MODEL

As stated at the outset, improving S&OP representative characteristics of each call the categories, or whether it’s a 4
is a continuous process. S&OP Maturity stage. Figure 5 shows a sample or 5 point scale is not important. The
can be measured over a period of format on 0 to 4 point scale of what a point is to layout the characteristics
time and be used a tool to implement calendar-driven plan for maturity of maturity as you see fit and measure
your S&OP Vision. Figure 4 shows a improvement should look like. against them. The implementation of
summary of Nexview’s S&OP Maturity The exact characterization of what simple tools such as these helps add
Stages on a 1 to 5 point scale with some constitutes a “3” or “4” or what you some objectivity to peoples’ opinion as

Journal of Business Forecasting | Fall 2010 11

to whether or not S&OP is improving results. Focusing on the levers above will and performance-oriented behaviors
and driving business results. Whether certainly help you improve your process. that will improve the effectiveness of
you are implementing or revitalizing, It’s the combination of preparedness, the your meetings, drive business results,
your maturity system should measure mechanical elements discussed above, a and Revitalize Your S&OP. Keep at it.
use of best practices, behaviors, and skilled team with clear role definitions, (info@ibf.org)

Figure 4 | S&OP Maturity Stages

Fig

Figure 5 | S&OP Maturity Stages

Fig

jAN FEB MAR APR MAR JUN JUL AUG SEPT OCT NOV DEC

12 Journal of Business Forecasting | Fall 2010