S&OP and Lean are mutuallybeneficial partners in best-practices game

Many companies set out with high hopes when implementing a best-practices improvement program such as Lean manufacturing. But when the program fails to yield expected results, it can be difficult to pinpoint where the problems lie.

A new school of thought, backed by two software and consulting organizations, may have some answers. Foremost is the belief that sales and operations planning (S&OP) is the missing ingredient in many lean programs.

“There are many ties between lean and S&OP, but most companies do not view them as working together,” says Bill Odell, a VP for Interlace Systems, a supplier of S&OP solutions. “Many fail to see the commonalities both share, when in fact they truly work hand-in-hand. Both programs strive to streamline internal processes and eliminate waste.”

Interlace Systems focuses on integrated business planning, which combines traditional S&OP with demand, supply, and financial planning components to assist companies in keeping plans aligned across the entire enterprise.

“Many companies do pieces of S&OP, but they don't link it back to financials,” says Odell. “Or they don't receive multiple views of demand plans, such as from sales and marketing, or distribution.”

Interlace recently began partnering with Lean Horizons to deliver tightly coupled S&OP and lean solutions. Lean Horizons offers process design, change management, and business-transformation services.

“We consider lean and S&OP to be one combined improvement program,” says Robert Hawkey, associate partner for Lean Horizons. “S&OP is a core lean tool. You cannot have a successful lean outcome without including S&OP. In fact, if a company is incorporating lean and it is not working as well as expected, they need S&OP.

“S&OP is a gateway for optimizing the top end of the value stream, which includes demand planning, logistics, and supplier selection,” Hawkey continues. If demand planning is not an integral part of a company's lean journey, poor or inaccurate demand signals can trigger significant waste across the supply chain

“Waste may come in the form of excess warehousing and distribution space, or significant inventory buffers as a hedge against erratic demand signals,” he says. “By using S&OP as a lean tool, organizations can rationalize supply chain assets based on clean demand signals and prevent unnecessary supply chain expenditures.”

Collin Snow, an analyst for San Mateo, Calif.-based Ventana Research, also speaks to the importance of capturing clean demand signals in the quest for a lean supply chain.

“Good demand planning aligns resources, as does S&OP, which also reconciles financial plans,” says Snow. “Users look at last month's plans, consider how to adjust them, then replay and replan to ensure resources are aligned properly.”

According to research done by Ventana, most manufacturers view lean and S&OP on different ends of the spectrum.

“Many still consider lean to be manufacturing-focused and push-oriented when it is not,” explains Snow. “Most companies are not mature enough on the demand-driven side, although S&OP is shifting the emphasis from the supply side to the demand side. Companies are learning that they need comprehensive feeds of both supply and demand for effective lean and S&OP.”