Still a dream: Mature S&OP processes yet to solidify for many European manufacturers
Malcolm Wheatley, senior contributing editor, Leeds, U.K. -- Manufacturing Business Technology, 2/14/2008 9:48:00 AM
While 92 percent of manufacturing businesses have a formal sales & operational planning (S&OP) process in place, 62 percent of them reckon not to have gained any quantifiable benefit from doing so. That, startlingly, is one of the findings from a global survey carried out by Boston-based Aberdeen Group on behalf of Atos Consulting, the consultancy arm of Paris-based IT services provider Atos Origin.Yet it doesn’t have to be that way, says Nigel Issa, a Leeds, U.K.-based Atos associate partner and supply chain team leader for the private sector. As a number of best-in-class manufacturers in the survey clearly demonstrated, an investment in S&OP can indeed deliver verifiable benefits.
“Best-in-class businesses have a clear performance advantage right across a range of key supply chain metrics, and also are more likely to be able to use their S&OP processes to link their demand and supply plans with profitability,” says Issa. “The conclusion is clear: Organizations that proactively invest in S&OP are more likely to be using best practice to deliver competitive advantage.”
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| As best-in-class manufacturers responding to an Aberdeen Group survey clearly demonstrate, investment in sales & operations planning (S&OP) solutions and usage can deliver verifiable benefits. |
Conventionally enough, Atos Consulting recognizes several distinct stages of S&OP "maturity," explains Issa. "S&OP Innocence," for example, embraces an ad hoc and event-driven approach to demand and supply problem solving, coupled to S&OP technology characterized by spreadsheets and simple data feeds.
"Tactical S&OP" and "Integrated S&OP" represent two phases that build on this, both in terms of the technology used and the integration with business processes and the business itself. In particular, says Issa, a sure sign of growing maturity is when businesses are seen to be reconciling demand and supply plans with their financial and performance objectives.
At the highest maturity level, termed Integrated Business Planning, best-of-breed S&OP software is deployed, and S&OP is but one part of a tightly integrated cross-functional process that embraces not just the order-to-cash cycle but also analytic processes such as product profitability reviews.
But various difficulties, adds Issa, conspire to limit the extent to which businesses can raise their S&OP maturity level.
Lack of executive and other key stakeholder participation in the S&OP process, for example, can undermine the importance that ought to be attached to it.
“If S&OP is only viewed as a tactical planning tool, senior management can start to disengage from the process,” Issa notes. “They need to understand that it’s more than just a tactical planning tool.”
And this misconception about S&OP’s tactical role tends to arise, he adds, when the S&OP process does not include enough—or appropriate—financial and performance-related information.
“Without an understanding of the impact of operational plans on profitability, it’s all too easy for S&OP to become a tactical planning tool used predominately by the supply side of the business,” says Issa. “S&OP must include financial and performance data, and be formatted in such a way as to enable business leaders to highlight how demand and supply planning decisions impact profitability, business, and performance objectives.”
Finally, IT and resource limitations can hold back S&OP maturity in a business. Pulling together all the data required for anything beyond the most basic S&OP process can be resource-intensive, explains Issa.
“The complexity of the data required—and the wide variety of sources from which it must be obtained—can mean that S&OP is limited by data availability and time constraints,” says Issa. “Better technology can help organizations to more quickly gather and format information they need to improve the scope and speed of their S&OP process.”
And the price, Issa argues, is well worth paying. “Although it’s 20 years since the first wave of S&OP supply chain thinking changed the way businesses thought about the link between sales and operations, the original S&OP principle of integrating the whole business around one plan and one set of objectives remains as powerful and compelling as ever.”
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