S&OP and Executive Meetings, a Necessary Tandem
As mentioned in our article, “Understanding Sales and Operations Planning”, S&OP is a structured planning process that uses forecasted customer demand to drive production schedules. It is a strategic and integrated business process that aligns demand, supply and financial goals in an organization.
The word “alignment” to define this process is not a coincidence. This planning process is a “boundary spanning activity” that, in order to be effective, requires active engagement and team work from cross-functional departments, ranging from sales, manufacturing and supplier management, to business management.
However, aligning all departments and members included in the process is not enough. It is well known that no business can succeed without its executive support. This involves getting buy-in from top management not only on the overall performance of the company, but also on every process that impacts growth. Sales and Operations Planning is no exception.
The Crucial Role of Executive Meetings in S&OP Success
To ensure your company’s S&OP plan is feasible, one key step is scheduling executive S&OP meetings – an essential component of the seven steps outlined in the article, “S&OP: a 7-Step Business Process”.
Executive meetings serve multiple strategic purposes such as:
- Updating corporate strategies
- Measuring on-going performance relative to supply chain and the company’s overall goals
- Assigning financial resources across the organization to serve the plan
- Designing systems that eliminate silos and sort out possible conflicts between the different functional units
According to this recent Forbes article, the first reason why S&OP fails in a company is the lack of support from the executive management.
Overlooking the advantages and opportunities that the S&OP process can offer an organization can lead to negative consequences, including the potential loss of customers or suppliers.
Conversely, a report by Deloitte shows that having an integrated and stable sales and operations plan can bring significant benefits. These include:
- 6% growth in EBITDA
- 20% improvement on forecast accuracy
- 25% reduction in inventory
Benefits of Regular Executive S&OP Meetings
The main objective of S&OP is to ensure a company can meet its customer demand efficiently while optimizing inventory levels, resource allocation and profitability. By regularly reviewing and adjusting the plan based on current data and market conditions, S&OP helps businesses make informed decisions, manage risks and improve overall performance.
It is a must that C-suites who make the final decisions are involved in regular S&OP meetings. This way you can make sure that every department and team member is aligned and that the plan is approved and supported by the top management, as well as by the appropriate financial resources.
Some of the key benefits these executive S&OP meetings can bring to your business are:
- Enhanced cross-departmental communication and goals alignment – Regular executive meetings improve communication between departments, team members and executives who are decision-makers. This collaboration helps breaking down silos and aligning functions to work together efficiently and towards the same business goals.
- Improved decision-making and resource allocation – Executive S&OP meetings enable not only the alignment across departments and the constant review and optimization of the sales and operations plan, but also informed decisions based on comprehensive data and cross-functional input. Executives can adjust plans based on real data about current market conditions and operational capabilities, resulting in a better resource allocation.
Tips for Effective Executive S&OP Meetings
It’s clear that executive meetings in the S&OP process are a main step to efficiently implementing the process.
Now, take a look at some tips that can help you and your company ensure successful executive S&OP meetings.
- Set clear agendas and objectives – Set-up a well-defined agenda and clear objectives before each meeting. Make sure the actions agreed in the meeting are assigned to the corresponding teams and set up deadlines. This will help to focus on the agenda’s topics and address all critical issues.
- Ensure data-driven discussions – All decisions need to be based on accurate and up-to-date data. The use of analytics and key performance indicators (KPIs) to guide discussions and decisions is crucial to measure the success of the process and, in the end, the overall business goals. Something to consider at this point, though, is cohesiveness. While it is an underlying goal of executive planning, aligning the daily activities of cross functional teams in a way that optimizes overall company performance can be counterproductive. Indeed, it can be an organizational dynamic that causes companies to struggle. Developing a methodology for creating metrics that drive both desired behaviors and decision-making is vital to any business’ success. A closed loop S&OP system enables corporations to make decisions based on a single source of truth. “Clean data” shared across an organization and that is updated in real time enables a company to perform “what if” scenarios. These foresee the impact and different outcomes their decisions would have across the entire organization. Reliance on a centralized database also promotes organizational transparency. With this system in place, authorized team members can have a deep and complete understanding of the objective data that drove the decisions. In the cases of predictive modeling, it also enables team members to understand the effectiveness of leveraging clean data, as well as to tweak models to incorporate up-to-the-minute input reflecting changes that might impact either demand or production.
- Foster collaboration across teams – Use different techniques and systems to approach all teams involved in the S&OP process and its success to encourage them to participate in these meetings. The use of collaborative tools where achievements and possible improvements are reflected can be an incentive. You want to leverage not only involving key representatives from sales, operations and finance, but also other relevant key areas that can add value by sharing different perspectives.
- Use of methodologies to track decisions – Decision Execution Management (DXM) provides a structured methodology to measure, communicate and track decisions. DXM metrics drive accountability across an organization. Good or bad, we can trace back the results of a decision to its source. Over time, we can develop performance metrics to determine the effectiveness of decisions. This process can drive continuous improvement. If a decision doesn’t produce the desired outcome, the team can revisit the assumptions that shaped it. Ultimately, executive S&OP meetings help refine decision-making to enhance future results.
QAD’s Sales and Operations Planning solution is the perfect tool to support your S&OP process, and drive sustained growth and profitability. Among other capabilities, it provides management with optimal decision support for the entire supply chain.
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