Executive S&OP – Getting Started Right

Sales & Operations Planning is a set of processes to balance demand and supply, integrate units and dollars, align aggregate plans (volume) with detailed plans (mix), and is a forum to establish appropriate policy and strategy.

Executive S&OP is that part of Sales & Operations Planning that sets the plans for success. These plans enable product to be delivered to customers when they want it, cost effectively, all the time. Top management is able to set targets for customer service performance, inventory levels, customer order backlogs, and production rates -- and then manage the business proactively to meet those targets.
 
As such, the Executive S&OP process needs to do a variety of things:

•    Establish volume balance by product families
•    Tie volume to mix inside the planning time fence
•    Integrate operational plans fully with financial plans
•    Set appropriate policy and strategy

While most companies are doing some form of Sales & Operations Planning, few are doing the executive piece well. Doing Executive S&OP 'right' requires more than the support of top management. It requires that top management 'do' Executive S&OP with hands-on involvement.

The challenge in getting started right comes from the fact that doing Executive S&OP is not an extension of a typical executive's past experience. It's not doing what they're doing better, but rather it's doing something different to become better. That's the rub - it's foreign to the executive's experience and therefore involves risk, uncertainty, and discomfort. Dealing with and mitigating this circumstance is necessary if you are to get started 'right.'

If implementing Executive S&OP requires a single decision to implement it across the entire company, many executives would not agree to do so. This approach would require a large investment of the organization's time doing something that the leadership doesn't understand, and that is foreign to their past experience. That's why we recommend a different approach.
 
We believe there are three levels of commitment, leading to two distinct go/no-go decisions. They are:

 
Commitment                  Resulting Action
•    Uninformed                •    Executive Briefing and Go/No-Go Decision #1
•    Semi-Informed           •    Live Pilot and Go/No-Go Decision #2
•    Fully-Informed            •    Complete cutover

Uninformed Commitment

This comes from reading a book or listening to an advocate. The executive does not fully yet understand what Executive S&OP is and what it will take to make it work, but is willing to invest a few hours listening to more from an Executive S&OP expert.

An Executive S&OP expert is someone who's been deeply involved in at least one - preferably multiple - successful Executive S&OP implementations. To qualify as an Executive S&OP expert, the individual needs to have been in a significant leadership role in directing the implementation. You may have an Executive S&OP expert working in your company: a person with successful and meaningful Executive S&OP experiences at a sister division or another company.

Semi-Informed Commitment

This comes from gaining a better understanding of what Executive S&OP is and how it is different from what is being done today. It also includes an understanding of top management's role in making Executive S&OP work. It results in the first of two go/no-go decisions: the first being a commitment to provide the resources to do a live pilot in 90 days running in parallel with the current practices.

Fully-Informed Commitment

This comes from seeing it work via the demonstration of a live pilot. It creates a 'line of sight' as to how the benefits will be derived from the implementation of authentic Executive S&OP. This results in the second go/no-go decision - a commitment to cut Executive S&OP across all product lines and begin to run the entire company that way.

Getting started with an Executive Briefing

For most companies, the best way to get started with Executive S&OP is to conduct an initial briefing - at the executive level. This is a several hour session facilitated by the Executive S&OP expert.  

The purpose of the executive briefing is to transfer enough information about the process to enable the senior management group to:

•    Understand the capabilities of Executive S&OP. They need to learn what it does, how it works (in very general terms), and what kinds of benefits companies have realized from using it.
•    Match Executive S&OP's capabilities to their business problems. This is where the business case is made for Executive S&OP. What problems is the company experiencing in shipping to its customers on time, running the plants effectively, keeping finished goods inventories low and customer order backlogs in line? Which of these would get better if Executive S&OP were used well?  
•    Learn how Executive S&OP is different from current practices, even if the current process is already called S&OP.
•    Develop a rough-cut benefit statement, covering both hard benefits (financial) and soft ones: enhanced teamwork, better decision-making at both the tactical and strategic levels, more control over the business, and so forth.
•    Understand how the process is implemented and what will be required of them personally and the company in general, including resource requirements.
•    Make an informed decision to put up a live Executive S&OP pilot in parallel with current practices

In some companies there's a reluctance to conduct such a briefing because they think they know all about Executive S&OP. Skipping this step is almost always a mistake, even if this is the case. The executive briefing gains a collective and common understanding between and among executives. To not do the executive briefing often results in surprises later that delay or derail the implementation.