One of the big buzzwords that’s been around in the Manufacturing industry for some time, at least with the larger organizations, is “S&OP”. S&OP stands for Sales and Operations Planning. You may or may not have heard of it yet, but a quick search will quickly show you that a bunch of others have. Many of these folks are career supply chain specialists, consultants, or academics.

Now, don’t get me wrong, S&OP is not BS, however, it seems that most of the information you find on the topic is at a theoretical level and really doesn’t lend itself to helping SME’s understand how they can implement some S&OP practices today, next month, etc to go ahead and get a portion of its benefit. That’s understandable, as S&OP CAN be a very heavy and complex topic with lots of nuance that needs to be dealt with to implement whole hog.

The reality is, embracing S&OP whole hog is not realistic for a SME but taking inspiration from the principles and finding the low hanging fruit that can be adopted for your business is a very real opportunity you can grab hold of to make substantial gains. The biggest bang for the buck for a SME is to focus on the integration point between sales and planning. The REV4 term for this is the “SOP Hole”.

One way I think it is useful to frame the crux of the S&OP problem and especially our SOP Hole is to turn to an analogy – family meals. Yep, I know a bit of stretch but stick with me. The analogy is a helpful way to see the problem, but it only goes so far. The problem for manufacturers cuts much deeper. Read on and I’ll show you why, and I’ll also show you what most manufacturers can be doing to start plugging that hole sooner rather than later.

Think about it for a minute, the process of cooking lunch or dinner at home over the course of a week or month is very similar to the concerns of a manufacturer.

Customer = Family
Demand = What the Family wants to eat
Capacity = The constraints like time, cost and calories.
Inventory = The pantry

The punchline from the analogy is this.

Contrast this against how most manufacturers operate. Demand planning works in a family because those doing the planning are engaged in the family. Who’s going where? Who’s coming over for dinner? Special occasions, meal preferences and probably some whining and complaining to boot. There are constraints around the cook. Maybe they are busier some days than others. Maybe there’s options to cook in advance and freeze meals etc.

But imagine if the person doing the meal planning had no idea about what’s going on in the family. The only time they talk is when they come to eat the meal. What if the demand planners just keep assuming that next week is like last week without taking into account any of the changing constraints?

If you’ve ever seen a well-oiled family machine run, with young kids, both parents work full time and one of them is exceptionally well organized it’s amazing how much they seem to be able to get done. Others fumble along with little planning based on forecasting and pay the price of being caught unprepared due to extra work commitments, need for kids to be at sporting events, appointments etc.

Yet, the problem for manufacturers is often far more amplified than this.

In a family the planner and salesperson are often the same person. Whoever runs the family household is often the one who coordinates meal prep and does the shopping, manages the pantry etc.

In a manufacturing company, they are almost always different people.

The salesperson in this analogy would be then be like someone who’s role it is to focus on relationship building and taking meal orders. They have no visibility or interest in the constraints/capacity the family must work with.

The planner in a family would have to make the family function. They plan the production of the meals, schedules, inventory buying etc. But imagine doing this without talking to sales. Imagine how dysfunctional and inefficient the family would be if they never communicated except around meals orders.

Without all the theory and bs, this is essentially what S&OP is. You start with what you think you can sell (meals you’ll eat), make a plan to make sure you have all the necessary materials and capacity to produce those products (ingredients and time to cook) while optimizing inventory around your plan. Finally, you ensure that the demand and supply plans are feasible from a financial perspective and align with overall company goals (kids’ activities, events, etc).

Conclusion

Getting planners and sales onto the same page is critical. Obviously if they could be the same person, that would be ideal. Obviously, they can’t, so we need to close that gap., This is our SOP Hole. The hole sucks revenue out of the company and it’s not that hard to fix. What can you do this week to make the gap a little narrower? What’s you plan for the next 6-12 months to keep closing the gap?