Sales and Operations Planning (S&OP)

Sales and Operations Planning (S&OP) is a corporate practice intended to deliver superior supply chain execution by leveraging a deeper alignment with other divisions beyond supply chain - most notably sales, finance and production. Despite the claims from multiple vendors that the best-in-class businesses operate under S&OP, most implementations suffer from similar flaws, which are intrinsic to the very nature of S&OP.

This is by no means a new process and sounds straightforward enough, however it can be incredibly complex to be implemented effectively. For example, just opening up communication to align all your various departments in the first place can be difficult enough, not to mention that this alignment not only has to be internal but has to correspond to what the market demands.

In this episode of LokadTV, we discuss just exactly why it is such a difficult tool for businesses to use and investigate, and what are the various alternatives available to a CEO looking to improve the way their company functions.

For example, we elaborate on the widespread phenomenon of “sandbagging”, where incentives are introduced for employees to reach certain quotas and why this more often than not ends up being highly counterproductive, with employees tweaking figures, forecasts or their workload in order to get those much desired bonuses.

Given the latest advances in technology, it can be argued that S&OP is becoming outdated. We explore in more depth why consultants are still so happy to use these processes and explain how the introduction of computers can improve on many of S&OP’s beliefs.

To finish up, we take a look at which companies are paving the way with their operational processes and what lessons can be learnt from their unique approaches.


00:04 Introduction

00:27 Perhaps we should start with describing exactly what S&OP is?

02:25 Where did this concept come from?

03:17 What is not so good about this approach?

06:17 Aren’t you just looking at things from a supply chain perspective?

08:39 You talk about this poor alignment with S&OP proces. Would that just not shift to a poor alignment on economic drivers?

10:38 Can’t sales teams just have a bonus for accuracy? They normally respond well to bonuses, right?

12:19 Are there any companies that are actually succeeding with these processes and leading the way?

14:03 Why can’t the S&OP process adapt to the existence of computers?

18:01 If this is such an outdated process, why is the market still using it?

21:47 If I’m a CEO and I am looking to improve my processes internally, what would you recommend?