S&OP - Cutting through the Marketing hype
Written by Dave Alberts, Director of Crimson & Co
Marketing trends and rebranding Sales & Operations Planning come and go, but the marks of maturity in the approach have remained pretty constant.
Though you wouldn’t think so if youread all the blogs, magazine articles and presentations exploring questions like ‘what is the difference between S&OP and Integrated Business Planning (IBP)?’
I don’t believe there is any fundamental difference between the two; it is just a discussion about good compared to great, with some shades of grey in the final product packaging.
What we can hopefully all agree on is that good S&OP is worth having, and that companies who do it well, perform better than those that don’t.
Benchmarking results across a range of companies show that businesses with high levels of S&OP process maturity achieve upper quartile performance as well as being the most profitable. Other benefits include:
- High levels of forecast accuracy
- High percentage of orders delivered to customers on time and in full
- Ongoing decreases in Cash-to-Cash cycle times
- Gross profit margin improvements year on year
Obviously not all these benefits can be directly attributed to just S&OP but without it these things certainly would not be sustainable.
Based on this, good S&OP processes seem to be worth having.
However, the shape and focus of this overarching process does differ per company and it’s definitely not a case of one-size fits all.
Many things affect the shape and focus of S&OP and the degree of customisation required include a company’s value proposition, its organisational structure, geographical spread and degrees of vertical integration.
If your company’s value proposition is all about operational excellence the supply management step of S&OP is going to be dominant. If your value proposition is more aligned to product or brand leadership then the ‘manage new activities’ step is likely to be a main area of focus.
Geographical reach also has a significant impact on where supply and demand is balanced and it’s no longer achieved in just one place. Different levels of optimisation occur locally, across markets, regionally and globally.
However, good S&OP processes do share certain characteristics such as:
- Risks and opportunities reviewed at each stage in the process
- Assumptions used to create the plans are well documented
- Financial implications and projections include upsides and downsides
- Behaviors need to be tracked and improved
- People capabilities need to evolve
- The process needs to be continually improved
Cutting through the marketing hype and the constant name embellishments (from S&OP to S&IOP to IBP) success comes from:
- Understanding the specific needs of your business
- Focusing on critical information and avoiding excessive detail
- Customising the core process to suit your business and the drivers of profitability
- Expressing plans as a range of outcomes with clear choices including the financial and performance implications
- Integrating the S&OP process with the E2E planning processes to address short, medium and long term needs
So, there’s probably no such thing as S&OP or IBP best practice, and if there is, it’s probably best if you don’t copy it.
Elon Musk's Boring Co. planning wider tunnels for freight
Elon Musk’s drilling outfit The Boring Company could be shifting its focus towards subterranean freight and logistics solutions, according to reports.
A Boring Co. pitch deck seen and shared by Bloomberg depicts plans to construct wider tunnels designed to accommodate shipping containers.
Founded by Tesla CEO Musk in 2016, the company initially stated its mission was to offer safer, faster point-to-point transport for people, particularly in cities plagued by traffic congestion. It also planned longer tunnels to ferry passengers between popular destinations across the US.
The Boring Co. completed its first commercial project earlier this year in April. The 1.7m tunnel system is designed to move professionals between convention centres in Las Vegas using Tesla EVs. It says the Las Vegas Convention Centre Loop can cut travel time between venues from 45 minutes to just two.
Boring Co.'s new freight tunnels
The Boring Co.'s new tunnel designs would allow freight to be transported on purpose built platforms, labelled as “battery-powered freight carriers”. The document shows that, though the containers could technically fit within its current 12-foot tunnels, wider tunnels would be more efficient. Designs for a new tunnel, 21 feet in diameter, show that they can comfortably accommodate two containers side-by-side, with a one-foot gap between them.
The Boring Co.’s new drilling machine, dubbed Prufrock, can tunnel at a rate of one mile per week, which is six times faster than its previous machine, and is designed to ‘porpoise’ - mimicking the marine animal by ‘diving’ below ground and reemerging once the tunnel is complete.
Tesla’s supply chain woes
Tesla is facing its own supply chain and logistic issues. The EV manufacturer has raised the price of its vehicles, with CEO Musk confirming the incremental hike was a result of “major supply chain pressure”. Musk replied to a disgruntled Twitter user, confused as to why prices were rising while features were being removed from the cars, saying the “raw materials especially” were a big issue.
Car manufacturing continues to be one of the industries hit hardest by a global shortage in semiconductor chips. While China’s chip manufacturing levels hit an all-time high in May, and the US is proposing a 25% tax credit for chip manufacturers, demand still outstrips supply. Automakers including Volkswagen and Audi have again said they expect reduced vehicle output in the next quarter due to a lack of semiconductors, with more factory downtime likely.
Top Image credit: The Boring Company / @boringcompany