Paulo Viola, the chief executive officer of NeoGrid North America, sat down with Supply & Demand Chain Executive (SDCE) to discuss his thoughts on sales and operations planning (S&OP).
SDCE: What does S&OP mean to you?
Viola: Sales and operations planning (S&OP) means aligning the whole company to achieve its objectives by combining strategic goals with operational experience. S&OP brings together a plan that maximizes the chances of achieving those objectives.
SDCE: Why is alignment and collaboration between functions important? What functions are the most important to align and why?
Viola: Without alignment and collaboration between functions, S&OP becomes just a way of communicating the top-down number and what top management needs to deliver, but not how to do it. Sales, marketing, distribution, production and procurement need to be aligned so that the company strategically buys, produces and distributes what it sells, and so that it invests in the right actions to make the most sales.
SDCE: What are the benefits of S&OP?
Viola: The key benefit of S&OP is the alignment and commitment it establishes between company silos so that all departments are working towards the same number. Other benefits include syncing the internal supply chain, improving efficiency and reducing wasted resources (personnel and materials).
SDCE: How does S&OP enable effective supply chain management?
Viola: S&OP uncovers topics for discussion: bottom-up planning, and risks and opportunities that can hinder or help achieve the company goals. The company invests better on how to increase sales; and it buys, produces and distributes according to what is planned and possible, not on what is wished.
SDCE: What is the most effective way to execute S&OP?
Viola: The most effective way to execute S&OP is through a simple (not simplistic) collaborative process, and technology in which stakeholders can share their experience and really contribute to company performance.
SDCE: Why can’t enterprise resource planning (ERP) perform S&OP well on its own?
Viola: ERP systems require expensive, lengthy customizations to meet ongoing needs and to respond to market dynamics. Data is housed in separate systems that don’t automatically flow seamlessly in and out of ERP—therefore, preventing alignment and collaboration. You run the risk of inaccurate forecasts that lead to overstocks and out-of-stocks. Due to its inherent inflexibility, relying solely on ERP to perform S&OP can trap you in catch-up mode against technology and trends, while losing out on profits and gaining dissatisfied customers.
SDCE: What’s the difference between an immature and mature S&OP process?
Viola: Immature: lack of communication, top-down decisions, lack of commitment with number (not a collaborative process, lack of ownership from different parties).
Mature: combination of bottom-up and top-down considerations, true collaboration and alignment, detached from sales quotas.
SDCE: What kinds of obstacles do those who implement new S&OP processes face (lack of strategy, competing priorities, lack of understanding, change management, etc.)? How can these obstacles be overcome?
Viola: Those who implement new S&OP processes face many obstacles and change management is one of the most important ones. The worthwhile change is going from a simply top-down model to a collaborative one, where silos communicate better, process has more visibility and pushing the blame around is not an option anymore.
For more information, please visit www.neogrid.com.