Page 350 - Orlicky's Material Requirements Planning

C HAP TE R 20

Sales and Operations Planning

Evolution of Sales and Operations Planning:
From Production Planning to Dynamic
Business Performance Management

By Andy Coldrick and Dick Ling

In the face of the Sarbanes-Oxley Act–mandated increased requirements for timely
reporting to Wall Street and other investors, a significant limitation facing every senior-
level executive is the lack of integration between what sales plans to sell, what operations
plans to make, and what the financial plan expects to return. Each of these plans is typi-
cally a silo within each function. The sales team develops and manages to the sales fore-
cast. The operations team develops and manages to a master production schedule (MPS).
Finance develops and manages to the budget. In reality, each of these three plans depends
on the other two. Overall company success depends on the holistic integration of these
different functions. Sales and operations planning (S&OP) provides that big picture.
S&OP has been used extensively since its creation in the late 1980s. The process
evolved during the 1990s, and numerous companies have gained tangible business ben-
efits in improved customer service and reduced inventories and have used the process to
facilitate growth and sustained profitability. Other organizations are struggling with sup-
ply-chain planning, collecting data for a monthly meeting in which sales, marketing, and
finance are less than enthusiastic attendees.
This chapter traces the evolution of S&OP and its application to companies of dif-
ferent industries and sizes and suggests reasons why some companies have maximized
the benefits and others have just become stuck in old paradigms. Our intent is that, by
providing you with an understanding the evolution, we provide you a context and frame
of reference to allow you to identify where you are today and gain some insights into
how to improve or change what you have. Evolution takes too long and does not guar-
antee success. Achievement of fast, sustainable benefits is through a challenging plan that
identifies behaviors, activities, and functions that need to change so that we can align
S&OP with the executive management agenda. For those who are just about to start an
implementation or reimplementation, we suggest taking the learning from the 1990s and
insist on business leadership from the start and avoiding the pain a supply-driven
process brings. We call this innovative right-to-left approach breakthrough S&OP.
329