Page 351 - Orlicky's Material Requirements Planning

330 PART 3 Managing with the MRP System

WHAT’S IN A NAME?

What started out as sales and operations planning has taken many different forms, now
being referred to by a multitude of names. These include integrated business planning, inte-
grated business management, integrated performance management, rolling business planning,
regional business management, and sales inventory and operations planning (SIOP) to name a
few. Several organizations continue to use the acronym S&OP, although stages of matu-
rity are quite different from company to company. Unfortunately, for many, a change in
name does not guarantee a corresponding change in the underlying process, behaviors,
and results. We still call this sales and operations planning. Some still use S&OP for
demand-supply balancing; others use it as a powerful cross-functional business process.

What Is Sales and Operations Planning?
Early versions of S&OP were driven by manufacturing to make material planning and
manufacturing planning more stable. These manufacturing origins show through in
many applications of S&OP and are characterized in some telling ways, including:

■ The timetable set around supply meetings. This involves representatives from sales,
marketing, and commercial having to attend a set of S&OP meetings established
around manufacturing locations and planning routine, rather than category/
range, reviews or customer- and market-driven events and calendars.
■ The view that sales and marketing are one homogeneous organization with “a view.” This
misses the very fact that sales and marketing have different drivers and objectives
and potentially conflicting views that need to be understood and reconciled.
■ The obsession with a single set of numbers. This is based on the naive belief that it is
possible to create one number that will represent all views of the business and that
all uncertainty can be eliminated to the degree that you can plan and control the
future this rigidly through the entire planning horizon. This is a relic of what was
called “best practices manufacturing resource planning (MRPII).” At the time,
many people were fixed on the idea that S&OP was a new part of MRP II designed
to give one number on which MRP II depended. In fact, the truth was, and still is,
that S&OP is the big picture. Previously, MRP II and now enterprise resource plan-
ning (ERP) provide the detail planning and execution to support S&OP.

Today, we see S&OP as a process for cross-functional decision making. Ultimately,
the process enables a business to accomplish monitoring and updating of its strategic
intent using the monthly operating plan as a robust foundation. However, through its
evolution, it has taken different forms in different applications and in many cases has fall-
en short of its full potential.
S&OP is a forward-looking process with a minimum horizon of 18 months or 6
quarters that integrates and aligns strategic and tactical views and decisions and directs
operational planning and execution. It is not a short-term scheduling tool with only a
four- to six-month horizon (Figure 20-1).