Page 361 - Orlicky's Material Requirements Planning

340 PART 3 Managing with the MRP System

FIGURE 20-6

Iterative business
management.

be recognized if supply people lead the implementation. Early engagement of finance is
crucial, and strategic influencing of sales and marketing is vital from the beginning to
ensure success. The paradox is that supply-chain people are normally the first to recog-
nize a need for S&OP, but they should not be seen as the principal leaders.

Managing Paradox
Used properly, the S&OP process provides a means of managing the choices and trade-
offs across the business and taking decisions to keep on track with strategic direction.
Inevitably, these decisions will need to cut through the conflict caused by opposing pres-
sures of seemingly contradictory views. The implementation, as well as the use, of S&OP
is riddled with paradoxical choices.
Reconciling these paradoxes is a key to unlocking the real potential of S&OP. To
illustrate, here are a few of the repeat offenders:

■ The leadership paradox. In many companies, the supply organization initiates the
S&OP process as a reaction/response to the pain caused by changing forecasts
and the apparent disregard from the demand side of the business for stability,
efficiency, and reduced complexity. By biasing the S&OP agenda with a supply
perspective, typically those functions that need to be actively involved and dri-
ving the process are often alienated. These situations pose a challenge: Those who
have initiated the process need to relinquish their leadership of it if they are to
realize the total business benefits.
■ The horizon paradox. There is a constant tension between the need to take decisions
to protect long-term value and the need to hit the numbers now. There are com-
pelling arguments for each of these objectives, and the only sustainable proposi-
tion is to do both! Some have made the error of defining S&OP with a horizon of
3 to 18 months; the intention was good in attempting to focus management atten-
tion beyond the immediate short term. Unfortunately, it led to disconnected
processes—a short-term sales and operations scheduling process (0 to 3 months)
with weekly or daily review and a separate S&OP process (3 to 18 months)
reviewed monthly and, sadly, no link between the two. A major benefit of S&OP
is that decisions taken in the medium to long term will decrease the number of
surprises in the short term. For example, a demand peak in months 9 through 11
must be solved by outsourcing; S&OP would make this decision proactively,
knowing ahead of time the consequences of the decision, so that when months 9