Page 362 - Orlicky's Material Requirements Planning

CHAPTER 20 Sales and Operations Planning 341

to 11 become months 2 to 4 months, we already know how to manage this peak.
If S&OP is disconnected, planners in short-term scheduling will behave reactive-
ly when they see the demand peak in month 3, make decisions, and count the cost
afterwards.
S&OP done properly would show a minimum of 0 to 18 months at an aggre-
gate level over the whole horizon, providing an aggregate view of the short term
in the context of the medium to long term. Quarterly and year-end targets are
important, but decisions must be taken in the wider perspective of next year and
so on. A year-end focus is pragmatic and appropriate; a year-end obsession is
unhealthy for future sustainability. This is why a minimum of 18 months’ visibil-
ity is recommended.
■ The consistency paradox. One person’s consistency is another’s bureaucracy. A mix
of personal preferences, functional bias, and national and company cultures all
add up to a very specific reaction to a prescribed way of doing things. Ultimately,
we would want to strike the appropriate balance between allowing space for peo-
ple to be creative in addressing issues and opportunities, taking decisions close to
the action, while providing a framework to direct that creative energy and allow
the interdependent elements of the organization to mesh together effectively. The
paradox is buried in the phrase appropriate balance. Why is it that in some envi-
ronments a timetable is taken as an absolute deadline, while in others it’s merely
a suggestion or even an imposition? Why do some organizations see a consistent
template/format as a necessary way to allow integration and aggregation of
information, whereas others see it as a request or challenge for innovative ideas
on how to lay things out differently?
In this chapter we have touched on some other potential dilemmas that will need to
be reconciled. We work to develop the behaviors and capabilities to cope with and thrive
on this ambiguity and confront the choices—allowing you to break through these para-
doxes and establish solutions that get both and in so doing add more value!
The changes made from the traditional S&OP model (Figure 20-1) to our five-step
process (Figure 20-5) have led many businesses toward a robust operational foundation
(Figure 20-7).
The two arrows between S&OP and the business plan are of equal strength, which
means that we have a robust and credible latest view of the business that may be differ-
ent from the budget, but the two must be reconciled. Each is credible, and we must
answer questions on what we need to do differently to meet the business plan. Building
the ongoing reconciliation is the first step toward a cross-functional business planning
process.
The next step is to update the strategies from reconciliation of the business and
operating plans, which is the goal expressed in Figure 20-1. The ultimate test is whether
the senior team has the commitment and confidence in the process to dismantle the
incumbent budgeting process.