Page 366 - Orlicky's Material Requirements Planning

CHAPTER 20 Sales and Operations Planning 345

continued to dominate the conversation and became a mindless pursuit of accuracy
beyond what was intrinsic in the markets in which a business operated.
Finance, meanwhile, had its own systems and realized that robust projections about
the future relied on understanding scenarios. S&OP demands for a single set of numbers
were perceived by many finance people to be naive.
In the context of decisive action, the role of managing and communicating assump-
tions played a huge part in enhancing the understanding and reconciliation of different
views of the future. Supporting the numbers with the underlying assumptions, risks, and
opportunities brings a richer dialogue about future projections and helps to focus on the
greatest causes of uncertainty. Understanding the range (high/low) of opportunities,
risks, and uncertainties is crucial to the discussion before agreeing to the latest view (see
Figure 20-9).
In recent years, increased innovation, broader offerings to customers, and reduced
product life cycles have made the old one-size-fits-all approach to crunching the numbers
simply inadequate. Progressive organizations have switched the focus from numbers
only to balancing numbers with the underlying assumptions to reduce the inherent
uncertainty to a minimum and better managed risk.
However, uncertainty cannot be removed completely. There is still a range, and that
range needs to be understood in the context of the decisions that will be taken on that
information. In environments with extreme uncertainties (e.g., companies on the bleed-
ing edge of technology breakthrough or movement into new markets and channels and
pharmaceutical companies in the early stages of development), there is a need to go
beyond understanding the range around a given projection and may be the need to run
alternative scenarios based on unique sets of different assumptions.
This level of sophistication requires a different level of input from across the busi-
ness and an understanding of how and when to use the output from different scenarios,
but the acceptance of a range of uncertainty and the probable need for scenario planning
typifies maturity in the S&OP process. Making decisions based on probability and/or
odds of an event occurring with a particular result becomes very relevant. At what point
should the odds trigger a scenario that we should include in the agreed latest view?

S&OP AS THE ALIGNER TO SUCCESS
AND FUTURE SUSTAINABILITY
In the last five years we have worked with several clients who had strong fundamental
S&OP processes. They had a focus on a business agenda spanning 12 to 18 months in the
future, aligned with business planning. However, to gear the S&OP process to future sus-
tainability, we need to ensure that there is alignment with the first two years of the strate-
gic view. Without this, S&OP becomes aligned with the business agenda only 18 to 24
months out, with a temptation to focus on the first 12 months.
With these clients, we have found great benefit in helping them align their S&OP
process with the strategy of the business and the shape of the future product portfolio. It