What is S&OP? By Accenture Strategy Guest Blogger

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A few weeks ago, I launched a new blog series on sales and operations planning (S&OP). In that introductory post, I outlined a number of important topics that I plan to explore in more detail throughout the summer. To make sure everyone is on the same page, I want to review the basics, the foundation, which is… what exactly is S&OP? I’ve seen and heard so many different answers and perspectives in response to this question. Therefore, I think it is important to share what I feel are some leading practices and also how leading organizations think about S&OP.

First of all, S&OP is indeed a process by most academic definitions (Merriam-Webster Link), as it follows a series of steps and activities with a particular cycle or cadence. And there are certainly meetings that occur throughout the process, but S&OP is not a meeting. S&OP is so much more than a process or a meeting. Yes, I’ve seen organizations that think they are ‘doing S&OP’ because they have a monthly meeting, but in fact they are actually missing the point of S&OP.

If one thinks about the purpose of S&OP, it is to ultimately match supply and demand, while balancing the cost (supply) and service (demand) tradeoffs of the supply chain. But as most of us know, addressing or solving this tradeoff is not linear in any way. Organizations face a recurring flow of supply chain imbalances that require decisions. S&OP serves to guide that decision making across the organization, making sure everyone is well informed and that trade-offs are analyzed and addressed properly. As a result, S&OP can be thought of more as an operating model to help organizations make better business decisions.

Based on what I have observed at leading organizations, and also as a practitioner and former planner myself, S&OP is much more akin to an operating model or governance model for the supply chain than it is a process. A colleague of mine at Accenture years ago shared a very simple and crisp definition of an operating model, which I have always liked: ‘it’s the way work gets done in an organization’. My intent here is not to engage in a debate over fancy buzzwords or nomenclature, after all, every supply chain organization I’ve seen refers to S&OP as a process. However, what’s important to take away is that S&OP can be bigger and more powerful, and that requires a mind-shift to think about it as more than a process.

A number of misconceptions exist about S&OP and its role in managing the supply chain. Here is a simple comparison spectrum that I often use to clarify what S&OP entails.

S&OP is not…S&OP is…
Monthly MeetingGovernance or Operating Model
Historical Performance ReviewForward Looking Plan
Forecasting ProcessDecision Making Process
Only Volume or Unit FocusedBoth Volume and Dollar Focused
For Operations or Supply ChainFor the Entire Business
Metrics and Dashboard ReviewsDriver of Actionable Insights

It’s important to think about S&OP more strategically as an operating model than as a process and this is the first step towards getting the most out of the ‘process’. In order to better understand how this mind-set is put into practice, I want to share a couple examples illustrating how leading organizations use S&OP to manage their business.

I trust this post provided a different perspective – that S&OP is much less about process mechanics and more about the mind-set in an organization. I look forward to reading your comments on this topic and to see what other perspectives people have on S&OP and its definition. In my next post, I’ll explore the areas of ownership and some of the organizational implications of S&OP.