Interview with Rupert Tubbs on S&OP
Our principal of Consumer Manufacturing, Sarah Simpson, spoke with Rupert Tubbs about the importance of Sales and Operations Planning in businesses today. Rupert gives an interesting insight to S&OP in a way we can all understand.
What is S&OP in layman’s terms?
At its most sophisticated, S&OP (Sales & Operations Planning) is a way of thinking and behaving. It is a way of orchestrating an organisation to ensure it is operating at its most effective. Nowadays, many people call this mature and fully integrated version IBP (Integrated Business Planning), where all functions, including financial planning and human resources, are informed by the same process.
In a more basic form, S&OP balances supply and demand, and the general idea is to implement a series of processes and controls that ensure customer demand is met without incurring unnecessary cost in manufacture or inventory. Done well, however, it is less about a process and more about a mind-set: decision making, foresight, accountability and governance.
Think about an Olympic Rowing Eight. Both sides of the boat have to be in balance (supply and demand) but there are still subtleties that need to be navigated while everyone is looking backwards (at last month’s performance measures) or focussing on their own pain. S&OP puts a cox in the driving seat.
Why is S&OP important?
So many businesses operate in silos. It’s not very surprising: the world is becoming increasingly complex, customers are becoming more and more demanding, markets - unpredictable. With so much going on, we simply try to do our bit as well as we can, but often that means we do not have the time or resources to align ourselves with what our colleagues are trying to achieve.
S&OP is a means of overcoming this insular approach. Without it, we can find ourselves pulling in opposite directions. Recently, I worked with an FMCG business who operated in a rapidly changing category with very demanding customers. Cost, service and complexity were all under pressure. The need to drive down cost had encouraged the operations team to simplify the manufacturing process, however the market wanted a greater variety of products in lower volume. The new manufacturing process could not cope: change-overs increased, cycle times lengthened, inventories rose and service dropped. The foresight provided by S&OP would have prevented this.
But S&OP is about more than avoiding failure. It is about re-enforcing success. At both a strategic and operational level, optimising a business by alignment through S&OP can transform performance and gain competitive advantage in service, sales, cost, capital and reputation.
Heads of manufacturing/supply or freight businesses always say they would like the ability to predict the future. How does S&OP help alleviate the pressure and show the “what-if” scenarios?
There is no question, the world is an increasingly uncertain place. Changes in consumer behaviour are greater than ever: who would have anticipated the extraordinary rise of the breakfast drink in the last couple of years? And if consumers are changing their breakfast routine, they are also changing the way they do things for the rest of the day. In a similar vein, turbulent happenings on a global level seem to be on the increase. In the last three years, we have seen Putin’s hostile takeover of Crimea, the devastating impact of Ebola, a collapse in oil prices, the migrant crisis and the rise of the far-right in Europe – the list goes on...
All these events have an impact on business, however tangential. The ripples from the Brexit vote alone could be fundamental for some. Trying to cushion your business from these changes, being able to react quickly to the unthinkable or to anticipate the predictable is more important than ever.
S&OP does not provide a business with a crystal ball, but it does provide a vehicle with which to analyse potential scenarios and their likely impact and a solid model with which to assess sudden changes.
What is the cost of getting an S&OP implementation wrong? Have you come across any examples?
I do not think that the cost of getting an S&OP implementation wrong compares with the risks of not having one in the first place. Any change in working practices costs time and money and effort, but the idea is that S&OP becomes a way of doing business.
More risky is the implementation of the business systems required to support S&OP. To run the process well – in fact to run the business well – you need a forecast for every product, a set of inventory policies, a capacity plan and a production plan; and you can’t work that all out on a piece of paper, or on an excel spreadsheet for that matter. There are some great systems out there that will provide an end-to-end S&OP plan, but they do cost money, time and effort to implement, and there is associated risk.
Have I seen any such implementations go wrong? Of course – implementing complex systems is always challenging. But I would say it is rarely the fault of the selected system. The usual root cause is quality of data. Get your data right and you will almost certainly start to see benefits quickly.
How would you define, identify and measure the outcomes of a successful implementation?
“Inventory and cost down, sales and service up”, would be the standard answer. These are easily identified and measured, but they are not the whole story. S&OP is about culture and behaviour.
I first implemented S&OP in 1994. I was working for a building products manufacturer and the managing director wanted to transform a woeful customer service performance in a sector where expectations were low. His first action, before we even started on the S&OP journey, was to erect a petrol station price sign (4 metres high with big numbers) right outside head office, where all our customers and employees could see it. On it, we displayed our weekly service levels, and they were dreadful. That really did give us a sense of common purpose!
What is the biggest piece of advice you can give to a business looking at their S&OP processes?
There is one key element to a successful S&OP implementation: the full backing and enthusiasm of the CEO. With their buy-in, you get buy-in from the directors, and thus from the rest of the business. And with this, you can achieve anything.
On one of my recent assignments, the outputs and recommendations of the S&OP cycle was the first item on the Executive Leadership Team’s agenda every month. It was sacrosanct, however busy the agenda. Every other item on the agenda referred back to it: manpower requirements, financial performance, capital investment. Everyone in the room was invested in S&OP. Behave like that and your implementation will be a success.
Finally, how important is the cultural change in a business going through S&OP overhaul?
It’s all about culture: new ways of working, of thinking and collaborating. Like all change initiatives, there is a hump to get over, a period during which you are doing things the old way and simultaneously trying to work in a new way, but very soon the latter should become a way of life.
Ultimately, S&OP should lose its branding and just become the way that people do business – a seamless interface between production planning and customer fulfilment, informed decision making, business control and governance. Implementing S&OP is a vehicle to better decision-making and collaborative working. In some businesses, this will be a greater challenge than in others - depending on their natural appetite for change from managing director to planner.
There is nothing new or difficult about S&OP. Every business is already forecasting, however crudely. Every business is planning, writing budgets, making investment decisions. S&OP is simply a way of doing this in a coherent way.
If you would like some information on how to utilise interim solutions within your business please don’t hesitate to contact Sarah on 01423 813677 / 07854881048.
Sarah Simpson is the Principal of Consumer Manufacturing at Interim Partners.