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SOPPrinciples TheFoundationforSuccess
SOPPrinciples TheFoundationforSuccess
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www.forecasters.org/foresight FORESIGHT 31
linkage can almost always be easily obtained no hedges allows the CEO/CFO to hedge
via spreadsheets. however they’d like to satisfy corporate or
WORDS FROM THE REAL WORLD: Each Wall Street rule of – “plus anything minus
month there are two reconciliations that are nothing.” If everyone hedges along the way,
required by S&OP: demand and supply. If no one knows what the real plan is, causing
the sum of the item-level forecast inside the confusion and second-guessing throughout
Planning Time Fence (PTF) does not recon- – not good.
cile favorably with the volume forecast with- 7. Executive S&OP is cross-functional
in a reasonable tolerance, resolution must be and collaborative. It involves, at a mini-
taken. Likewise, if the sum of the item-level mum, Sales/Marketing, Operations/Supply
supply replenishment schedules inside the Chain, Product Development, Finance, and
PTF do not reconcile, action must be taken. General Management.
Both of these require simple arithmetic and, WHY: One of S&OP’s key roles is to help
if necessary, human-intensive actions. Not to people raise potential problems and conflicts
do so is a disconnect that must be avoided. in a proactive manner before they become
This is not a technological challenge. crises. Nearly all business problems are most
6. Executive S&OP must function in effectively solved cross-functionally, not in a
multiple units of measure – demand, silo.
supply, finance, logistics, and so forth. PUSHBACK: “Many of our department
There must be tight alignment between heads have been here a long time; they’re not
the operating plans and the finan- about to change.”
cial plans through appropriate unit- IN PERSPECTIVE: Making S&OP work in
of-measure conversions into currency. a company is largely a matter of managing
WHY: This is necessary in order to manage change. It’s not in the data; it’s not in the soft-
the business internally with one and only ware; it’s not in the process charts – it’s in the
one set of numbers. people.
PUSHBACK: “We can’t run the business WORDS FROM THE REAL WORLD: An
with only one set of numbers. Our policy organization chart has the black lines run-
is to under-promise and over-deliver, so ning north and south. Most good decisions,
the numbers that go to Corporate and Wall however, are made cross-functionally – east
Street each quarter are different from those and west. We’ve heard this called “managing
we operate to.” the white space.” S&OP defines the cross-
IN PERSPECTIVE: Please note the word functional, collaborative relationships so
internally a few lines up. This means inter- this white space can be managed; to do so
nally within the company. What you tell the will very often require a change in the cor-
D PS QPS B UF PďD F PS UIF 4US F F U JT B EJČF S F OU porate culture. Because of this, Lora Cecere,
matter. a researcher in the supply-chain space, finds
WORDS FROM THE REAL WORLD: that success with S&OP is dependent on
Getting everyone on the same page is one of three things: 60% behavior change, 30% pro-
the things that S&OP accomplishes, thereby cess definition and improvement, and 10%
aligning energy toward common goals. With technology.
regard to financial plans, Adam Szczepanski, 8. Executive S&OP by its nature will trig-
past CFO of V&M Star, put it this way: “The ger disagreement between various parts
financial plan in Executive S&OP is ‘the plan’ of the business, and thus an organization
. . . the basis for the [rolling] business plan.” must learn how to openly welcome and re-
Notice the word “basis” in Adam’s statement solve these differences.
above. Having one set of numbers inter- WHY: Left unresolved, conflicts – for
nally that everyone has contributed to with example, between the commercial side of
www.forecasters.org/foresight FORESIGHT 33