S&OP (Sales & Operations Planning) and S&OE (Sales & Operations Execution) are both essential to the success of your business, but has your S&OP process become almost exclusively an S&OE process?
Are you noticing things like:
- Balancing demand and supply is an ongoing struggle
- On-time delivery is not improving
- Inventory is not reducing
- Customer service levels are not improving
- You focus almost entirely on current problems in production
If so, then you have likely shifted into the S&OE side of decision-making.
Commonalities Between S&OP and S&OE
Before we look at the differences – let us look at the common ground with both processes. Both processes are concerned with balancing demand and supply; both are critical business processes that are inextricably linked, and both are based on a common data set and platform. S&OP is the plan and S&OE is the detailed execution of that plan. Some stakeholders will be involved in both processes while others are aligned with only one.
The Difference Between the Two
The processes differ significantly in several ways. S&OE has a tactical planning and execution focus. It typically has a weekly cadence, focused on the next 12 weeks or so – although this will vary depending on the nature of business and supply lead times. It is concerned with item-level review, daily/weekly time buckets of demand and supply, detailed capacity-planning, inventory optimisation and tactical decision-making.
S&OE will largely be managed and led by middle-management with key decisions around:
- Capacity planning
- Current material supply problems
- Schedule adherence
- Inventory optimisation
By contrast, S&OP is strategic and planning focused. It typically has a monthly cadence, focused on the medium and long-term planning for the business from months 4 through to 24, but again this time horizon will vary depending on the nature of business. It is concerned with planning at product family level, monthly time buckets, rough-cut capacity planning and inventory policy extending across a 24-month horizon with significant strategic decisions being made for the business.
S&OP will largely be managed and led by senior-management with key decisions around:
- Equipment requirements
- Plant and facility requirements
- Future resource and strategic source of supply requirements
- Management of strategic customer accounts
- Alignment with the annual operating plan (AoP)
- New products, new markets and business growth plans
The Issue with Only Using S&OE
Having an S&OE process in conjunction with a separate but connected S&OP process is where you want to be. But if your monthly S&OP process focuses more on item-specific, short-term planning and supply/production issues – the likelihood is you are managing an S&OE process exclusively by default. Having only an S&OE process is where problems arise. Executive management are getting involved in details they should not and the opportunity to focus on long-term planning, alignment of supply chain with business and strategic decision-making may be lost. With this approach, ongoing problems will continue to arise and business benefits will not be realised.
With both S&OP and S&OE we are striving to balance attainment of highest possible levels of customer service while minimising our costs in achieving this. The granularity and time horizon are different, but complementary. Fundamentally, S&OP is a strategic, medium to long term business planning process, while S&OE is a shorter-term and tactical, planning and execution process.
In summary, an effective S&OP and S&OE process is required to ensure business benefits are fully realised however it is easy to slip into only having S&OE thinking in your business.