To succeed with an initiative like sales and operations planning, you know you will need the commitment of your senior leadership team. But what if your senior colleagues are not convinced about the benefits?
Some years ago I worked with a paper company where one of the board members was championing S&OP, but was facing deep scepticism from his colleagues. He reckoned that completely changing the way that market and operational decisions were made was too radical for his colleagues to accept without proof.
So he decided to set his colleagues a challenge that would prove the point. He devised a model and gave them the weekend to see who could find the most profitable result. He even put up a modest prize to make it interesting.
They were given a real business scenario in terms of sales demand, production, logistics and market constraints along with financial data that they were all very familiar with. They were challenged to find the best supply and demand plan to maximise profitability. While they may have had their doubts, nobody wanted to be beaten. So that weekend every one of them spent some time working on the problem until they felt they had a respectable result.
It was perhaps a little unfair that one of them had experience as a planner, so knew how to use a spreadsheet to look quickly at many different options. Not surprisingly, he was the clear winner – and enjoyed his moment of triumph.
The S&OP champion had already created the model using an optimisation modelling tool and very quickly created a number of feasible scenarios. The optimal solution beat the best of his colleagues attempts by about 5%, adding nearly €5 million to the bottom line.
As you are reading this, you probably won’t be surprised by this outcome. But the real result was that the senior leadership team soon decided to back proposals for an initial trial and subsequently a full S&OP initiative. It was delivered successfully and the business used the tools every month in a formalised S&OP meeting involving Sales, Production and Finance to ensure that operational decisions were based on profitability.