Gartner Survey Lays the Path for Successfully Achieving S&OP Maturity

In a recent survey of 147 S&OP leaders across the globe, Gartner analyst Tim Payne focused on the key success factors and capabilities required for companies to successfully reach stage 4 and stage 5 levels of S&OP maturity.

As a reminder, stages 4 and 5 are defined as: A company reaches Stage 4 when S&OP can support not only operational metrics, but also business outcomes such as demand generation, risk management practices and budgeting and reforecasting decisions. To do this it leverages advanced modeling, what-if analyses and linear programming/optimization.

A company reaches Stage 5 when the Stage 4 capabilities are extended across trading partners such as major suppliers, channel partners or customers. This creates an extended view of demand across the value chain that allows the trading partners to further fine tune their decisions and collaborate closely.

In the survey, Tim found that as companies work to achieve higher levels of maturity in their S&OP capability, they often struggle primarily due to difficulties defining and connecting S&OP explicitly with business outcomes that tie with overall company objectives and metrics. They therefore underperform, leaving money on the table and falling short in achieving key objectives like growth and sustainability.

4 Recommendations for Increasing the Success of S&OP Maturity

In order to increase the success of maturing an S&OP practice and improving its impact on the business, Tim focuses on 4 key recommendations:

    1. Design an S&OP roadmap that emphasizes the need for end-to-end integrated planning solutions, including current and future supply chain and business unit requirements. Integrated planning means the ability to influence not only the normal S&OP decisions — e.g. service levels, inventory and capacity/sourcing — but also the ability to shape demand generation efforts and financials.
    2. Define and link S&OP explicitly with business-oriented outcomes from the processes that tie with overall corporate objectives. Extend beyond forecast accuracy, service levels and capacity utilization to emphasize impact on volume/revenue growth, profitability, return on assets and agility.
    3. Introduce more outside-in, externally / business-focused metrics into S&OP. Emphasize metrics that support business capabilities, decisions and trade-offs, not just operational decisions. Examples include order / campaign profitability, forecast variability, network effectiveness, etc.
    4. Choose S&OP technology that can support Stage 4 maturity by emphasizing the above requirements – and that can scale to support a global instance not only for current but also future needs

The summary above highlights the need for broader inputs and participation in S&OP, especially from the P&L owners who can specify and guide the definition of future state, ideal business outcomes and key metrics associated. Others (e.g. category managers and commercial teams) must extend their reach beyond providing a forecast, to really analyzing the trade-offs between demand generation, service-ability, profitability and ROA. Finance must also get more involved, as there is limited or no financial input today into key S&OP decisions. Even those that have financial inputs often use error-prone inputs such as standard costs.

Capabilities Required to Mature S&OP and Improve Business Impacts

The survey also highlights a set of capabilities that are required to mature S&OP and to achieve successful business impacts. They are as follows:

    1. Strong collaboration capabilities, including planning, scenario analysis and performance tracking. This is especially important as the scope of S&OP expands to include more functions as well as executive participation
    2. Supply chain modeling must support meaningful scenario analysis, underpinned with advanced analytics, especially linear programming/optimization and Monte-Carlo simulation. The model must be configurable to: a) fit the business model of the company, b) support a broad range of scenario analyses beyond just network or inventory modeling, and c) easily incorporate/accommodate changes to the product mix, value chain and costs.
    3. Tight integration with the SCP system of record – this will help ensure S&OP remains linked with execution
    4. Support for single global instance – the architecture and performance of the application must be scalable to support current and future business needs

In summary, the survey report lays the foundation for transforming S&OP from an important process into a critical contributor towards business success. Tim does a great job of informing S&OP leaders of the key success factors and the most important capabilities they should emphasize as they work to mature their S&OP process and its contribution to the business.

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