In this series, Effective S&OP, we are identifying the key characteristics required to have an effective Executive S&OP process. In this article, which is the last in the series, we will outline how to measure and improve the process through each cycle.
There are three levels of measurements you should use to track your progress towards S&OP maturity: Process, Effectiveness, and Results. While it is important to know the business results you are looking for out of S&OP, if this is your only measurement of progress it can be frustrating. These measurements can be considered like steps or building blocks. You need all three measurements in place, but results won’t happen consistently unless you have a good established process and continue to improve the effectiveness of your planning.
Process measurements provide feedback on whether your Executive S&OP process is setup for success. Are you doing the right things with the right people and in the right way? Two tools are recommended for this:
Process Assessment tools. Assessment tools, like the S&OP Assessment, provide valuable benchmarking on how your current S&OP process is doing. You should have a cross-section of S&OP participants complete a process assessment on a regular basis. This will help identify where there are disconnects on practice or expectation across the organization and help to provide a common understanding of what is expected. Track your results over time to determine how your S&OP is maturing.
Meeting Scorecard. This is a good measuring stick to determine if the basic S&OP process you have laid out is happening. Do you have the right people, methodology, and data to engaged with the right accountabilities? The S&OP meeting scorecard should include a measure of participation, schedule and data availability.
Effectiveness measurements provide feedback on the team’s ability to develop a plan and deliver on that plan. An effective S&OP process is one that delivers accurate plans. Establish tolerance bands for your bookings, shipments, and production plans. Measuring whether each of these plans is in or out of tolerance will provide an indication of how you are improving over time, identify where you need to focus improvements, and ultimately help you manage risks and set operational parameters. Ultimately tolerance bands should be set to match your operating buffers (lead time, flex capacity, inventory) so that out of tolerance measurements identify where these buffers may need to be adjusted or planning activities improved.
Finally, result measurements are the Return on Investment (ROI) that management is looking for when starting an S&OP implementation or improvement project. These could be operational results like reduced inventory, improved on-time delivery, or reduced stockouts. Strategic results may be to increase market share or improve new product introduction process. Financial results might be to improve margins or reduce expedited freight charges. These measurements should be at the family level.
Having the measurements in place to track your process, effectiveness, and results, will allow you to accurately evaluate and improve your S&OP process. This is just one key way that can make your S&OP a more effective process. See the Executive S&OP: Best Practices to get a full picture of what an ideal process should be like.
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At DBM Systems, our consultants have over 20 years of experience providing S&OP leadership to businesses worldwide. We equip teams with coaching and the tools to quickly start and sustainably run an effective S&OP process. Learn about our process and unlock the power of S&OP in your organization.