Why Is Sales & Operations Planning So Hot?

With Businesses Becoming Ever More Complex, S&OP is a Necessity

Expert Insight: The S&OP Report
By Tom Wallace

“Tom, S&OP is the hottest strategic issue I’ve seen in years,” stated
Dave Caruso, a Vice President at business research firm AMR. That
agrees with how lots of people see it. Many, many companies today are
jumping on the Sales & Operations Planning (S&OP) bandwagon.

Why? After all, S&OP has been around for quite a while: about 20
years. What’s causing this sudden surge in interest?

Well, there are several reasons:One is the very fact that it has been
around for 20 years or so. Thus its current popularity conforms to
what I call the process adoption curve. This says that there is a 15
to 25-year lag between the development of major new processes and
their widespread adoption.

Think about it. MRP was invented shortly after 1960, but didn’t really
gain momentum until the early ‘80s. Total Quality also got its start
in the ‘60s and didn’t get big until the mid- to late-80s. Just-in-
Time came over from Japan in the late 1970s but it’s taken until
recently for it to become very popular as Lean Manufacturing. Ditto
for Six Sigma.

Another reason S&OP is so hot is its power as a coordination tool. As
such, it’s very different from tools to increase reliability (Total
Quality, Six Sigma, and so on). Further, it’s different from tools to
reduce waste and time (Just-in-Time, Lean Manufacturing, and the
like.) S&OP’s job is to help people deal with complexity and change.

Here are two questions for you: If a business is very simple, and if
things rarely change, does it need S&OP? I doubt it. Whatever
coordination and forward planning is required can probably be done on
the back of an envelope.The second question: have you seen many
companies like that lately? I haven’t. This is the 21st century;
change is a way of life. Further, despite the wonderful simplicity
that Lean provides, most businesses are becoming more complex, not
less.

S&OP can help greatly to manage in a complex, rapidly changing
environment. Complexity is increasing – due in part to global
sourcing, off shoring, and extensive use of contract manufacturers.
Change is accelerating, due in part to demanding customers such as you
and I who want quicker response, more product variety, and the next
big thing sooner not later. Companies are turning to the powerful
coordination tool known as S&OP to help them cope with this complexity
and change.

Source:
http://www.scdigest.com/Assets/Experts/Wallace_06-10-10.php?cid=1262