30/03/2022

Decision making

Sometimes driving S&OP towards decision making is challenging, with meetings often focused more on the here and now than looking forward, especially when the economic environment is so uncertain.

        The pandemic highlighted the importance of collaboration, consensus and transparency in this process and, if we weren’t aware before, the criticality of using S&OP to make timely and effective decisions. So, how do we optimize S&OP for decision making?

        With the challenges presented by COVID and the Ukraine war scenario planning is critical, so a business has a response to factors that may become reality. This reduces the all too common firefighting loop that businesses find themselves in. I have seen, however, that functions don’t always like giving up their power of decision making to a collaborative, cross-functional forum, partly because they feel that they alone have the depth of knowledge to make decision relating to their functions, and partly because they can make decisions quicker if they operate outside the S&OP cycle.

In the shorter or in the longer term?

         With that, it’s important to define where we take decisions – in the shorter-term S&OE or in the longer term, more strategic S&OP process? Having very defined S&OE and S&OP processes stops people from ‘going rogue’ and making siloed decisions.

        In the packaging world linked to FMCG, volumes have reduced compared to pre-pandemic. As a result, we’ve had to make some very quick decisions. Do we stock build, turn off capacity for example? If so, we can’t wait for the S&OP cycle. Tactical decisions, tackling the next month’s view, are then taken care of. This reassures people across functions that the key tactical decisions are being taken in a timely manner, and thus stops them going ‘off-piste’. Communication of these decisions is also a critical part of ensuring alignment across the business.

         You may well find that maintaining your existing S&OP cycle in this current environment is having negative impacts on your business. If I see an upturn in demand, I want us to be ready for it so we don’t miss out on sales – S&OE helps with that.

Fluctuations

         Things are changing so much that we can make a decision one week, and by next week the assumptions behind that data have changed and don’t support that decision anymore. Assumptions behind market behaviour are changing with us coming out of COVID, people coming back to work, inflation, and the war in Ukraine. All of that creates demand volatility.

         We need to be on top of all these fluctuations, increasing the importance of shorter term decision taking, but leaving the S&OP process intact so we’re not constantly changing the longer-term strategy based on tactical decisions.

          You have to keep the shorter and longer-term planning approaches separate. I caution against making S&OP more tactical – it’s not designed to be agile. It’s about identifying gaps. So, regardless of whatever is happening in the short-term we don’t change our targets and budgets, and so we shouldn’t change our S&OP.

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          Identifying best and worst-case scenarios allows us to close the gaps ahead of time so we don’t have to make tactical decisions. This helps delineate S&OP and S&OE, keeping the right level of decision making in the right forum. If we do need shorter term, and tactical decision making then we take that to S&OE.

          S&OP stakeholders don’t always read the meeting pre-reads so if there are decisions that need to be made coming out of the next S&OP meeting, I’ll meet the main participants individually ahead of time and walk them through the desired outcomes. In week 4 before S&OP, I might book an hour with the key people which can then be canceled if not needed.

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