S&OP - 4 Key Drivers of Continuous Improvement
In previous articles (eg How to Build a Strategic Capability in S&OP), I have highlighted a number of critical foundations required to embed and sustain effective S&OP. As I have also described, it is not unusual for the enthusiasm and engagement in the deployment of a new S&OP process to dissipate over time and ultimately undermine the operation and value of the process.
In order to maintain the relevance and added-value of S&OP across the enterprise, it is essential that there is an ongoing focus on continuous improvement which is, in turn, underpinned by constant tracking of the value created by the process.
Some key elements of a robust continuous improvement approach for S&OP are outlined below. It is important to note that these are a mix of hard and soft measures, and that whilst most focus is normally devoted to the former, the underpinning soft elements (such as culture, values, reward and recognition) can often be the more decisive influences on sustainability.
1. Process Ownership & Representation
In order to maintain high levels of engagement and drive ongoing process improvement it is important to define a clear infrastructure representing the various enterprise stakeholders in S&OP and also their specific roles and accountabilities in driving a sustained and improving process. For example;
Corporate Process Owner - A clear central owner, or guardian, of the process is required with a clear accountability for defining and maintaining process standards and KPIs. This provides the basis for creating and maintaining the corporate standard for the process to ensure that a consistent and joined-up enterprise process can be executed.
User Board – Engaging cross-functional participants with an ongoing focus on applying and improving the process is crucial. This ensures that central process owners are regularly connected with the teams executing S&OP and that real-world experiences of the process in practice are discussed and understood. The composition of this group should reflect the cross-functional nature of S&OP and, in particular, not revert to a supply chain focus.
Champions/Super-Users – A network of champions, typically reflecting the key specialist roles in the S&OP process, provides the capability to offer detailed feedback on the strengths and weaknesses of the process and also share best practice and propose improvements.
As outlined above, the respective roles and accountabilities of these various groups must be clearly defined (ideally in a co-creation process involving a cross-section of the stakeholders) in order to agree clear governance processes for the ongoing management of the S&OP process. Building and maintaining the involvement of these groups clearly requires an ongoing investment. This should ideally be discussed as part of any S&OP deployment planning so that it is seen in the context of protecting and leveraging the much bigger investment in overall S&OP deployment.
2. Key Improvement Processes – Audit, Benchmarking, & Change Control
Having created the cross-functional engagement and infrastructure described in (1) above, it is important to provide these groups with the insight and evidence to inform ongoing improvement of the S&OP process. Three processes are central to this;
Audit – Periodic internal audit of S&OP process operation is a useful tool to identify key strengths and learnings from around the business and at the same time highlight and address the potential negative effects of lack of process adherence. However, it is essential to set up an audit approach carefully and transparently (and with full senior leader support) to ensure a focus on continuous improvement and avoid an excessive bias towards simply policing and monitoring adherence.
Benchmarking – Whilst an internal audit approach provides valuable insight on both process metrics and business outcomes across business divisions or teams, a more externally-facing assessment is clearly important. Various approaches to this are possible depending on the level of detail and precision required. There are many S&OP conferences and networking events and these provide an opportunity to gather high-level information on typical process benchmarks. Some industry sectors also have benchmarking groups in which anonymised data is shared. Specific engagement of specialist S&OP consulting firms also offers the ability to benchmark key metrics and outcomes within or across sectors.
Change Control – Both audit and benchmarking often suggest opportunities for process improvement and value creation for the business. However, any process change should be underpinned by strong cross-functional engagement. This ensures the ongoing commitment of all stakeholders to the process and connects them directly to the drivers for change. This should be a key focus for the partnership of Corporate Process Owner, User Board and Champions as outlined above. In particular, it is critical that, in addition to ‘fixes’ driven by underperformance, proposals for improvement are systematically reviewed and incorporated where suitable into a standard corporate process. This provides the stakeholders across the business with a clear route to propose and advocate positive change to the S&OP process in a structured and transparent way.
3. Supporting Adoption of Best Practice
This topic is related to (2) above as it is potentially a key driver of process improvement. However, the focus on best practice in many organisations tends to be on sharing rather than adoption. As a result, good intent on best practice can tend to default to a somewhat passive process in which good practice is presented but not does not become the new norm. There can be various reasons for this, including cultural norms in the organisation on innovation and ‘not invented here’ thinking.
Clarity and alignment in areas (1) and (2) above in both process ownership/representation and in change control provide the opportunity to ensure that adoption of best practice becomes an accepted focus. However, it is helpful to ensure a balanced approach to driving adoption of best practice. In particular, a key aim should be that the process is experienced both as an opportunity to recognise and reward (see also (4) below) the development of best practice in teams across the business, as well as ensure consistent take-up elsewhere. Examples of this include;
Sharing success stories and associated best practice through internal communications to the network of Champions – explicitly recognising the role of specific individuals and teams in these successes provides an excellent opportunity for peer and leader-driven recognition.
Internal competitions in which awards are made to recognise innovation and best practice. However, the value of S&OP is delivered through consistent, routine application of the standard process and so any competition should also reflect the importance of this ongoing, disciplined application. Competitions can be carried out in ‘campaigns’ which rotate the focus on different S&OP topics – also reflecting the breadth of both hard and soft contributions to creating value from the process.
Ensuring that periodic process reviews or After Action Reviews reflect and report on key process strengths and achievements and do not focus only on shortfalls and fixes.
4. Cultural Factors
As introduced above, softer issues can have a significant effect on the sustainability and evolution of the S&OP process. The various structures and processes described here provide the rational and structured requirements to continuously improve the quality and contribution of S&OP. However, the engagement and adherence to these is fundamentally shaped by the softer environment. Two examples of this are outlined below;
Values – The prevailing values in the organisation are critical in providing a supportive environment for continuous improvement in S&OP. Firstly, S&OP is a highly-interdependent process and built on strong cross-functional partnership. If the culture and practice of the business primarily recognises and drives silo-based behaviours, then this will be reflected in the day-to-day operation of S&OP but also hamper any attempts to build cross-functional engagement in continuous improvement. Therefore, this should be a critical focus in the initial deployment planning for S&OP but also in the design of ongoing ways of working. Typically, deployment programmes do not focus enough on how to create the necessary cultural influence in the business to allow S&OP to be sustained and improved.
Reward & Recognition (R&R) – A practical influence of cultural norms on cross-functional partnership is an organisation’s R&R framework. Whilst internal communications and strategy presentations might emphasise the importance of end-to-end partnerships to drive customer value, this is often not backed by R&R approaches. This is important to note in the context of ongoing process adherence and improvement - silo-based measures will fundamentally conflict with the requirements of S&OP teams to optimise decision-making at enterprise level and will drive both execution and improvement focus in a sub-optimal manner. Whilst it may not be possible in the short-term to fundamentally shift cultural norms on cross-functional working, it is often feasible to introduce metrics and R&R approaches which enable and encourage more joined-up cross-functional behaviours.
The majority of S&OP deployments fail to deliver the planned value for their businesses – in many cases this is because initial energy and engagement for the process wane over time. An ongoing focus on driving continuous process improvement, supported by broad cross-functional representation and processes greatly increases the sustainability and value of S&OP. This effort is significantly leveraged when supportive cultural elements (such as reward and recognition) are aligned with the more commonly-discussed hard components of process, structure and governance.