S&OP Ownership – The role of the Commercial & Finance Functions
Whilst S&OP was first developed and applied in the 1980s, best practice for its design, deployment sustainability is still fervently debated. A common theme in these debates is where in the organisation the process should be owned in order to maximise S&OP take-up, effectiveness and sustainability. Traditionally, S&OP was seen as a supply chain-driven process and was often owned and led from the Supply Chain function. However, there is now frequent challenge to this assumption, so where should S&OP be owned?
Before addressing that question, it is important to clarify why ownership of S&OP is so critical, and what we actually mean by ownership.
S&OP is a complex planning process with significant cross-functional participation enabled by specialist technical and analytical inputs. The complex and distributed nature of the process and the need to sustain it on a monthly cycle means that strong ownership is required to maintain the array of contributions but also focus them on the key strategic priorities for the business.
It is useful to categorise 2 forms of ownership within S&OP;
1. The co-ordination and facilitation of key process inputs - these typically include significant technical expertise and include forecasting, supply planning and inventory management and require the use of advanced tools and software
2. Leadership of the process - this is a broader leadership role, ensuring collaborative working to drive the process towards optimised enterprise-level decision-making and also ensuring an ongoing, high-level organisational focus on S&OP as a core planning vehicle across the business.
In the early stages of S&OP maturity, when the focus is primarily on balancing demand and supply volumes, the primary emphasis tends to be the co-ordination of the key process inputs (such as demand forecasts and supply plans) and synthesising proposals for action from these. The Supply Chain function routinely takes ownership of this role and this is typically very effective.
However, as S&OP maturity evolves the requirement for ownership of the process becomes more and more focused on business leadership and decision-making. It is in this role that the Supply Chain ownership becomes less appropriate as the scope of the role becomes broader and more outward-facing with the process aiming to support the execution of enterprise business strategy in its broadest sense.
The Options for S&OP Ownership
Supply Chain – Whilst many businesses delegate overall ownership of S&OP to the Supply Chain function, this is often problematic as the intent is for S&OP to be perceived and applied as an overall enterprise planning approach, not simply a Supply Chain-focused demand and supply balancing process. Supply Chain ownership tends to signal the latter and this can reduce Commercial engagement in the process and potentially limit the impact of the process in driving broader cross-functional strategic and operational alignment. Furthermore, as the decision-making driven by S&OP goes beyond the scope of the Supply Chain function (eg commercial trade-offs across the portfolio or regions, promotional priorities, launch scheduling etc) this is not a natural fit.
Commercial – A key advantage of Commercial ownership of the S&OP process is that this firmly demonstrates the objective of S&OP as a core business process driving tangible business outcomes such as sales, profitability and growth. Commercial ownership of the process also provides an external-facing perspective and the key drive to align S&OP decision-making with the creation of value for customers. These are fundamental objectives in S&OP and the Commercial function is uniquely placed to ensure that these are at the heart of the monthly S&OP cycle. However, planning is typically not a dominant cultural theme in the Commercial function and in practice this means that it is often overlooked as the overall S&OP owner. Notwithstanding this, Commercial ownership of S&OP offers the benefit of strong customer focus and P&L accountability which can then be applied through the process to maximise customer value and business outcomes by driving cross-functional collaboration.
Finance – Finance have a key responsibility in the business to provide stewardship and focus on the fundamentals of business performance including sales, profit and growth. In many businesses, the Finance function also take ownership for core planning processes (including of course financial planning or budgeting). In this role, Finance routinely work cross-functionally to gather and align business plans and financial data in order to support senior management decision-making. These elements are also critical in S&OP. The Finance function are therefore well-positioned, both from a capability perspective and in terms of cultural fit, to take on the overall ownership of S&OP. As S&OP maturity evolves they are then also able to directly manage the integration of S&OP and financial planning and ultimately the extension to full Integrated Business Planning (IBP).
As a result of these considerations (and my experiences in S&OP/IBP deployment), my preference would be for Commercial ownership, especially for a mature S&OP/IBP process. However, recognising the strong connection between S&OP and financial planning (especially when developed to full Integrated Business Planning or IBP), it is also wholly appropriate that S&OP is owned in Finance.
I would maintain however that the Supply Chain function retains a strong leadership role with particular focus on the range of technical processes underpinning S&OP including forecasting, demand planning and supply planning. In this approach, the Finance function would take the overall ownership of the core business process to drive optimal enterprise decision-making but in doing so, work in close partnership with the Supply Chain as expert providers and enablers of the technical S&OP processes.