There’s a relatively new term buzzing around the sales and operations planning (S&OP) arena: sales and operations execution (S&OE). For those close to the S&OP process model, the current definition of S&OE is remarkably close to traditional master planning — a concept around long before S&OP was ever conceived. In fact, when I went through my early S&OP training, I was taught the fundamentals of master planning, mostly because S&OP evolved as the more strategic and longer-horizon layer atop the master planning function. S&OE picked up significant mindshare during COVID as organizations struggled with supply and demand imbalances at the detail level. A delayed arrival of shipment of caps for a body wash is a good example of a typical detail-level issue that master planning or S&OE would help manage.
In simple terms, S&OE is a weekly (or more frequent) planning process to address execution-level supply and demand imbalances, as well as execution planning. While S&OP focuses on the strategic-to-tactical plan, S&OE pulls in the tactical plan to address specific execution requirements. The processes go hand in hand; still, many companies confuse the time horizons and fail to connect them. Some pundits suggest tactical tools or processes work well over a longer horizon, making the two interchangeable. But they are not: The level of aggregation, mix and time horizons are considerably different.
The real challenge for most organizations is that S&OE often lacks the formality or connection between the sorts of executive-level decisions made within the S&OP process and the more tactical or executional decisions that tend to affect day-to-day operations, such as how much inventory to carry, which production line to use, or which product is a production priority when raw materials or capacity are constrained.
The good news is that, because the concept of S&OE as master planning has been around for a while, most organizations probably have an S&OE-like process. This is a great place to begin the transformation to effective S&OE — by improving process connections, meeting structure and participation, while moving the process closer to available technologies. Here’s how to do it:
1. Consider a digital twin. A digital twin is like a sandbox for what-if decision-making and, therefore, an enabler of both S&OP and S&OE. I encourage every organization to build such a sandbox to help navigate and mitigate garden variety disruptions. During implementation and development, emphasis should be placed on simplicity when adding or removing demand or capacity. This usually makes the tool more usable.
2. Balance your executive presence. Executive buy-in is critical for any process to succeed. After all, executives usually decide what teams get funding and which are an operational priority. However, during the pandemic and ensuing supply chain disruptions, leaders became more involved (some might say overly involved) in supply chain processes. However, it’s unlikely that executive teams still — or ever — need to be that hands on. To set guideposts for when the executive team needs to be involved, check out alerts and exception-processing features in your planning tools to automatically flag when input is needed. Set baseline rules for escalating executive participation in S&OE meetings, then implement that criteria as soon as possible. I tend to use two simple criteria to know when to engage executive: Am I out of stock now? And do I expect to be out of stock within the next two weeks?
3. Leverage supply chain analytics. Most organizations will benefit from building out their supply chain analytics tooling so that they can identify problems before they emerge. During COVID, I set up red flags to help identify when a customer ordered five times their normal weekly volume or when there was a dramatic mismatch between typical point-of-sale (POS) consumption for an item and the forecast or orders. This is one area where machine learning has great potential to help supply chain planning.
4. Seek out better demand signal data. In the eyes of a master planner, a demand signal is either a forecast or an order — usually whichever is greater. Master planners are not normally looking at POS or influencer data on a daily basis. However, they should be clued into changes in external demand signals. Whenever there is a fundamental change in demand, such as a mix shift at the POS level, this should be interpreted and communicated to planning team members as soon as possible. In reality, unfortunately, they are often the last to know.
5. Keep a close eye on production or supplier attainment data. Most organizations fail to measure production attainment data from either their own or contracted manufacturing plants or, similarly, data regarding the accuracy of their suppliers’ purchase orders. Both sets of metrics are essential to the S&OE process. In my own supply chain, I have implemented weekly production attainment meetings just for this purpose. The better you understand variation in production or receipts, the better you will be able to plan your business at an execution level and, most importantly, communicate the challenges to leadership.
6. Include key S&OE learnings, feedback and metrics in the S&OP process. Most organizations need to add a master planning — or S&OE — summary to these meetings, thereby improving the coordination between the processes. Include in this summary any known or potential trade-offs and any direction as to product priorities, inventory builds or depletions, and general preferences. To this end, I always have my master planner attend S&OP meetings. If you don’t have that luxury, make sure S&OE or master planning process information flows to S&OP.
So, call it whatever you want: master planning or S&OE. But whatever you call it, get better at it through some straightforward improvements in communication and data exchange. Good luck, and happy planning and executing.
