3 transformative trends impacting S&OP strategies

By Sarah Gilchrist, director analyst, Gartner Supply Chain practice

As organizations grapple with ongoing economic uncertainty, many supply chain planning (SCP) leaders will face organizational resource constraints and competing business priorities. As leaders navigate these challenges, sales and operations planning (S&OP) is posed to play a critical role in helping optimize the balance between demand and supply, while aligning operational plans with strategic business objectives.

According to a Gartner survey, organizations with well-designed S&OP processes are 1.2 times more likely to outperform competitors in key metrics such as on-time, in-full (OTIF), cost, or inventory. Similarly, those consistently exhibiting desirable behaviors were 1.1 times more likely to achieve superior S&OP outcomes.

To maximize potential, SCP leaders must strategically allocate their efforts in the S&OP process to remain competitive and achieve superior outcomes. At the Gartner Supply Chain Symposium/Xpo next month, we will discuss trends that are driving S&OP performance and steps SCP leaders can take to implement in their organization. Key trends we see taking hold include:

1.)  Shifting beyond short-term objectives

Forty-two percent of supply chain organizations struggle to lift the focus of S&OP planning beyond short-term objectives, according to a survey by Gartner. The data shows that promoting a culture of looking ‘up and out’ within S&OP remains challenging for many organizations.

Often, S&OP processes focus on immediate goals, usually at the expense of mid-term and long-term planning. As organizations face increasing complexity and uncertainty in their operating environments, there is a growing need to shift S&OP strategies beyond short-term objectives. As part of the shift, organizations need to prioritize forward-looking approaches that encompass strategic goals and future growth drivers.

Planning beyond short-term objectives involves aligning S&OP processes with mid-term financial objectives and business strategies. This requires a comprehensive understanding of the supply chain's capabilities and constraints, as well as the ability to anticipate and respond to changes in consumer demand and competitive dynamics. By extending the planning horizon, organizations can be proactive in better resource allocation, risk management, and opportunity capture to support sustainable growth.

2.) Collaborative decision-making and transparency

In an increasingly interconnected and complex business environment, organizations must foster a culture of collaboration and open communication across functions to optimize their S&OP process. Gartner research indicates that high-performing organizations exhibit positive behaviors such as transparency and accountability and curb negative behaviors such as poor information sharing and unreliable data collection.

Open sharing of relevant information and data across departments is critical for a successful S&OP process. This should include transparency about risks and opportunities across the organization. By acknowledging risks rather than shying away, stakeholders can work together to form a mitigation strategy, taking into account the full end-to-end supply chain’s capabilities, and make informed, proactive decisions.

Collaborative decision-making will empower cross-functional teams to contribute their expertise and insights, enhancing the quality and effectiveness of S&OP plans. Organizations that encourage these behaviors will be better equipped to navigate uncertainties and achieve superior S&OP outcomes.

Use approaches such as peer-to-peer behavioral contracts to define what good looks like, and ensure S&OP sustains a productive, forward-thinking focus. By encouraging the open sharing of information and data, organizations can ensure that all stakeholders are informed, helping to facilitate more effective decision-making.

3.) Increased stakeholder communication

Supply chain planning leaders often struggle to decide which initiatives to invest in to embed and develop their S&OP process. According to leaders surveyed by Gartner, 45% rank active stakeholder communication about the importance of the S&OP process in achieving corporate goals as a top-three initiative that has the biggest impact on driving business outcomes.

This is best achieved by contextualizing your communications with stakeholders by incorporating current market conditions impacting the business and customers, as well as the organization’s goals into your message. Then demonstrate the clear link for how S&OP will support the business to meet its objectives in this context. All too often this critical step of connecting to macro issues and business goals is overlooked, leaving stakeholders to lack motivation to be an active part of the S&OP process.

Additionally, identify which metrics matter to each stakeholder and create a linkage to show how a good S&OP process would support these metrics. For example, sharing forecast accuracy results might not mean much to the finance or marketing teams, but sharing the impact of missing the forecast in terms of revenue miss, inventory increase, working capital impact and margin loss would make the picture clearer. Always quantify the value driven within the S&OP process.

Regularly reinforce the relationship between the process and achieving expected business goals and the benefits with each stakeholder. This communication can take place in multiple forums such as group meetings, functional area meetings and one-on-one discussions.

About the author

Sarah Gilchrist is a director analyst in Gartner’s Supply Chain practice where she advises clients on demand and supply planning, sales and operations planning (S&OP), sales and Operations Execution (S&OE) and customer collaboration in the supply chain space.

SC
MR