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Understanding The Benefits Of S&OP

We sat down with Michael J. Hassenger, S&OP Process Owner at Caterpillar

21Jun

Mike is a process manager for Caterpillar’s Enterprise Systems Group with specific emphasis on the Sales and Operations Planning (S&OP) process. He has spent 15 years with Caterpillar, working with machine business units around the world. Much of that time has been spent executing, designing, coaching, and refining the process for Caterpillar. Specific areas of emphasis during his tenure have involved incorporation of an evolving distribution strategy, a robust Rough Cut Capacity Planning (RCCP) process, increased dealer visibility to market conditions, and most recently, deployment of SAPs new Integrated Business Planning (IBP) module.

We sat down with him ahead of the S&OP Innovation Summit, which takes place in Boston this September 22–23.

How did you get started in your career?

After spending 6 years in the US Navy, I started at Caterpillar in manufacturing, moved over to 6 Sigma, and then was hired by the corporate business information group. It was there I was first exposed to the S&OP process. Shortly thereafter, I worked as a supply chain manager and was involved as a practitioner in S&OP before returning to a corporate role managing the process.

S&OP has undergone something of a resurgence in recent years, what do you think has been behind it?

S&OP uses precious resources, whether they be from sales / marketing, operations, or finance. So there's an inherent 'cost' associated with doing S&OP. Couple that with a 'forecasts are always wrong' mindset, as well as in many cases the benefits of S&OP are 'prevention of bad things happening' (as opposed to discrete line items on a PnL or balance sheet), and it's easy to get to a view where S&OP doesn't really add anything except cost. However, as the market moves and adjusts, those that rely on annual planning processes or just attempt to respond to the 'issue of the day' find themselves behind. The costs of not doing the process become very apparent in retrospect, so attention returns.

What do you think are the main benefits of S&OP? Where do think some companies fall down?

We typically identify the following benefits for our organization:

1. Increased organizational alignment around a single set of operational objectives.

2. Improved financial understanding, decision making, and forecasting accuracy.

3. Improved responsiveness to shifts in market conditions.

We see the following challenges:

1. Lack of process engagement.

2. Preference to influence the forecast rather than the market.

3. Permitting factors other than accuracy to direct planning activities.

4. Preference of working to 'my' plan rather than doing the hard work of achieving 'our' plan.

What do you consider the most important aspects of an effective S&OP strategy?

The most effective S&OP processes are well led. Leaders are engaged, spark and conduct spirited discussions and hold participants accountable for actions. From there, there are three main elements of an effective S&OP:

1. People: Are people clear on roles / responsibilities and do they have the training necessary to conduct their role properly?

2. Process: Is the process well defined in terms of cadence, sequence, and deliverables?

3. Technology: Are the right tools selected for the organization? Does system configuration support logic and consistent outcomes? Does it match your strategy?

What will you be discussing in your presentation? 

In my presentation, I will be discussing experiences around each of the 3 items listed in para 5 work together to synchronize operational processes. 

You can hear more from Michael, along with other industry-leading executives, at the S&OP Innovation Summit. To register your interest, click here.

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