Best Practices in Global Sales and Operations Planning From Actual Implementations

As S&OP evolves from local or regional to global, the challenges that come from operating on this scale become significantly greater. This research highlights insights and experiences from those who have progressed on this journey.

• It is often difficult to know when to expand to a global S&OP process. Complexity increases as companies transition from a totally local or regional operational footprint to begin sourcing globally. The complexity continues to grow when the make and deliver processes expand globally. As the operational footprint expands, the planning processes also need to expand.
• Creating a balance between local and global requirements is not always easy. Successful global processes are created after, first, understanding the current global organizational structure and interactions, and then, designing the layered global sales and operations planning (S&OP) structure so that it facilitates effective business trade-offs for each level and part of the organization.
• Companies often find it challenging to know when they are on the path to a successful global S&OP implementation. S&OP process facilitators will know when they get active pull from the organization to bring important decisions into S&OP and when the business sees the return in the financial and operational metrics.

Supply chain and S&OP leaders:

• Assess your current process and how it supports profitable decision making globally.
• Standardize the S&OP template, but tailor the design and the dialogue to the business needs — locally, regionally and globally.
• Resource the global implementation appropriately, and allow time to progress through the change curve.
• Use standardized metrics with defined goals that are reviewed on a regular cadence to help steer and navigate the process.

As companies scale the S&OP process from local or regional to global, they need a broader view of demand and supply, and all the trade-offs that must be considered. During this evolution to becoming global, the cost, complexity and challenges that come from operating on this scale increase dramatically (see Figure 1). Traditional, more localized S&OP processes get stressed. A mature process becomes layered across planning horizons, regions and business units. This complicates the process and governance, but eases the decision making. In this research, we explore the right balance and share best practices for organizing and governing S&OP in a global organization, based on the insights and experiences of those who have done it.

Source: Gartner (August 2012)

In companies with highly functioning S&OP, there truly is no process that is more fundamental to predictable financials. When properly designed, managed and utilized, S&OP provides a monthly window into how the company is currently performing and reveals performance projections against financial targets. It also highlights potential barriers that may prevent achieving these goals. S&OP provides the framework for fully informed trade-off decisions that enable an organization to make course corrections in more frequent and timely intervals throughout the year, building predictability into its performance. This description of what an S&OP process should deliver is ambitious in the context of a company operating in a single geography, but when the scope is broadened to organizations operating across multiple geographies and product lines across the globe, the challenges increase greatly.

Over time, many companies have grown through mergers and acquisitions, product complexities have increased, and supply chains have become geographically extended. To meet these challenges, organizations often structure themselves using operating models based on a geographically dispersed set of local sales companies with functional reporting lines into regional or global centers of excellence, delivering not only their products but also supply chain, marketing, brand and technical support services. As this occurs, companies require a broader view of demand, supply and the potential trade-offs. The challenge is in creating an effective design that supports a multicontinent, multiexecutive, distributed business environment with all of its inherent cultural and regional dynamics. A mature process becomes layered across planning horizons and regions or business units.

In a recent Gartner panel discussion on global S&OP, we asked participants from three industries — consumer products, high tech, and apparel and footwear — to share insights from their experiences in designing and implementing a global S&OP process (see Note 1). The discussion covered the following key topics:

• Governing global S&OP complexity
• Determining the organization structure to accommodate different levels
• Driving decision making in a global environment
• Overcoming challenges and resistance to a global process

One aspect of governance has to do with knowing when it is appropriate to expand S&OP beyond the local or regional focus to a global view. Companies that have successfully done so take into consideration the following governing aspects:

• Profitable global decision making — Assess the current process to determine if it is effectively delivering the promise of S&OP for profitable decision making across the business. If not, it may be time to develop a globally layered structure that will add value and provide better decision making without adding undue overhead and complexity.
• Centralized and decentralized decisions — When a company gets to the point that decisions are no longer just centralized or just decentralized but are a combination of both, depending on the decision or the planning horizon time frame, it is time to expand the process to layers that are local or regional and global.
• Cross-market risks and opportunities — Determine if there is a need to make business trade-offs across markets. If one or more markets are having successes or challenges in certain periods, a global view allows for balancing trade-offs and decisions that will better achieve the business goals. If a company has only a local or regional process, it cannot easily see the need or the opportunity to respond to these business situations.
• Local or regional relationships — In some companies, regions play a large role because they are the closest to the customer and channel partners. These companies can take advantage of the insights and relationships at the local level by leveraging across businesses for risk management or a value proposition that would most likely not happen if the process was operated only at a central level and not layered effectively.

Another aspect of governance has to do with the balance between maintaining a standard methodology, yet providing the flexibility to address unique local and regional business characteristics needed to be successful. One thing to keep in mind is that the processes in each country or region are not all at the same level of maturity. It is important to tailor the process accordingly and to have flexibility of content and dialogue that is relevant for the region. The common thread across the regions and the layers should be aligned metrics.

From a process structure perspective, experience shows that it is best to align globally on the language and terms used, as well as the process cadence for meetings and reporting. It is also very important to align on both design principles and governing principles. Once a company has these set in place, it can work out the nuances of each market in a way that meets their needs. If one market isn't as mature as another, the company may choose not to give them the same toolset, or it may opt to not set the expectations as high at the start. It is best to give degrees of freedom to each market to work out their details, as long as they abide by the few global requirements.

The complex organizational design of global companies makes governing the process significantly more difficult when trying to navigate through local, regional and global structures. Companies that have been successful with a global process, design the S&OP structure so that it facilitates the business trade-offs that must be made at each level of the organization. They design and manage the process so that it drives appropriate decision making, despite the often conflicting goals of the global organization. Here are a few points to keep in mind when setting up the organization structure:

• Recognize that implementation is different from running the business. It takes different skill sets and mindsets to design a comprehensive new global process. Running the business using S&OP on a regular basis is best done by the supply chain planning organization as part of the normal course of business. Implementation requires a team that includes representation from various markets, large and small, along with the company headquarters' or global representation to get comprehensive input on the design, as well as the best way to embed the process into the global and regional organization. This type of implementation team gets input and makes connections from deep within the organization, which improves the odds of acceptance of the process, while the implementation team spreads the news and gets others on board.
• Ensure that no region or the global headquarters dominates the S&OP process policies and best practices, forcing the smaller or newer regions to follow their lead. Successful global processes provide a mechanism for cross-pollination of ideas and a learning repository for companywide S&OP knowledge. This is beneficial when people change roles, and it shortens the learning curve to implement the process in additional regions.
• Position the supply chain organization as the facilitators or stewards of the process. Best practices have the supply chain organization as the original initiators introducing S&OP throughout the markets. It guides the participating groups to build the best plan that reflects what they can market and sell, and the best supply response to achieve the business strategy and operating targets. As the process becomes more embedded, it becomes the local business process, headed up by the regional general managers or profit and loss (P&L) owners. At this point, the local business units own the local process, and the supply chain organization facilitates it, while providing input to the global S&OP for a macro view.

The complexity of driving appropriate trade-off decisions grows as a company expands globally. The dispersed nature of a global company increases, and companies are challenged with current decision-making practices. In some businesses, making the right trade-offs can be the difference between being profitable or not. To counter these challenges, supply chain leaders should consider the following:

• Set up a structure that provides a shared understanding of the global decision-making framework. This framework should define which decisions must be made globally, locally or jointly and by whom. Develop this framework, based on which layer has the appropriate knowledge and insight to make the best decision for the business.
• Use supply chain segmentation to guide and shape decision-making practices, allowing specific attributes of the different segments to drive the process. Often, it is helpful to look at trade-offs from a segmented view or a regional view, along with the global view, to see aspects that wouldn't be apparent if looked at only locally or globally. In some segments, it may be appropriate for certain decisions to be made locally; in others, regional or global decisions may be better for the business.
• Consider where in the product life cycle a particular product is when deciding where to make the trade-offs. When a product is newly launched and ramping up to a steady state, it may be more productive to have decisions made from a broader perspective than a local one as the market and the product are still settling in. As the product becomes established, local or regional influence on the decision trade-offs becomes more valuable to the productivity of the product. Determine where and when to transition decision-making ownership, based on product life stages and the business impact.

Regardless of where the decisions are made, it is important to have full transparency and shared assumptions from the local level to the global view. The information used to support analysis and decision making must be factual and shared openly, without bias or hedging. Successful processes support a culture of openness and transparency.

Transitioning to a global S&OP process brings challenges and a need to counter the resistance to change. Companies that have successfully rolled out global processes focus on a few priorities:

• Demonstrate benefits to the business early on — A big challenge is often getting all the layers to understand the value of the globally layered process and to want to participate. It is important that all see how it can help the business improve. To counter this resistance, demonstrate how the process will benefit each market and the business as a whole. Providing these results early on can be a big challenge, but if the process is designed to deliver the right information and make the right business trade-offs to meet the business goals and achieve the strategy, the results will speak for themselves.
• Transparency drives trust — Another challenge is having trust and transparency from top to bottom. If assumptions at the top change, it will be hard to show value at the local level. If the businesses aren't transparent about issues, it is hard to have confidence in the roll-up global view. All involved have to trust the information they get and share in the assumptions. It is important to have guiding principles in place to build trust and teamwork to achieve success.

Companies often ask us, "How do we know we are on the right path?" There are a few signs to watch for:

• See if the process is challenging people to work and respond in new ways that better align to the business strategy, provide predictable business results globally and drive toward profitability.
• S&OP process facilitators begin to get pull. The businesses will start asking to participate. They begin to experience active participation and engagement in the process, and will start to see the return in the financial and operational metrics. The business will grow and meet its goals.

Here are a few recommendations for a company embarking on a global S&OP initiative:

• Obtain sponsorship and vision from the people who matter. Say where you are going and why it is important to the company.
• Learn from other companies that have gone through it already.
• Resource it properly, and invest the time to go through the change curve.