Facts vs. Myths – What You Really Need to Know About S&OP
Myths about S&OP primarily arise from misunderstandings, lack of knowledge, and poor experiences with implementing and managing the process. A lack of management support, resistance to change, and inadequate tools and technology further fuel these myths. Today, I’ll tackle the most common and frequently repeated myths so you can understand the truth about S&OP.
What is S&OP? A Reminder
The S&OP process is integrated sales and operations planning. I described it in detail in a previous article. In brief, the goal of S&OP is to improve the predictability of a company’s financial outcomes. How is this achieved? By aligning the organization’s efforts around a single plan, which consists of customer demand forecasts and operational plans (reviewed monthly within a 12-18 month horizon), evaluated for credibility, feasibility, and acceptability. In practice, this plan is implemented through a four-step monthly cycle, including:
- demand planning,
- resource planning,
- PreS&OP meetings to align plans among key functions,
- S&OP meetings for top management approval (e.g., CEO, board of directors).
A lot of myths have formed around S&OP, so it’s time to debunk them. Below are the top 10 myths about S&OP and what you need to know to avoid misconceptions.
The Most Common Myths About S&OP
Myth 1: A company must meet certain requirements to be ready for S&OP implementation
I often hear companies claim they’re not ready for S&OP because they lack a system, data, or a forecasting process. However, the only real requirement for starting S&OP implementation is the desire and need for change.
At the beginning, we use the data available in the company or that can be relatively easily gathered. Implementing S&OP often involves introducing a forecasting process (starting with simple, high-level data aggregation, e.g., company-wide sales or by main product groups or sales channels).
I also recommend starting S&OP implementation with Excel and avoiding software at the beginning since the specific requirements for such software aren’t clear yet. Often, it turns out that specialized software isn’t necessary.
Myth 2: S&OP and IBP are entirely different
IBP stands for Integrated Business Planning, a process that covers more areas and is more complex (e.g., financial planning). In practice, there’s no reason why S&OP can’t be designed to follow the IBP model. Recently, an S&OP expert commented that the difference between S&OP and IBP is “just rebranding.” Thus, there’s no major difference in calling the process S&OP or IBP.
Myth 3: S&OP is a tool for inventory optimization
One of my favorite myths. S&OP implementation often results in significant inventory reduction. This result stems from better integration across company areas. However, these benefits may take months to materialize. If inventory is the only issue to address, look into inventory management solutions first. Focused actions in a specific area can yield faster results. S&OP, while transformative, requires time. Interestingly, in some S&OP processes, inventory may not even be a significant focus.
Myth 4: Implementing S&OP also means implementing production scheduling and purchase planning
While it’s possible to simultaneously implement S&OP, production scheduling, and purchasing, they are separate processes. S&OP operates on a higher aggregation level than production scheduling, which typically involves individual products. Additionally, scheduling usually covers a few days or weeks, while S&OP looks 12-18 months ahead. This myth is often perpetuated by companies offering “S&OP software,” which actually provides scheduling and purchasing software.
Myth 5: S&OP is the same as MPS
MPS, or Master Production Schedule, is a process that enables production planning over a few weeks or months, primarily for inventory-producing companies with unstable demand profiles. MPS helps optimize production capacity and ensure a stable demand signal for suppliers. While MPS may be part of S&OP, it isn’t applicable everywhere, such as in companies with short shelf-life products or services.
Myth 6: S&OP can be implemented once and will function on its own
This belief is a major reason for S&OP failures. For successful S&OP implementation, there must be a dedicated process owner to ensure its smooth functioning and, most importantly, its ongoing development. The only constant in S&OP should be change. Like it helps the business adapt, the process itself must adapt. The S&OP owner need not be a full-time role but must be clearly designated. Shared responsibility (person A oversees one part, person B another) often doesn’t work.
Myth 7: Implementing S&OP is the same as implementing a planning system
As I mentioned earlier, I recommend not implementing S&OP along with a software system. S&OP is a process that supports communication and decision-making. While a system can automate certain actions (e.g., generating forecasts, reports) or streamline communication, S&OP itself is not an IT system.
Myth 8: S&OP implementation takes a long time
Some companies offer year-long S&OP implementations, usually involving a pilot process in one part of the organization and gradual expansion. However, there are alternative methods to launch the first S&OP cycle for the entire company within a few weeks. Although the initial cycle may not be perfect, systematic improvements can make it mature over time.
Myth 9: S&OP implementation is expensive
Implementation costs can be high but don’t have to be. Recent studies put the cost of S&OP implementation between $300,000 and $1.15 million, plus maintenance. For large corporations with concurrent system implementation and consulting from major firms, costs can exceed these ranges. In a more realistic scenario, the primary cost is time.
The time of the implementation team and meeting participants is crucial. Top management usually participates, which means meetings aren’t cheap (if calculated based on salaries). However, apart from this, major costs aren’t necessary if additional software isn’t implemented.
Additional costs often involve consultant support. In Poland, full implementation support generally costs between 100,000 and 300,000 PLN, depending on the consulting firm and organization scale. Smaller support (e.g., training and team preparation) is much cheaper. Costs also vary based on the chosen consulting firm and the level of support provided.
Myth 10: S&OP is only for large manufacturing companies
S&OP works effectively in small, medium, and large companies. It applies not only to manufacturing but also to trade and service companies. The process is highly flexible (as long as we discard these myths). S&OP principles can be applied in almost any organization that has sales and operations.
Conclusion
These are just a few of the most common myths about S&OP. Each one can discourage organizations from implementing S&OP. Part of my mission is to debunk these myths so more companies can benefit from the advantages S&OP offers. For more information on S&OP, visit my LinkedIn profile or my YouTube channel.
Paweł has worked in various industries and held a wide range of roles throughout his career. He’s been a manager, a planner, a lecturer, and even a shift supervisor in a coffee shop. Each of these experiences has taught him how to work effectively with people and how to ensure that processes run smoothly and efficiently.
His core expertise lies in Sales and Operations Planning (S&OP), inventory optimization, production planning, and process management, enabling businesses to align their operations, improve their KPI performance, and enhance financial predictability. Paweł focuses on improving communication between departments and implementing strategic solutions that drive measurable results.
