& Operations Planning:
from Other Companies
by Dave Garwood
often hear the question ...."How do other companies manage their SOP process
and what results do they get?" We sent a questionnaire to companies we
thought were doing a good job with SOP and were deluged with responses!
The feedback provides some interesting insights ...
The most frequent issue we hear about SOP is lack of integrity with
the sales forecast. Our respondents indicated they had significantly reduced
this problem. Variation in monthly actual demand compared to plan (forecast)
by product family was within +/- 25% for 80% of companies. The companies
that responded have clearly assigned accountability for meeting sales plans.
Actual sales are compared to plan every month and root causes for deviations
are determined. As a result, 82% attest that "Sales forecast accuracy significantly
improved with the SOP process."
The performance to Supply plans was also interesting. As would be expected,
the tolerance for variation was tighter for supply than demand plans. Variation
in actual production compared to plan by product family was within +/-
10% for 64% of companies. Most companies clearly assign accountability
for meeting supply plans, calculate capacity requirements and track demonstrated
capacity at least monthly.
Finding the right number and structure of the product (or process) families
is always an elusive issue. The survey included companies of many different
sizes from a wide variety of industries. In spite of the diversity, 81%
of the respondents were able to plan their business with 20 or fewer product
Most companies had a formal SOP process and a followed a documented SOP
policy. Over 90% of respondent companies have participation by the executive
staff in the final SOP meeting.
successful processes were are well organized and many people in the organization
participate. Ownership for the finalized plans is widespread.Separate pre-meetings
to make preliminary demand and supply plans to reach compromising partnership
agreements, where needed, are employed. The majority of the companies reported
that agendas are circulated in advance and brief Minutes follow these meetings.
plans are not just operational plans. Over 86% of the respondents derive
financial plans from the SOP plans.
The reported benefits derived from the SOP process included better integration
of departmental plans, improved customer order delivery, enhanced communications
across functional department silos and better company-wide decision making.
Most companies also reported significant inventory reductions!