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Sales and Operations planning is a pivotal decision making process to adapt to constantly changing market and supply conditions. To balance the customers’ requirements with the capabilities of the supply chain, financial and strategic ambitions companies operate an S&OP process.
S&OP is evolved into an integrated business management process including elements like financial planning and new product planning in the late ‘90s. Sales and Operations Planning (S&OP) is a set-of collaborative business processes and technologies that enables an organization to timely respond to demand and supply variations and risks with, data driven decisions.
Measuring the quality
Decision making is common in all these definitions. However, in all S&OP related publications there is hardly any mentioning of the quality of these decisions. Perhaps because it is a difficult topic. How do we measure the quality of S&OP decisions? At the moment we take the decisions we do not know the outcome, and when we know the outcome we cannot relate it to the decision anymore!
Let’s look at another discipline where decision making is extremely important; the medical world. Imagine an operating theatre where seven different specialists are co-operating to save a life! This is full of decisions. Since lives are involved it is extremely important make high quality decisions. Also there you only know the outcome after the fact. In that world they have developed the concept of Decision Quality (DQ). You cannot measure the quality of a decision at the moment you take it, but you can create all conditions to be sure that you will take the best possible decision at that moment of time.
Main elements
Decision quality does (1) look at the ‘right’ answer’, and (2) if the most important parties are part of the decision process to achieve alignment and commitment to action. The main elements that influence the making of the described best possible decision are:
Process quality, the degree to which a process continuously ensures that the rules for information validation and for decision- making are sound. Procedural quality reflects how good the process is defined and executed.
Information quality; is the degree to which correct and up to date information is available to support decision making.
Behavioral quality; the degree to which countermeasures are applied to limit the effect of bias inflicted into the planning process.
Having a checklist at the S&OP meeting covering those aspects assures that the decisions are as good as they can be!
Optimizing your S&OP?
TIAS offers the Executive Master of Operations and Supply Chain Excellence which is a 11-module program, completed over a 22-month period. It offers you the latest theories, techniques and skills needed to successfully define and execute your company’s operations strategy.