Aligning Sales & Operations with a 1-Page Plan | Rob Tracy Consulting

Aligning Sales & Operations with a 1-Page Plan

by | Mar 20, 2021 | Operations

The Problem

Sales and operations have crossed swords since the dawn of manufacturing. Lately, however, I’ve noticed a consistent theme: With unexpectedly strong sales, the manufacturing group has fallen behind, which has led to long lead times and missed deliveries. It’s a tough spot because it can be hard to dig out of the hole once you fall behind.

The sales team complains about manufacturing’s ineptness, wondering why they can’t get more product out the door. The other side of that coin is manufacturing complaining about the lack of a decent forecast, saying, “If we had known this was coming…”.  They blame each other and meanwhile the customer is not being served well.

Capacity Changes Take Time

We need to face a modern manufacturing truism – it takes time to adjust capacity in a manufacturing plant. There is no magic dial to increase throughput by 20%, 30%, or 40%. People need to be hired and trained, and suppliers also need to ramp up. Certainly, a little overtime can have a short-term capacity impact, but it’s relatively minor and potentially counterproductive as people become fatigued. Systemic increases in capacity and throughput take time.

Misalignment Impacts Customers and Profitability

The decision to increase or decrease capacity is a business decision, not just an operations decision. It requires that the leadership team look into their crystal ball and make judgments about what the future holds. There are implications to guessing wrong, and that includes guessing too high or too low. If you guess too high, you may have hired people and created an elevated cost structure.  If you guess too low, you may not have built the capacity that is needed, leading to poor customer service.  We’re never going to guess the future perfectly, but rather than sales blaming ops and vice-versa, our energies are much better spent having a constructive dialogue about the actions that the team can own.

Simple Sales & Operations Planning (S&OP)

I have found that a simple Sales & Operations Planning (S&OP) process can be invaluable in making proactive decisions about capacity, and it has the positive side benefit of improving the relationship between sales and operations.

A one-page Excel spreadsheet with the following:

  • 13 weeks across the top
  • Bookings forecast by week – translated into the operations unit-of-measure, such as hours, units, or pounds
  • Headcount by week
  • Overtime by week
  • Production Throughput by week
  • Calculated backlog (previous backlog + new business – production throughput)
  • Calculated lead-time (backlog divided by weekly throughput)
  • A weekly 30-minute meeting between sales, operations, and finance

The spreadsheet is straightforward with simple math, and it can become quite accurate as you dial in some of the inputs. The most important element is that it allows you to play “What if” games? What if sales are higher? What if they are lower? What if we increase to 10-hour days? What if we hire five more people?

All of these options can be adjusted and refined – live and in-person at the weekly S&OP meeting. At the end of the meeting, sales and operations are aligned and committed to the plan. Conducting the review weekly allows for adjustments as conditions change, and it tends to keep the meetings short since there are usually only minor tweaks to the plan.

I consider the weekly S&OP meeting to be a foundational meeting in a manufacturing company. The first draft of the spreadsheet can often be set up in a ½ day working session, and then it’s just a matter of conducting the weekly meeting.

It’s simple, and it works. Give me a call at 651-398-9280 if you’d like to discuss your Sales & Operations Plan.