S&OP Maturity Levels – Building Competitive Advantage

This article is mainly based on insights from Lora Cecere, Founder and CEO of Supply Chain Insights LLC. Lora originally advocated a five-stage model for S&OP maturity and provided practical recommendations for advancing the S&OP process to higher levels. In this article, we provide a quick summary of Lora's model and propose a sixth stage to meet the ultimate purpose of the supply chain: fulfilling customer demand efficiently and effectively.

S&OP looks different at every company. No two processes are the same. While Sales and Operations Planning (S&OP) is defined by the Association of Production and Inventory Control Systems (APICS) as “a process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain,” the implementation of this process is easier said than done.

According to Lora, to achieve this goal, companies need to adapt their supply chain processes to be market-driven, the highest maturity stage. The definition of a market-driven value network is: an adaptive supply chain that can quickly drive alignment within the organization market-to-market to improve value-based outcomes. These supply chain processes sense and translate market changes (buy- and sell-side markets) bidirectionally with near real-time data latency to better optimize and align sell, deliver, make, and sourcing operations to the goal. The focus is on horizontal process orchestration. The redefinition of S&OP processes to be market-driven is a fundamental building block to a market-driven strategy.

The five stages of maturity according to Lora are:

1. Stage1- Develop a feasible plan
2. Stage2- Match demand with supply
3. Stage3- Drive a profitable plan
4. Stage4- Become demand-driven
5. Stage5- Drive a market-driven response

We recommend a sixth stage: become “service-driven.” Each stage offers increasing opportunity and Return on Investment (ROI). However, moving from one step to another can often mean redefining the data model and data inputs.

Lora suggests that supply chain maturity in S&OP can be quickly assessed by answering these five questions:

1. What is your S&OP goal?
2. How do you achieve the correct balance between demand and supply?
3. How do you make decisions?
4. How does your organization measure success?
5. How do you tie S&OP planning to execution?

We are adding a sixth critical question: What service levels are you aiming to achieve across different markets and product categories? If someone insists on a 100% service level, it calls for a reality check. Pursuing a "perfect plan" is often the byproduct of a purely deterministic planning approach, which may not align with the complexities of real-world supply chain dynamics.

While each stage of the S&OP process maturity has a different process goal, most companies lack goal clarity and are not clear on the definition of supply chain strategy, which undermines S&OP success. The definition of supply chain excellence should be a prerequisite for the formation of a team to work on S&OP. Frequently, cross-functional teams form with a different, often unexpressed, goal in mind. They will each say “supply chain,” but the term will have a very different meaning to each person. In these cases, the team will struggle for months—or years—to gain alignment.

While most companies just move from stage to stage in S&OP without deliberate alignment to a goal, this aimless wandering is a mistake. Each step of the S&OP maturity model has a different goal. The fastest progress is made when companies are deliberate and work the process.

Many companies assume that implementing a technology tool will automatically elevate their S&OP maturity. However, they often approach tool implementation with a limited understanding. Some see it as a way to enhance demand planning, while others focus on supply optimization, production scheduling, procurement, or transportation. Meanwhile, higher management tends to view S&OP as a holistic process, aiming to align cross-functional objectives at an aggregate level—often overlooking the granularity and precision needed for effective execution.

To be continued….