Sales and Operations Planning:

A Global Comparison

January 2013
Bryan Ball
 January 2013
Sales and Operations Planning: A Global
Comparison Sector Insight
Sales and Operations Planning (S&OP) is a critical process for any company Aberdeen’s Sector Insights
interested in strong performance. When considering this process, however, provide strategic perspective
one frequently asked question is, "How does the S&OP process differ, if at and analysis of primary
all, from region to region or country to country?" research results by industry,
market segment, or geography
In this report, based on 100 enterprises surveyed in August 2012, we take a
look at this question by evaluating the differences between regions in terms
of pressures felt, capabilities, and technology enablers in place. The data was
segmented by geographic region and reviewed by North America (NA),
Europe (EMEA) and All Others (Asia, Africa, South America, and the
Caribbean). The approach we took when reviewing the data was to first
uncover any noticeable differences in practice and behavior and secondly to
provide insight regarding the impact of these differences. Understanding
how and why any differences exist may suggest possible solutions to
companies in other regions tackling those same problems that might not
have previously been considered.

Worldwide Pressures
As a starting point we will look at the pressures faced by all companies in Sector Definition, n =100
each geographic region to see if there are any notable differences (Figure 1).
√ North America: 51% of all
respondents
Figure 1: Global Pressures by Region
√ Europe: 23% of all
respondents
√ All Others: 25% of all
respondents

Source: Aberdeen Group, August 2012

This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and
represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc.
and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.
Sales and Operations Planning: A Global Comparison
Page 2

Structurally, North America is a fairly mature market and is geographically

isolated in comparison to many of the EMEA and All Other countries that
may have several immediate neighbors, cultures, and languages they must
account for.
Customer mandates are number one for all regions as the top pressure.
This is more so for EMEA and All Others compared to NA, but increasing
customer demands are clearly not just regional issues. However, the nature
of these demands will likely vary by region. For example, it could be
packaging, engineering support, marketing, field support, or some other
form of requirement. The type of business will also influence the customer
demand such as make-to-stock versus make-to-order, consumer goods or
capital goods, or process industries versus discrete products. The key
realization is that each region is driven by the market requirements coming
from the customer. North American companies are much more concerned
with growing their top line revenue than the other two regions, which might
reflect the maturity of the NA market. In a mature market, competition and
the battle for revenue share are the keys to expanding. In emerging markets,
growth may be a function of being the first to market with speed and
execution being more important factors to winning.
Compared to EMEA, the likelihood around improved top line revenue in the
mature NA market is twice as great (46% vs. 23%) which again may reflect
differences in what constitutes success in EMEA.
The All Others group represents countries in emerging markets, which have
more anxiety around increasing supply chain costs. As business moves out
of the immediate sphere of control and extends to other regions and locales
operating under different regulations, tariffs, and taxes, the cost of doing
business is often structurally different and may prove to be more costly (this
is one reason why companies with strong facility or capability footprints in
NA will buy established companies in emerging markets or partner with a
3PL as they build a geographic or sales presence). Expansion in emerging
countries can provide supply chain challenges that more mature markets
have already addressed.
The differences are not huge across the board for all regions with the
exception of the emphasis in NA on top-line growth. With the economic
downturn, a healthy return of revenue lost is not unexpected. There are Best-in-Class (BIC) Breakdown
differences in weighting one pressure versus another but overall nothing too by Sector
significant. √ North America: 58% of BIC
companies are in NA
Worldwide Capabilities √ Europe: 16% of BIC
Figures 2 and 3 show the capabilities by region as well as indicate the Best- companies are in EMEA
in-Class, the top 20% of performers, from our September 2012 report,
√ All Others: 26% of BIC
S&OP: A Critical Process for Superior Performance (see sidebar).
companies are in the
The first key observation is NA lags in all categories in terms of likelihood developing world
to have the capabilities in place even though their percentage of Best-in-
Class is representative of and even slightly greater than their percentage of

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Sales and Operations Planning: A Global Comparison
Page 3

size by region (58% of Best-in-Class vs. 51% by size). This may simply reflect
that a disproportionate number of these companies not in the Best-in-Class
lag further behind in NA than in other regions. It is important to remember Best-in-Class Performance on
that the Best-in-Class definition is based on performance metrics and not Key Metrics
just capabilities (see sidebar for Best-in-Class Metrics definition).
√ Average Customer Service
The second noteworthy point is that the emerging All Others category is a Rate: 95.6%
leader in many categories and the EMEA group falls typically in between
North America and the emerging markets. √ Average Cash Conversion
Cycle: 30 Days

Process Capabilities √ Gross Profit Margin: 42.6%

Figure 2 indicates the process capabilities. There is a definite gap advantage √ Forecast Accuracy (Product
for the All Others group in planning capabilities. They are much more likely Group Level): 85%
to manage constrained and unconstrained planning as well as "what if"
scenarios.

Figure 2: Worldwide Process Capabilities Comparison

Source: Aberdeen Group, August 2012

Unconstrained planning is typical of the Material Requirements Planning

(MRP) capability, which answers the question of what is required to meet
the demand without constraints. Constrained planning is typical of some
type of a supply chain planning tool or finite scheduling application that
addresses the question of what can be managed based on what's available.
The EMEA and All Other groups are close on the unconstrained or basic
MRP capability but the All Other group is 43% more likely to have advanced
capabilities in place to address constrained planning.
The indication here is that even with MRP capabilities the NA group is far
less likely to evaluate multiple scenarios during Demand and Supply
balancing. This may be a result of the indication that 54% in NA are "still
trying to put a formal S&OP process in place." It would follow that a formal

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Sales and Operations Planning: A Global Comparison
Page 4

sales and operations planning process requires the discipline of scenario

planning to make it successful.
Responding to unplanned events also indicates a strong advantage for the All
Other group compared to NA, as All Others are 98% more likely to have
this capability. However, at the financial integration level there is not a lot of
separation, even though EMEA is slightly ahead.

Measurement and Organizational

Even organizationally, the NA group lags behind. EMEA stands out in their
inclusion of sales and marketing in the forecasting process, which is not
surprising given their focus on establishing a formal demand-planning
process.

Figure 3: Worldwide Measurement & Organizational Comparison

Source: Aberdeen Group, August 2012

In terms of measurement and use the All Others group is ahead in their
capabilities. This provokes some interesting questions when comparing the
regions overall. The more mature markets lag the emerging markets in
capabilities and EMEA seems to be the most mature in having the sales and
operations planning process established compared to the other two groups.
The question arises then if there is there some underlying explanation
behind these observations? Capabilities are often a function of the
technology in place, so as we move to the enabler section, we will look for
possible insights to explain these observations.

Technology Enablers Worldwide

Figure 4 shows a comparison of the technology enablers by region. Some
significant differences between regions are clearly obvious.

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Sales and Operations Planning: A Global Comparison
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Figure 4: Worldwide Enablers Comparison

Source: Aberdeen Group, August 2012

The NA group is more than twice as likely to be using legacy systems

compared to the other groups, 67% for NA, 33% for EMEA and 25% for All
Others. This may explain the corresponding gap in capabilities exhibited by
the NA companies with the observation that in a more mature market the
technology is older and lags the emerging markets in capabilities.
However, it is also important to realize that the Best-in-Class, regardless of
region, are similar to NA in their likelihood to be dealing with legacy
systems at 63%. But the Best-in-Class still manage to have the capabilities in
place as identified in Figures 2 and 3.
Another key factor to note is the NA group is less likely to have integrated
Enterprise Resource Planning (ERP) modules in place, only 38% compared
to 55% for the Best-in-Class. The All Others group is a clear leader here at
73% likely to have these in place. This is most likely due to dealing with
legacy systems in NA that developed independently rather than as an
integrated system. Having integrated modules reduces the system to system
handoffs and separate data models that might exist with applications that are
not integrated and must share information between them. Any extra
interfaces or handoffs, builds in delay and potential for error. An underlying
principle in supply chain management is to minimize delay or system latency
in order to increase process speed and improve the time to information and
decision.
As it relates to the sales and operations planning process, there is not a lot
of differentiation between the groups as far as using a specialized S&OP
solution.
There is, however, a distinct advantage held by the emerging markets group
for having newer technology and not being saddled with legacy systems.

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Sales and Operations Planning: A Global Comparison
Page 6

However, the advantage of current technology has not directly translated

into a higher percentage of Best-in-Class performance companies.
The other factor to consider is that early adopters in mature markets will
go through cycles of upgrading or fall-behind at some point. Displaying the
Best-in-Class capabilities and enablers for comparison suggests that even
though there is a fairly high percentage of the Best-in-Class that still use
legacy systems (63%), they have managed to achieve a high level of
capabilities.
Given the percentage of Best-in-Class companies that fall in North America
(58%), this would clearly suggest that becoming Best-in-Class is not just
about having the systems but rather what you do with them.

Required Actions
Comparisons by regions reflect that the more mature markets lag in
enablers and in capabilities. Emerging markets reflected by the All Other
group are ahead technologically since they have invested more recently and
are not encumbered by legacy systems. Compared to the Best-in-Class, the
EMEA region appears to be further ahead as far as having established a
formal sales and operations planning process and leads in the category of
formalizing a demand planning process, similar to the Best-in-Class.
Based on these observations here are some recommended actions
regionally that seem warranted:
North America:
• Establish formal S&OP process
• Upgrade from legacy systems for planning capabilities
• Upgrade for more integrated systems
• Involve sales and marketing in forecasting process
EMEA:
• Establish a formal demand planning system
• Upgrade technology for constrained planning
• Upgrade technology for more integrated systems
• Implement formal S&OP specialty system
All Others:
• Establish formal S&OP process
• Integrate financial planning and feedback into S&OP process
• Establish formal demand planning system within S&OP process
Each geographic region has some unique pressure with which it is dealing.
Emerging markets are more likely to have stronger system capability since
they are not dealing with legacy systems, but as noted by the profile for
Best-in-Class (63% are using legacy systems), it is how those systems are
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Sales and Operations Planning: A Global Comparison
Page 7

used that determines performance. It also shows that just having newer
technology does not necessarily translate into superior performance. Again
it is the execution that counts.
As new markets equip themselves with better tools however, the
competitive edge will shrink over time for those on legacy systems. The
caution is to avoid complacency and continue to upgrade selectively to
improve your capabilities.
For more information on this or other research topics, please visit
www.aberdeen.com.

© 2013 Aberdeen Group. Telephone: 617 854 5200

www.aberdeen.com Fax: 617 723 7897
Sales and Operations Planning: A Global Comparison
Page 8

Related Research
S&OP: A Critical Process for Superior CSCO View of Resilient Supply Chains;
Performance; September 2012 October 2012
Demand Planning: Renewed Focus for Supply Chain Control Tower: Concept
Companies to Drive S&OP and and Impact; August 2012
Operational Improvements; November
2012
Author: Bryan Ball, Vice President and Principal Analyst, Supply Chain Practice
(Bryan.Ball@aberdeen.com)
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This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies
provide for objective fact-based research and represent the best analysis available at the time of publication. Unless
otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be
reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by
Aberdeen Group, Inc. (2013a)

© 2013 Aberdeen Group. Telephone: 617 854 5200

www.aberdeen.com Fax: 617 723 7897