Archive for March, 2008

We had a great call today with Tom Wallace – the noted author and expert on sales and operations planning (S&OP).  We were talking about the trends we see in the market – increasing demand volatility, shortening product lifecycles, global outsourcing – and their implications on sales and operations planning, particularly a company’s ability to execute to the plan in the midst of all these changes.

The reality is that most companies struggle to live up to the plan as soon as its finalized.  What ends up happening is that a bunch of issues come up that you just can’t plan your way out of and people are required to figure out what to do.  In these situations, time is of the essence, so companies are trying to find ways to make critical business decisions in a timely fashion and ensure that their actions are consistent with the objectives agreed to in the sales and operations planning process.  At this point, Tom observed “there are a lot of seven figure decisions being made by people with five figure incomes.”  Love it – great quote.

The reality is that in most companies there are a lot of seven figure decisions (decisions that have million dollar plus impact on the business) being made in the trenches, where the rubber meets the road (this is not a knock on the people, quite the opposite – these are the people that get things done.  The issue is whether or not you’re giving them the tools they need to do their job).  Volatility is driving this – a lot of things are changing inside the sales and operations planning horizon and the company needs to act, quickly and decisively.  Front-line decision makers need to collaborate to determine what options exist, what the impact of those options would be, the right tradeoffs to make, etc.  And, unfortunately, in most companies this critical process is one of the least automated but happening potentially hundreds of times each day.

Who’s making seven figure decisions in your company?  You might be surprised who is, and terrified to see the tools they have to quickly reach the right conclusions.

IndustryWeek is reporting on new findings from AMR on the projected growth in supply chain software in 2008.

Planned Application Upgrades or Adoption for 2008 (Process vs. Discrete)
Source: AMR Research

As a vendor of supply chain software, this is certainly good news.  It’s also consistent with the momentum we are seeing.  I noted the interest in sales and operations planning (S&OP).  As I’ve written in the past (see here), we are definitely seeing strong interest here – but not as you might expect.  Companies are certainly focused on improving the planning process itself, but the greatest interest is in what happens when the planning meeting ends.

The volatility that companies face is increasingly making it hard to live up to the commitments made during these meetings.  The emphasis is on the “O” in S&OP, on the operational implications.  How do you execute day in and day out in the midst of constant change in a way that is consistent with the companies objectives?

Supply chain visibility, another area of investment, is certainly one piece of the puzzle – it’s the foundation of being able to address some of these challenges.  But, it’s never enough.  Visibility can tell you a problem, but visibility alone can’t help you actually solve the problem in most cases.  What front-line decision makers need are tools for collective risk tradeoff and to deliver a profitable response.

I believe we will increasingly see companies invest in solutions that empower people to make faster and better decisions.  In a static world, planning and execution are the priorities.  In a dynamic world, empowering people to respond to change becomes the new priority.

A post here at SupplyChainer asks what it takes to create a good promotion management system.  I commented at the site, but have posted below as well.

** my comment **

Agree with your thoughts.  You mention that you should have a plan B in case demand is higher than you speak.  I would take that one step further.  You need to ensure that your front-line decision makers are armed to deal with whatever comes up.  You might have, as you noted, an upside surprise in demand.  You could also see demand vary in geographies differently than you had planned.  There’s also the potential for supply disruptions that could impact your ability to meet the demand that the promotion generates.

The reality is that you just don’t know.  Unless you can predict with absolute certainty how your promotion will impact your business, you need to be able to respond to unexpected issues.  A lot of money goes into a promotion, and the last thing you want is to find that you can’t respond as needed to unexpected outcomes.

Empowering front-line decision makers with the ability to quickly sense issues, to fully analyze their impact and then to collaborate on a profitable response, you’ll go a long way toward ensuring a successful promotion.

There’s a post here at AlwaysOn asking whether or not demand is finding supply.  The post accurately reflects the shift underway in most companies.  That is, there’s a transformational shift underway from a push-centric business model that is dominated by supply management to a pull-centric model dominated by demand management and the customer.

As the post states, the implications of this are huge.  It was one thing to plan your supply and capacity, it’s another thing to try to plan the customer.  It just doesn’t happen.

What we’ve continually seen is that companies have put in place processes and tools (mainly your traditional demand planning and supply planning systems along with ERP) to manage the old push-centric model, but don’t yet have tools to excel in the new pull-centric, customer-focused business model required today.  The result – a lot of people using spreadsheets to try to cope.

Manufacturers need to evaluate the implications of this transformational shift on their business and develop new processes, supported by new tools, to become more responsive to changing customer demands.