Archive for the ‘S&OP Expert Blog Series’ Category

Welcome to the S&OP Experts Blog Series.  This series will feature a weekly Q&A with an industry thought leader on sales and operations planning trends and strategies. A follow-up question and answer session will be hosted in the S&OP section of the Supply Chain Expert Community.  Registered community members may submit their questions for the expert of the week.

 Tom Wallace, of T.F. Wallace & Company, is a writer and educator specializing in Sales & Operations Planning. Tom is author or co-author of over a dozen books and is currently a Distinguished Fellow of The Ohio State University’s Center for Operational Excellence.

Kinaxis: Do you think the definition of S&OP is clear in the marketplace?  If not, is that a problem? How do you define S&OP?
Tom: A significant problem exists with the meaning of Sales & Operations Planning, which formerly meant an aggregate volume planning process in units and dollars, involving top management. Over the past 8 to 10 years, that term has morphed to include the detailed mix tools such as master scheduling, plant and supplier scheduling, advanced planning systems, kanban, and so forth.

Confusion abounds. When someone hears Sales & Operations Planning or S&OP, they don’t know whether the speaker means the volume process, the mix processes, or both.

Is this a problem? You bet it is. When top management in companies not yet doing S&OP learns that it means the detailed, mix processes as well as volume, they will not be receptive to getting involved – nor should they. The detailed stuff is not their job.

For this reason, we use the terms Executive S&OP for the top management process and Operational S&OP for the detailed, mid and lower management functions. It is becoming more widely adopted as more people see the confusion. I use the term S&OP interchangeably with Executive S&OP and refer to Sales & Operations Planning as the combination of the two.

Kinaxis: Many are advocating the evolution of S&OP to Integrated Business Planning?  Are you a proponent of IBP? Tying the financial plan/measures directly into the process is a key component of IBP, what else distinguishes IBP from S&OP?
Tom: Tying the financial plan/measures directly into the process is a key component of S&OP, and it has been since almost Day 1. I’m not certain exactly what IBP is, but I suspect it’s a lot more similar to S&OP than different.

Kinaxis: Can the S&OP process be carried out without technology? Does this relate to the S&OP maturity model?
Tom: Yes to both. The S&OP process (that’s Executive S&OP) can be carried out without S&OP-specific software. Today there are still more successful S&OP users with only spreadsheet software than otherwise.

And yes, there is some relationship between S&OP-specific software and S&OP effectiveness. The really leading edge users have found that Excel will take them only so far and that they need software help to go forward.

Kinaxis: Is it possible to have an effective S&OP process that only looks at the aggregate or “volume” level? How important it is to consider the operational feasibility of the S&OP plan?
Tom: Close in, looking at aggregate data is not sufficient; granular detail is required inside what APICS calls the Planning Time Fence, the point inside of which one needs to know which specific  products will be produced. In most companies, this ranges from two to twelve weeks into the future.

Beyond that point, aggregate planning works well provided that the data (average selling price, bills of resources, and so forth) are kept current.

Kinaxis: There is indeed a great deal of cross-functional cooperation and collaboration that is required for managing S&OP – how are companies enabling this, and are they doing it successfully?
Tom: Cross-functional collaboration is not a pre-requisite for successful S&OP; it’s a result. Improved teamwork is a natural by-product of  S&OP. I tell people that if they’ve implemented S&OP and have not seen an improvement in teamwork, they didn’t do it right. It’s that simple. Enhanced teamwork follows successful S&OP just as day follows night.

Kinaxis: What role does exception management play, or should play, in S&OP?
Tom: Some, but not as much as one might think. This is because Executive S&OP deals with aggregated volumes and thus there are far fewer numbers to look at. 

Kinaxis: How and where do what-if capabilities fit into the S&OP process?  Is it a priority capability for an effective S&OP process?
Tom: They’re essential. But . . . this does not have to be highly detailed simulation eight months or so out in the future; simulating at the aggregate level is adequate in virtually all situations. In the near term – inside the Planning Time Fence – the simulations need to be much more granular.

Welcome to the S&OP Experts Blog Series.  This series will feature a weekly Q&A with an industry thought leader on sales and operations planning trends and strategies. A follow-up question and answer session will be hosted in the S&OP section of the Supply Chain Expert Community.  Registered community members may submit their questions for the expert of the week.

Lora Cecere is a Partner with Altimeter Group and the author of enterprise software blog “Supply Chain Shaman.” Lora is known as a supply chain visionary who understands software. She brings seven years of industry analyst expertise coupled with two decades of manufacturing, marketing, and software expertise.

As an enterprise strategist, Lora focuses on the changing face of enterprise technologies. Her research is designed for the early adopter seeking first mover advantage. Current research topics include the digital consumer, supply chain sensing, demand shaping and revenue management, demand-driven value networks, accelerating innovation through open design networks, the evolution of predictive analytics, emerging business intelligence solutions, and technologies to improve safe and secure product delivery.

Kinaxis: What do you believe is behind the surge of activity around S&OP?  What are the anticipated benefits?
Lora: The surge of activity around S&OP is largely driven by economic uncertainity.  Based on the research, companies with mature S&OP processes sense and respond to market changes 5X faster.  When companies start with change management, they get there 3X faster.

Kinaxis: Do you think the definition of S&OP is clear in the marketplace?  If not, is that a problem? How do you define S&OP?
Lora: The process is 25 years old, and the definition has changed and morphed over time.  There are as many definitions of S&OP as there are mutts in the dog pound.  I define the process of S&OP as a cross-functional planning process to help organizations better sense, shape and respond to demand to maximize opportunity and mitigate risk. When it is done correctly, there is balance between the “S” in S&OP and the “OP”. It is a monthly process with weekly operational reviews to tie planning to strategy.  This most often happens when the process reports to the profit center manager with the following characteristics:

• An assigned S&OP planning team
• Clarity on the operating strategy.  There is a clear definition of how many value chains the company has and what drives value in each.
• A tie of assumptions to build a “playbook” for the month, and the tracking of the playbook by an operational team on a weekly basis.
• Clarity of roles on what global means.  How does the organization make global planning decisions to execute locally?
• Tight integration with new product launch
• Clarity of complexity:  Streamlining of processes and products to ensure that the right level of complexity is achieved in the business (product and services portfolio).

I take a demand-driven or market-driven view.  I contrast this difference in table 1:

Kinaxis: How important is a maturity model for S&OP?  Do companies have to be at the most advanced stage of S&OP to claim to be doing S&OP?
Lora: A maturity model provides a roadmap for process maturity.  As such, I think that it is extremely important.  The process starts with reacting to demand, then progresses to balancing demand with supply, and then moves to managing a profitable demand response.  In the last and most mature stage of S&OP, companies can answer these three questions with these answers:

1. What is the Goal?   The goal of our S&OP process is to maximize opportunity and mitigate risk.
2. How do we Make Decisions? The S&OP process reports to a profit center manager.  We manage a monthly process to only bring critical decisions to the executive S&OP meeting where the profit center manager ultimately makes the critical decisions to balance the opportunity for go-to-market strategies with the risk of the supply plan.
3. What does Good Look Like?  We have X number of supply chains.  We use the same metrics with different targets for each.  The critical metrics are forecast accuracy, inventory turns, margin, revenue, and customer service.

Kinaxis: Many are advocating the evolution of S&OP to Integrated Business Planning?  Are you a proponent of IBP? Tying the financial plan/measures directly into the process is a key component of IBP, what else distinguishes IBP from S&OP?
Lora: Frankly, I don’t have energy for this argument.  Essentially S&OP has moved bottoms-up and Integrated Business Planning has moved tops down.  I find that both are important, but since the tops down approach has not matured as fast or as quickly as the bottoms-up approach, I prefer to talk about the process as S&OP.  I find that the most mature processes tend to call it S&OP.

Kinaxis: Organizational thinking is often inherently bound by the dimensions of the “box” it is currently in because people don’t question working assumptions strongly enough. Do you believe “process inertia” is a barrier to advancing S&OP processes?
Lora: I think that we are bound by history, and conventional paradigms.  The largest barrier is change management. I believe that it is 60% change management, 30% process and 10% technology, but you cannot get there without technology.

Kinaxis: Can the S&OP process be carried out without technology? Does this relate to the S&OP maturity model?
Lora: Yes, it can be carried out without technology; but not well. In general, companies that are greater than 250 Million in revenue, with more than 100 employees need a S&OP technology. This becomes more acute if there are constraints or demand/supply variability.

Kinaxis: Is it possible to have an effective S&OP process that only looks at the aggregate or “volume” level? How important it is to consider the operational feasibility of the S&OP plan?
Lora: Yes, if there are no issues with demand or supply variability or constraints.  Very few companies have this luxury.

Kinaxis: There is indeed a great deal of cross-functional cooperation and collaboration that is required for managing S&OP – how are companies enabling this, and are they doing it successfully?
Lora: It starts with tackling the change management issues (see my recent post).  The process is monthly and clearly defined by roles, responsibilities and workflows.  There is a defined and rigorous cadence to both define the planning process (monthly) and to tie the planning process to execution (weekly).

Kinaxis: If you had to name 3 priorities for a company looking to evolve their S&OP process, what would they be?
Lora:

1. Tackle the change management issues
2. Build a S&OP organization reporting to the profit center manager
3. Identify the monthly/weekly processes with clear roles and responsibilities

Kinaxis: What role does exception management play, or should play, in S&OP?
Lora: Exception management is needed in both planning and execution. For planning it is used to streamline “what if analysis” while in execution, it helps to trigger deviations to the planning playbook.

Kinaxis: How and where do what-if capabilities fit into the S&OP process?  Is it a priority capability for an effective S&OP process?
Lora: Absolutely!  The most mature processes hinge on what if analysis not only for supply, but especially for demand.  They also have strong capabilities for demand translation and orchestration.

We are very pleased to announce that, starting tomorrow, we will be launching a weekly S&OP expert interview series on this blog, giving readers the opportunity to receive insight and perspectives from thought leaders in the industry on sales and operations planning trends and strategy.

The series will feature a weekly Q&A with top research analysts, consultants, industry and press.  You can see all of the interviews in the series here.

To subscribe to the entire S&OP Experts Blog Series, sign up for the blog’s RSS feed.

The experts to be featured include:

Lora Cecere, Partner, Altimeter Group

Tom Wallace, Writer & Educator, TF Wallace & Company

Eric J. Tinker, Principal, Nexview Consulting

Simon Ellis, Practice Director, Supply Chain Strategies, Manufacturing Insights, an IDC Company

Andrew K. Reese, Editor, Supply & Demand Chain Executive

Steve Puricelli, Senior Manager, Supply Chain Management, Accenture

Bob Ferrari, Executive Editor of the Supply Chain Matters blog and Managing Director, The Ferrari Consulting and Research Group LLC

Colleen “Coco” Crum, Managing Principal, Member of the Board of Directors, Oliver Wight Americas

Nari Viswanathan, VP, Principal Analyst, Supply Chain Management, Aberdeen Group

Atul Chandra Pandey, Industry Head – Enterprise Application Integration & Services, Infosys Technologies

Patrick Bower, Sr. Director, Corporate Planning & Customer Service, Combe Incorporated

We welcome your comments on the insights that will be shared during this series.  We plan to faciliate a follow up question and answer session on the S&OP section of our Supply Chain Expert Community following each post.