Posts Tagged ‘Sales and operations planning (S&OP)’

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AMR (now Gartner) defined 4 stages of S&OP transformation: 1: Reacting, 2: Anticipating, 3: Collaborating, 4: Orchestrating.  They report that many companies get stuck in stage 2 because it is stage 3 where they really need to go through an organizational transformation.  As a vendor we need to ensure that we have the capabilities to support this transformation and take them on to stage 4.

What I find unfortunate, is that companies will design processes without first getting an understanding of the business process transformation enabled by the technology available to them.  Many will try to take their existing process, which was supported by Excel and a myriad other tools and manual processes, and try to duplicate it in whatever technology system they select to employ.  The consequence is often a great deal of customization – cost and time – with, more often than not, little added benefit, and in fact, probably less benefit than could have been achieved by deploying the standard service and changing processes to accommodate it. I realize that this is a very vendor-centric perspective, but it does have merit.  (And despite the fact that we are a vendor with this perspective, we too have fallen victim to having done this when deploying some technology solutions – it’s an easy thing to do as it is natural to think that the way you do things is the only and best way.)

Without a doubt, applications can always be improved, but the one-sided perspective of designing the process without consideration of the technology used to support the process has both short term cost consequence – heavy customization – and long term transformational risk – doing it like we always did.

Current S&OP processes, especially those advocated by some of the traditionalists, were designed when Excel was a novelty, when companies manufactured most of their own product, when China was “very far away”, and when the internet was a military weapon designed for DARPA.  It took a month to collect the data let alone analyze it.  Why can’t an S&OP cycle be run in less than a week?  Why can’t S&OP be a continuous process?

Anyway, enough of my sermonizing. Let me ask, do you agree?

Often when I am asked to describe the difference between planning and response I use the analogy of going on vacation.  I think the analogy best captures the benefits of planning – cost reduction, work place coverage planning – with spontaneity – waking up and deciding whether to sail or swim, stay in bed or watch the sun rise.  There are also negatives to planning and response that can be applied to vacations.  Planning far ahead to get the cheapest deals could mean that some natural or economic disaster ruins your plans – earthquake in Haiti, oil spill in the Gulf of Mexico, hurricane in xxx.  On the other hand, waiting until the last moment may mean that you can’t find the best deals to get to where you would like to be ideally.  But I have friends who love the serendipity of letting the “fates” decide.  To them this is a lot of the enjoyment of going on vacation, but having a double income and no kids, they can afford to be “spontaneous”.  We have the constraints of 2 university aged kids – sorry, young adults – and another in high school, 1 dog, and 1 cat.  And I have a German wife.  Believe me, going on vacation requires a lot of planning.

So what’s this got to do with supply chain management?  Well, I think a lot.  But I will expand on this later.  Let me first continue with the planning/response duality, and the effect technology has had over the past 20-30 years on one’s ability to be more responsive.

Our 2nd son has gone to Europe for some weeks in the summer.  I was equally fortunate after high school to get a trip to Europe, but that was in 1973.  The available technologies were very different…

                                              His base is an apartment in the south of France and he will be travelling to Turin, Venice, Rome, Paris, Frankfurt, Prague, and Munich.  Lucky guy, huh?!  As you can imagine, this trip has been in the planning stage since before Jan 2010.  Not only does he have an anxious father, he has a German mother, so meticulous planning was required.  This included searching for concerts/events across Europe on the internet and then booking Eurail tickets to get to the different destinations.  And finding youth hostels over the over the internet and pre-booking accommodation.  I, on the other hand, had a well thumbed paper copy of a “Europe on the cheap” guide.  Whenever I got to a new location, the first thing I had to do was to find a youth hostel for the night.  And believe me, English was far less prevalent in 1973.  So a lot of the planning and coordination which we did in 2010 that simply not possible in 1973.

Guess what?  He left the key to the France apartment at home!

He called in a panic from Zurich at 1:30am (parents not amused) using his cell phone.  We were able to find a hotel near the apartment using the internet and to book him a room for a few nights.  When I was travelling, I guess I could have sent my parents a telegram, but that would have only reached them later in the day, long after I would have had to try to sort something out for myself. 

And he has his own credit card.  I had to carry around a thick wad of traveller’s cheques and go to a bank – which were only open Mon-Fri from 10:00am to 3:00pm.  Actually, on Wednesday they closed at 12:00. 

Once he had checked into the hotel, he sent us an email to say that he was well settled, which we had in our inbox’s once we woke up again.

To get the key to him we went on-line to find the quickest (and cheapest) over-night service, and then emailed the concierge with the tracking number and expected delivery date and time.  He now has the key and hopefully the rest of his trip will be filled with as much adventure, but from positive experiences.

The key here is that we take technologies that are available to us for granted.  We forget how these technologies have changed the manner in which we can conduct business, and all too often the manner in which we use technologies in business lags the capabilities available to us.  So I smile when I hear people state that technology has no role in S&OP.  No business process is about the technology, but imagine if we did not use even a rudimentary technology such as EDI?  What about the ubiquitous use of Excel?  Let me tell you that in 1973 we were still using paper punch cards to submit a job to a data center.  The job queue was usually a few hours and when you came back you would discover that you had typed an S instead of a D, meaning the whole job had failed.

As my story about my son’s trip illustrated, technology has allowed us to shrink the time it takes to reach a decision and to include others in the process of compromise required to reach this consensus.  Not only that, we have mechanisms to know much sooner that an issue has occurred, which is of tremendous value.  The sooner you know about something happening and the quicker you can respond, the more likely you will be able to affect the course of events and reduce the risks or take maximum advantage.

In the recent webcast “What S&OP Capabilities Matter Most”, Lora Cecere made the case that S&OP planning is much too complicated and much too detailed to not use technology. With the number of variables we have in such complex analysis, I definitely agree.

I also strongly believe (contrary to some) that technology on its own is not enough. And that was the theme of Bob Ferrari’s blog post as well: The Critical Importance of S&OP Organizational Alignment. Companies need to be aware that having the tools does not guarantee successful planning – even if they pick the right ones, which in some cases is a difficult task.

Over and over we advise that having good, reliable data is essential. I think everyone by now is well familiar with the “garbage in garbage out” motto. But another critically important point that companies need to keep in mind is the impact of their own culture and social capital.

As Lora mentioned, ‘What If’ capabilities need careful thought. To increase the chances of a successful implementation will require training the team not only on using the selected tool but also preparing their mindset for new processes that they will need to put to work. In some cases, the existing skill set can be adjusted through training, but in other cases the lack of flexibility and an open mind from team members can compromise the effort. So to go back to Bob’s view on the importance of organization alignment, senior management must be supportive and provide guidance on how everyone can conciliate the challenges of managing day to day operations and investing time and effort to prepare for the future.

The 21st century supply chain analyst needs to be able to analyze data, build relevant reports on the go, and ultimately make sound decisions.  Technology is necessary, but it is only a facilitator.

I had the pleasure of participating in a webinar which featured Lora Cecere, a preeminent speaker on all matters regarding S&OP. Lora has worked for at a number of CPG companies; Manugistics (a software vendor); was the most read analyst at AMR for a number of years; and is now at the Altimeter Group.  If anyone can claim to have “been there, done that,” it is Lora.  The title of the webinar was “What S&OP capabilities matter most?” (presentation available on-demand here)  There is no question in Lora’s mind that this is fast and effective what-if capabilities.

Lora has arrived at the conclusion that what-if capabilities are key to S&OP based upon a study she is conducting.  As Lora stated,

“2009 was all about Demand.  2010 is all about supply.”

Of course in 2009 the issue was demand coming to a screeching halt, and 2010 is all about people scrambling to get supply to satisfy what demand there is given the tepid upturn in the economy.  A number of polls were conducted as part of the webinar which not only confirm the growing importance of what-if capabilities, but also confirm demand volatility as a key driver.  Over 70% of attendees indicated that there has been a big increase in the importance of what-if capabilities in S&OP.  (It must be noted that the registrants and attendees covered a wide variety of industries from Retail to Pharma, and a broad range of company sizes too.)

Perhaps more surprisingly is the dominance of demand volatility as a driver for the need for what-if analysis.  Perhaps we would have received a different result if we had used the term “Supply volatility” or “Supply availability” rather than “Supply reliability”.  Most customers and prospects are telling us that they have real problems with supply shortages of both key and commodity items.  Many of our existing customers are running what-if analysis on what could be built or what demand should best be satisfied based upon an available supply of key components, and therefore insufficient supply to meet all demand.

What was not surprising is that only 12% of respondents state that they have sufficient what-if capabilities, whereas over 40% of respondents state that their company is only just starting to use what-if analysis in the S&OP cycle, and 40% of respondents state that there is a large gap in what-if requirements and capabilities.  While not surprised, I must admit to having been confused by these results because what-if and compromise across functional and organizational boundaries is a key tenet of S&OP.  How are companies running an effective S&OP process without these capabilities?

As Lora stated during the webinar,

“It’s not enough to connect numbers. You need to know which market drivers have greatest influence and to perform what-if’s on supply/demand using these market drivers.”

Let’s accept for now that demand volatility is the primary driver for the need for what-if capabilities, but dig a bit deeper into what this means.  Much of forecasting is focused on creating a statistical forecast based upon past shipments.  This works fine in a fairly stable market when demand is fairly predictable and everyone can afford finished goods inventories to buffer against demand fluctuations.  What has caught everyone by surprise over the past 2-3 years is the rate of change. Demand volatility is no longer represented by historic demand patterns.  This is a “rear view mirror” perspective of the market.  And S&OP cannot be about the rear view mirror.  It is all about looking far into the future when market drivers are very uncertain, let alone demand. Little is known about competitor activities.  At least governments have to publish plans for recovery, even if the efficacy of their plans can always be questioned.

I can think of no better way of evaluating the effect demand uncertainty has on the supply chain than a robust what-if capability, starting from range forecasting.  Instead of a single number forecast, arrive at a best estimate but also test upside and downside scenarios to evaluate and mitigate against risks to which you company will be exposed.  Which is worse, to be left with excess and obsolete components or to lose market share because demand is not being satisfied?  What if we sourced from a more expensive supplier but they would provide shorter lead times and more flexibility on volumes?  Would this provide us a lower overall inventory liability?

These are the types of decisions you should be making during an S&OP cycle.  I don’t know how they can be performed without what-if capabilities.

Again, check out the recorded webcast presentation to hear Lora’s take on the issue.

This is a follow-up to my post from a few weeks ago: Expediting versus Planning.  I received many comments and recommendations on this subject as to whether much of the expediting that occurs is in fact related to planning deficiencies.   After reading and reflecting on the comments I received, it seems to me that the premise that effective planning by itself will reduce the need to expedite is not necessarily true.  Obviously, effective planning is critical to reduce expediting.  Without a good plan, then what do we execute?  However, no matter how good plan is, it will always change.  Forecasts by definition are not accurate.  As we all know, changes and disruptions can occur in an almost infinite number of ways throughout the supply chain.  The best plan will always be out of date almost immediately after it is published.  (Just to be clear, when I say plan, I am referring to the MRP plan.)

Given the assumption that a plan is crucial, together with the realization that the plan will not be accurate, we are led to the conclusion that we need a stable plan, but be able to adjust the plan as and when needed. We need to be able to adjust the plan only when significant enough factors warrant a change to the plan, and with enough lead time and stakeholder buy-in to execute properly.  To restate, I believe that the following are important:

1. Plan Accuracy and Stability – The MRP plan needs to be stable enough to enable effective execution but we need to be able to detect exceptions that are significant enough to warrant a change
2. Responding to Change – The capability to effectively respond to required changes needs to be in place

How do we effectively accomplish the above?

Plan Accuracy and Stability

• First, the plan needs to start with an effective Sales and Operations (S&OP) process.  The more robust the S&OP process, the better that the high level plan will be.   
• We need to be able to detect or sense the need for changes, and once needed changes are detected, we need to be able to discern which are significant enough to warrant a change to the plan. 
• We also need to be able to prioritize these since there may be more than we can deal with. 

The key is that potential problems such as material shortages and late customer orders need to be detected for the future.  Obviously, once late orders or shortages have occurred, they are easy to detect (maybe even by way of angry calls from customers or buyers getting urgent messages from production regarding shortages.)

Referencing a recent blog post by Kerry Zuber, “Driving performance improvement through exception management“, Kerry states that in some organizations, there can be as many as 30,000 action messages generated by an MRP regeneration.  This exemplifies the complexity of the MRP plan and sheer volumne of exceptions in many organizations.  The organization cannot work all of these recommended actions, but which ones are the right ones to work?  Which ones signal that something in the higher level plan needs to be adjusted?  A second level, automated process needs to be in place in this type of environment to prioritize actions and also alert the responsible parties. 

The capability is required to detect what future demand will be late due to the mis-alignment of supply schedules,  issues with capacity in the supply chain and other issues.  If the future state/impact cannot be detected, then adjustments or contingencies cannot be put in place to avoid or mitigate them.  And as mentioned, we also need to be able to determine which of the detected changes require action and by who.

Responding To Change

Once changes are detected, we need a process to effectively implement these changes. This involves two key process and system capabilities:  simulation and collaboration.

We need to be able to simulate what-if scenarios to determine how best to deal with the change.  For example, it is difficult to calculate what the impact of a supplier changing commitments on a PO schedule will be in many environments without being able to simulate what that change in the commitment does to the overall plan.  In developing a response to the change, we need to be able to simulate multiple action alternatives and assess how well they will solve the problem and also whether they are achievable.

These simulations cannot be done in a silo.  Any significant change needs to be collaborated on with the extended supply chain.  Collaboration is certainly required with other internal organizations and potentially with affected external suppliers.

I realize that the above is very high level and probably over simplified, but I believe the general concepts are necessary in a complex manufacturing environment to optimize planning.  Without an optimized plan, execution cannot be effectively and efficiently accomplished and we have to resort to a lot of brute force exercises, including expediting.  Even the best of plans needs to be monitored for required adjustments and we need to have effective processes and systems in place for responding to these changes.

Has your organization implemented a process for responding to change?

Just a reminder of our webcast next week with Lora Cecere, Partner with Altimeter Group.  

What S&OP Capabilities Matter Most?

Date: June 29, 2010
Time: 1:00 p.m. EST

Register today!

Based on recent research, Lora Cecere outlines optimal practices for S&OP, and what’s required to get there.

As S&OP grows in significance, companies are redefining S&OP and the supporting technological requirements. While the field evolves, everyone has a slightly different take of what the future state of S&OP maturity will look like. Learn the points of differentiation companies like Kinaxis are putting forward.

P R E S E N T E R S
Lora Cecere, partner, Altimeter Group
Trevor Miles, director, industry and applications marketing, Kinaxis

FREE REGISTRATION

That’s a good question isn’t it?  Well, that’s the topic of our upcoming webcast presentation with Lora Cecere, Partner with Altimeter Group.  

All the details below….  Register today!

What S&OP Capabilities Matter Most?
An Overview of User Requirements and Technology Offerings

Date: June 29, 2010
Time: 1:00 p.m. EST

Hear first-hand some key findings from the Sales and Operations Planning Report publishing this month by Lora Cecere of Altimeter Group. Based on her recent research, Lora outlines key user requirements for S&OP technologies. Lora answers the question of what’s needed and what’s available in S&OP offerings today.

As S&OP grows in significance, companies are redefining S&OP and the supporting technological requirements. While the field evolves, everyone has a slightly different take of what the future state of S&OP maturity will look like. Learn the points of differentiation companies like Kinaxis are putting forward.

P R E S E N T E R S
Lora Cecere, partner, Altimeter Group
Trevor Miles, director, industry and applications marketing, Kinaxis

FREE REGISTRATION

There seems to be a battle raging between the old guard of process consultants who state that S&OP is a process that requires minimal technology and those that state that S&OP has evolved to the point that more mature or sophisticated S&OP cannot be achieved without technology.  The truth of the matter is both are correct, but the process advocates are in a shrinking market.  Their market is end-of-life.  Let me explain why.

At the 2010 AMR/Gartner supply chain conference in Phoenix this past week, there was a lot of debate about the reason that S&OP has gained so much attention over the past few years, even though it has been around for 20-30 years.  Most people point to the recent economic turmoil as the tipping point.  Personally I think this is too simplistic and relegates S&OP to a fad.  I believe there are 2 deeper causes: Outsourcing coupled with the arrival of the Millenials in the work force.  Though different these causes are closely related.  Outsourcing is the business driver, while the arrival of the Millennials is about the removal of traditional barriers and therefore increased adoption.

Many of the companies that I consider to be on the leading edge of S&OP maturity are mostly in high-tech and are heavily outsourced.  Their focus has shifted from asset utilization, principally of production capacity, to one of financial and operational performance across a distributed supply chain network.  Their role has become one of coordination, dare I say of management, rather than execution.  Of course S&OP has a big role to play in companies that are still vertically integrated, but their ability to command and control is greater and their need to sweat the assets is also greater, and therefore their incentive to adopt a more advanced form of S&OP is less.

One of the often quoted barriers to the adoption of S&OP is the cross-functional cooperation and collaboration that is required.  This is why process consultants state that S&OP is a process first and technology is a very distant second.  Yet AMR cites the lack of adoption of technology as the primary reason that companies get stuck with immature S&OP processes, and much of the technology is focussed on collaborating across organization and functions to establish consensus demand and supply plans.

The arrival of the Millennials (or Generation Y) – born between 1977 and 1998 – in the work force is leading to a much greater adoption of social media in the work force.  Of course these generational groupings are not exact and the so-called Generation X – born between 1965 and 1976 – has also shown a great adoption of social media/networking, and are currently one of the fastest growing groups on Facebook.

“Generation X and The Millennials: What You Need to Know About Mentoring the New Generations”, by Diane Thielfoldt and Devon Scheef, August 2004

I am referring here more to an attitude rather than to a particular technology, such as social networks embodied by Facebook and LinkedIn.  We have not yet seen wide adoption of these technologies for trade across organizational and functional boundaries.  The rapid adoption of Microsoft SharePoint indicates pent up demand for sharing of information within companies, though the most common form of sharing information across organizational boundaries is still email or EDI.

According to the Harvard Business Review,

“(Millennials) need to work in a social environment, often one that would appear to some of us as chaotic. This means, however, that they are very good at working in teams. They are good at multi-tasking, understand how to employ technology productively, and as a result can often produce good work at what appears to be the last minute.”

Much of the process consultants’ message is about overcoming the barriers of a silo’ed organization, principally those of sharing information between people/organizations with competing objectives.  This is especially true in an outsourced environment, but even in large multi-nationals with 10,000’s of employees.   The Millennials are very versed at the use of technology to do exactly that and have far less sense of privacy of information, both of which aid in the access to and availability of information.  And they are accustomed to doing this at arm’s length through technology, not face-to-face with someone with whom they have a pre-existing relationship.  Again, I am not talking about particular technologies, but rather the attitude toward sharing information with virtual strangers and the use of technology to do this.

How do these causes of a greater interest in S&OP come together? Angel Mendez of Cisco made the comment a few years ago at the AMR conference that Cisco has over 20,000 people in their supply chain, only 2,000 of which work for Cisco.  In other words, Cisco is heavily outsourced.  Let’s face it most of the 20,000 that don’t work for Cisco are changing frequently, do not work in the same time zone, and very likely don’t speak the same language. The ability to find the right person with whom to communicate, negotiate, and reach a compromise is crucial to an effective S&OP process. If you think it is tough to get communication going between sales and production, try doing it between a distribution partner and a contract manufacturer.  Yet we have the opportunity to do so by learning from the Millennials’ use of technology to find and to communicate with strangers.

Of course we can still continue to communicate via phone, fax, or email. But a far more effective manner of communicating and collaborating is to do so through systems that emulate the best aspects of social media while providing a security framework to validate the credentials and access rights of the person.  One of the most important aspects to be emulated is “self-declared” interest.  Let the user decide what data they wish to “follow”, what changes in information constitute an alert, and what data to change to evaluate a scenario.  However, because S&OP is carried out in a business context, an audit trail must be kept of all changes made, including the information people are watching and the alerts they have created.

None of these requirements would exist if it wasn’t for the pervasive outsourcing and off-shoring that has taken place over the past 20 years.  Outsourcing has created an environment in which the OEM role in the supply chain is principally one of coordination.  They capture demand, ensure that there is adequate supply, schedule the introduction of new products, and commission new capacity.  (Companies that have their own manufacturing need to do this too, of course, which is why S&OP is not limited to the companies that have outsourced.)  Off-shoring means that lead times have been extended and, because of the cost of shipping less than full containers, more “lumpy”.  Communication channels have also become extended and less transparent because of different time zones, languages, competing objectives, etc.

What do you think is behind the renewed interest in S&OP? Is it only a fad based upon the current economic turmoil?  Will the Millennials make as much of a difference to the manner in which companies communicate?

As always the AMR/Gartner conference, held this past week in Phoenix, was well attended, informative, and, believe it or not, a lot of fun.  This year we had some of our Sales organization attend and that is always bad news for the Marketing folks.  We have neither the stamina for nor the practice of the late nights, let alone the will to refuse to participate.

Before the meeting we heard that the meeting was fully booked and that people were being turned away.  I am usually sceptical when I hear this, but I have to say all the sessions were packed with many people standing at the back of the hall.  The Top 25 dinner on Wednesday evening was well attended as was the barbecue on Thursday evening.  While we did not attend the Peer forums run during the day on Wednesday, I heard anecdotal evidence from attendees of a packed house.  While good for AMR, and the conference as a whole, I interpret the strong attendance numbers to mean that companies in North America are feeling a lot more bullish about the economy.  This is important given the theme of the conference, which was “The Economy of Abundance: Rebuilding the Infrastructure of the Global Supply Chain for Sustainable Growth”.  Rebuilding infrastructure is not cheap and is a long-term commitment.  One has to be fairly confident of the outcome before embarking on infrastructure investment.

As always the announcement of the AMR Research Supply Chain Top 25  is one of the main events. In announcing the list for 2010, Debra Hofman made the observation that

“Twenty years ago, a typical product company had supply chain reporting to manufacturing, with responsibility mainly for inbound materials management and outbound shipping. New data shows that supply chain reports to manufacturing in only 6 percent of companies surveyed, while 61 percent have the head of supply chain reporting directly to the CEO, general manager or president of the business.”

For those of us who have toiled in the industry for years, this is good news.  I don’t mean this in a selfish manner, but rather that it is great to see that the value added by the supply chain function is being accepted and therefore the transformative capabilities of the supply chain function are being adopted.  The value add is from being able to operate more efficiently and therefore to reduce costs, while improving customer service.  The transformative capabilities are from being able to operate more effectively in an increasingly global market with a widely dispersed supply chain because of off-shoring and outsourcing.  But also more effectively in terms of using the existing infrastructure – whether currently inadequate (emerging economies) or crumbling (Western economies) – at a reduced environmental cost.

I compared the top 10 companies on the AMR list for 2010 using the free Kinaxis Benchmarking Service, and summarized the results below.  The AMR convention is to average the results over the past 3 years, which I have done too.  One observation I would like to make based on the table below is the constant interplay between efficiency and effectiveness brought out by the fact that the two companies with the highest  net profit, Cisco and RIM, have amongst the worst working capital ratios (WC Ratio), other than Apple (which is number 1 on AMR’s list).

The speaker list was carefully and well chosen.  I was struck by what seemed to be a conscious effort to get more speakers from outside North America.  The keynote address was given by T. Boone Pickens, chairman of BP Capital Management and founder of the Pickens Plan.  I had never heard Mr. Pickens speak in person before, and was thoroughly amazed at his command of the facts.  He spoke for over an hour without notes and without a script, constantly reeling off facts about the energy industry.  While not entirely aligned with Mr. Pickens politically, I find his plan to use natural gas compelling.  Some facts he stated which made me sit up and take notice are:

• Maximum oil production in the world is 85M barrels/day.
• Demand in 2008 was projected at 87M barrels, until the economic crisis hit
• Forecasts for Q4 in 2010 is 86M barrels.
• 70% of all the oil in the world is owned by state run oil companies
• 1 mcf of natural gas is equivalent to 7 gallons of diesel
• 1 mcf of natural gas costs $4.10
• 7 gallons of diesel cost $21
• A battery cannot move an 18 wheeler
• The US spends $1B/day on oil imports

While these facts are compelling reasons to adopt the Pickens Plan for the conversion of the heavy truck industry to natural gas, it is also a wake-up call to all supply chain practitioners about the future cost of fuel and its impact on the supply chain.  While switching to natural gas in the US makes sense from an economic perspective, most supply chains are now global and will be under increased strain from both cost and scarcity of fuel.  If we include sustainability and “green” issues, there is a lot of incentive to rethink our supply chain designs and to operate our existing supply chains both more efficiently and more effectively.

In keeping with the theme of the conference, the other speakers, namely Robert Blackburn (BASF), Didier Chenneveau (LGE), Brian Krzanich (Intel), and Richard Lechner (IBM) all emphasised sustainability in all its aspects including reducing the impact of application and by-products (including containers) of the main product.  But the overarching theme of all the speakers was the effective use of the supply chain to reduce the movement of goods to a minimum while satisfying customer demand in order to reduce the financial and environmental cost of the supply chain.

We had a much bigger presence than normal at this conference and it was well worth the cost and effort.  The quality of the speakers is excellent and AMR does an excellent job of identifying a topical theme.  As always the more detailed sessions run by AMR analysts were also of excellent quality.  There was a real buzz at the conference about S&OP. Jane Barrett of AMR made the observation that many of the companies that were early adopters of S&OP have now started to use a different term to distinguish their more mature S&OP practices from standard practice. One can always tell when a topic is reaching critical mass because people start inventing new names for it in order to differentiate their application.

I’d be really interested to hear from other people who attended the conference to compare and contrast observations/opinions.

In talking with a number of companies, sales and operations planning seems to be the hot topic. Why is there a such focus today on changing the S&OP processes of yesterday? Much has changed since the early days of S&OP. It seems that overnight the unexpected can throw your demand and supply plan out of complete alignment. Global economies, unpredictable demands and interrupted supply are much more pronounced today versus when current, outdated S&OP processes were pieced together. Although S&OP processes may vary from company to company, there seems to be some commonality around the complaints of current processes and what people are looking for in the future.

Integration

One description I heard was “Silo-based” S&OP. The silos described by the companies we talked to exists between S&OP participants, functions, sites and divisions. People are looking for one place to see a global view of demand, supply and financial data however all of this data rarely exists in one source. Today’s challenge is getting this data to a state where it can be useful. This seems to be the biggest cause of frustration with current S&OP processes. It also the reason why most S&OP process cycle times are measured in weeks and not days or hours.

Collaboration

The second request most often heard is that all participants collaborate in the process. Companies have described their process as being linear. Those responsible for demand, shape and develop the demand plan and then pass it over the fence for supply rationalization which could include passing it to manufacturing or outsourcing partners often in different locations. Somewhere in there is a financial review but many times this linear process leads to decisions based on “gut feel”. This is part of the “Black Hole” in supply chain Lora Cecere describes. One person said it takes weeks to get the wrong answer. Those responsible for S&OP all need to be sitting at the same table including sales, marketing, demand and supply planners and your financial team.

Quick Evaluation

With the current data challenges this makes it difficult to quickly re-evaluate demand plans rationalize supply and review optimal inventory targets to support growth and margins. This is also why S&OP participants tend to look after their piece and then pass it along rather than collaborating on strategy and direction. Being able to go to one place for all elements of S&OP will also enable you to develop exception based action plans. Conducting “what-if’s” with all participants around the table will enable a process that delivers a clearer vision of the future. It’s not that you will run the S&OP process every day, but when you need to run it, you can do it. You don’t have to wait for the next monthly planning cycle.

Going to one place for all S&OP data elements, collaborating with all participants and quickly making sense of information to develop your S&OP strategy are three key requests often heard when launching an S&OP project. What else would you add?