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SupplyChainBrain attended our annual Kinexions user conference, and while there, they completed a number of video interviews with customers, analysts, and Kinaxis executives. And, we’d like to share them!
In this interview, hear Kathyleen Beveridge, director of sales operations with Qualcomm discuss “What’s Wrong With Traditional S&OP?” According to Beveridge, the sales and operations planning (S&OP) process brings great value to an organization, but companies need to take a fresh approach in order to ensure more efficient planning cycles.
Sales and operations planning involves a number of sequential stops. Mistakes anywhere along the way can lead to inefficient planning, says Beveridge. A new approach is needed that allows companies to become more agile in a difficult business climate.
Under the traditional approach to S&OP, it can take upwards of two weeks to compile data. “By the time you get in front of the management team, that data has already changed,” Beveridge says. Qualcomm has adapted S&OP to a weekly cycle, under which it has more frequent discussions with key decision makers. They focus on the state of the company’s supply and demand balance, with an eye toward making “immediate course changes” if necessary. The company also conducts monthly S&OP meetings that focus on longer-range issues.
Our recent white paper, “Four Capabilities Required for 21st Century Sales and Operations Planning“, does an excellent job of outlining both the current state of sales and operations planning (S&OP) and the benefits companies can derive from ensuring the tools being used to support the process include those key capabilities. What the article fails to empathize […]
Much has changed in the business environment, let alone the technology environment, since the origins of the term S&OP by Oliver Wight nearly 30 years ago. From a business environment perspective we have only to look at the rise of the BRIC countries – Brazil Russia, China and India – let alone the rest of […]
The biggest toy sellers (Target, Walmart, JCPenney and Amazon) have announced their picks for the hottest toys of the year. Coming in at number 1 are Pomsies – animatronic, interactive pets that kids can take anywhere. Let’s hope supply chains are doing their thing by producing enough of these cuddly critters to meet demand so the world doesn’t have to deal with another Cabbage Patch Kid-like debacle.
So now that the kids are taken care of, what’s on your wish list? If you’re looking for that something special, why not consider the ultimate S&OP toolkit?
As Gartner Research Director Matthew Spooner noted in his recent presentation at the Gartner Supply Chain Executive Conference, advanced sales and operations planning (S&OP) is like a hotel. It’s “somewhere you visit, not somewhere you live.” What exactly does that mean? Essentially that while it can, and in many cases does, drive improvements to your balance sheet, it’s not a blanket, one size fits all process that applies to every aspect of your company’s supply chain.
In fact, Spooner says S&OP isn’t a supply chain process at all. It’s a business one. Also often referred to as integrated business planning (IBP), it’s just one way many businesses are evolving to stay competitive in a changing landscape. Uncertainty around high-impact events, expanded global presence, pricing pressures and increasing product mix complexity are just some of the reasons more companies are looking to kick their traditional supply chain practices into high gear.
As outlined in Spooner’s presentation, companies with higher S&OP maturity are clearly seeing a positive improvement when it comes to profit and loss (P&L) statements. According to data from Gartner’s 2013 S&OP Maturity Research Study, higher maturity businesses saw a 5.6% increase in revenue, 7.5% decrease in costs and a 7.2% increase in profitability because of successful advanced S&OP.
I love talking to customers and prospects! Each of these interactions provide me with an opportunity to meet someone new, learn about their business, their challenges, dreams, and aspirations. The topic that often comes up in these conversations is Sales & Operations Planning (S&OP). While S&OP as a discipline has been around for over two decades, it has been generating great interest recently. As much interest as it has generated, based on my conversations, the results from S&OP efforts have been mixed at best. From time to time, I hear comments such as:
“My monthly S&OP process takes 6 weeks to execute”
“We have this massive excel sheet into which we load all our S&OP data to generate the reports for review. The process to gather the data is time consuming and by the time we present our S&OP to our leadership, the world has moved on and our plans are no longer valid”
“We started S&OP as our COO insisted we do it. It is turning out to be a report to him, rather than a tool to run our business”
In fact, this has been such a recurring theme that I decided to share my point of view in this blog. Let me elaborate on what I believe are the reasons behind this disillusionment.
In my previous blog post, I compared a pilot flying from New York to LA at night without any modern navigation systems or instruments, to supply chain teams trying to effectively manage their organizations without a proper S&OP process. Obviously, the likelihood of either arriving at their intended destination in an effective and timely manner is quite slim.
Successful sales and operations planning provides a navigation system to help determine where you are going, where you have been, when you are off course, and how to get back on course. To be effective, S&OP must:
Bring together demand and supply planning (often referred to as East-West integration)
Bring together Finance and Operations (North-South integration).
Tie volume and mix plans together
Facilitate S&OP on-demand, not only on-schedule
I covered the first two bullets in my last post, so let’s discuss the other two here.
Key #3 Tying together volume and mix plans
One of the stumbling blocks of traditional S&OP is that volume-only plans often end up being infeasible when disaggregated to the mix level. The challenge is to translate the aggregate, volume-level plans to a SKU or mix-level operational plan and then test the feasibility of the plans before committing to them. Otherwise, the S&OP plan will lose credibility within the organization.
The second challenge is to keep the plan feasible.
In a previous post, I talked about the ineffectiveness of Excel, ERP, and legacy planning for S&OP. If those aren’t the right tools for the job, what is?
I heard a colleague once give the following analogy: Imagine a pilot flying from New York to Los Angeles at night without any navigation systems or instruments to measure his location, wind speed, or altitude. Instead, every two hours he checks the stars with a sextant, extracts data from the flight recorder about his throttle settings, and draws in the plane’s likely location on a map.
What are the chances of that pilot actually getting to LA? Can he arrive on any predictable timetable? You’ll likely agree his chances are slim to none.
A modern pilot embarks with a general flight plan, but then monitors a continuous readout of key metrics, which he uses to make numerous small course corrections to arrive at the proper destination on schedule.
It’s the same for business. Successful S&OP provides a navigation system to help determine where you are going, where you have been, when you are off course, and how to get back on course.
The four keys to highly effective S&OP are:
East-West integration – bringing together demand and supply planning
North-South integration – bringing together Finance and Operations
Tying together volume and mix plans
S&OP on-demand, not only on-schedule
With this model of S&OP, process execution evolves into operational orchestration, efficiency goals are coupled with measures of effectiveness, and cost control objectives are appropriately balanced with mandates for delivering business performance and value-based outcomes.
In this post, I’ll tackle the first two keys and I’ll follow-up with a second blog post for the latter two.