Move from Looking Back to Looking Forward with What-If Scenarios


Sales and operations planning (S&OP) is a collaborative planning process designed to answer the question: Can we satisfy the request for product? The challenge is to identify and solve problems while they’re still low level and before they can escalate to disrupt the supply chain.

In the course of developing executive S&OP or integrated business planning (IBP), supply chain teams often get stuck with a focus on problem solving in the near term. Until a consistent process for problem solving is in place, it’s difficult to move forward to problem prevention where companies can focus on a longer horizon that rolls out four to 24 months.

S&OP maturity can help teams to make this transition by providing credible information for decisions based on problem solving to mitigate risk. Credible information will also help S&OP stakeholders to develop plans on facts more so than assumptions that tend to be inaccurate.

One of the biggest obstacles to improving S&OP maturity is a lack of visibility into planning assumptions and a failure to tie the plan to actual outcomes. Establishing a collaborative process can help to expose the interrelationships between assumptions as well as to inform scenario planning to help executives avoid unexpected bad results that can jeopardize careers.

Scenario planning, also known as “what-if” analysis, is perfectly suited for the conditions in today’s market environments that have high uncertainty and are prone to costly surprises, such as demand volatility. Organizations need to establish a framework for the future and infuse new insights into strategic thinking to move forward successfully.

Types of Scenarios for What-If Analysis

Business as Usual: Most financial and operational plans assume stable business conditions—that what we are experiencing today will be similar to what we experience tomorrow. However, when considering normal business conditions, it’s important to review parameters that could change.

Examples are both internal and external and can include:

  • A customer wins a large contract and decides to source it out of a new location, creating a need to shift your supply plan
  • A critical machine breaks down and will take months to repair, reducing the units one plant can produce over a time period

Neither of these are major events, but will require a plan modification to address without disruptions.

Status Quo Challenges: Change is the watchword of the day. Markets are dynamic and shift readily, requiring adjustments to facilities, locations and workloads. While these changes are usually planned well in advance, planning for impact to supply and demand must take a forward-leaning approach with what-if analysis.

Examples are usually internal and can include:

  • The organization decides to close an aging plant and distribute its production responsibilities across three other existing plants, each located in a different state
  • The new product launch schedule is compressed, making go-to-market cycles faster

While the planning process provides the luxury of time to make the adjustments, scenario analysis must consider dependencies such as logistics—both shipping and sourcing—and changes to capacity planning.

Major Events: This type of change is caused by external forces, including the environment, weather, natural disasters, regulations or political situations. These types of scenarios should be run as a component of your disaster recovery plan as they can impact both demand and supply.

Examples are mainly external and can include:

  • A hurricane, such as Sandy, on the eastern seaboard
  • A compliance requirement that escalates production costs
  • An unstable region or country due to political unrest or revolt

These situations require that planners understand the potential ramifications from possible scenario in relation to raw material availability, operational costs, and customer impacts.

Develop a Common Framework for the Future

Businesses deal with a variety of conditions, including uncertainty, demand volatility, the perception of limited new opportunities, rapidly changing technology and a number of strong differences of opinions. Many of these conditions are internal, and what-if analysis presents a great opportunity for expanding organizational learning. What-if analysis also offers a great method for resolving those differences and creating the opportunity for collaborative evaluation and planning that is the cornerstone of S&OP.

The beauty of Executive S&OP is that it will adapt to your organization’s specific needs and operational style. There are many methods to choose from—whether a use of systems thinking, examining seemingly unrelated forces or attempting to re-perceive reality, given recent market shifts. As the assumptions used for planning are matched with actuals, improvements can be made.

By using enabling technology for what-if scenarios to forecast how specific events can impact supply and demand, your organization’s leadership will gain the ability to look forward with predictive analytics that act as a “GPS” keeping your processes on the right track to success. With this type of preparedness, leaders have the information and visibility they need to make better decisions that will help the company become more responsive where it matters most—with your customers.

Three Criteria for Selecting S&OP Technology


Even though, according to Gartner, organizations are expected to spend about $10 billion in 2014 on supply chain planning technology, poor forecast accuracy and demand variability remain the top obstacles to meeting supply chain goals. These have been the top two obstacles for the last seven or eight years for sales and operations planning (S&OP). Perhaps it’s time for organizations to change the way they approach technology.

As more data is integrated to provide more visibility across functions, technology must speed up the capability to respond to market changes. Technology that enables this level of agility must be fit for purpose in the newer environments in which supply chain professionals find themselves working. Technology must provide the capability to extend our models, get our practices in place and capitalize on the data, and be able to interpret it in near real-time with higher visibility.

Based on a Gartner survey, the top priorities for companies evaluating technology are integration with ERP, followed by functionality of the tool under consideration. The professional services, support and maintenance provided by the vendor serves as the third-ranked priority. Considering that Gartner estimates that only 25% to 30% of the functionality of S&OP tools are in use with end users, Tim Payne, Lead Supply Chain Analyst for Gartner suggests there’s a better way to move our S&OP processes toward maturity.

Technical Architecture. How well an S&OP tool will support business processes is directly dependent upon its architecture.

Based on what you’re trying to achieve, how will it work in the environments of your supply chain process? Consider how your data models work, as well as your analytics.

  • How hard will it be for end users to adopt?
  • How will the tool allow you to scale, for example, if you want to move from a regional supply chain to a global one?
  • How will speed to visibility and insight be affected if model size increases? In other words, can the tool process thousands of calculations from global, integrated data sources in seconds, regardless of location?
  • How easy will it be to make changes to processes based on continuous improvements?
  • How will the technical architecture of the solution enable us to move our S&OP up in maturity levels?
  • Is there a unified process and data models across functions to extend the visibility of the plan data across an end-to-end supply chain?

Vendor Innovation and Thought Leadership. This is really about how the vendor goes about ensuring that supply chain teams can access and use the right functionality at the right time in the ways that work best for them. But it also includes looking forward:

  • Event-driven planning allows teams to respond to what they see in execution.
  • The willingness of vendors to co-develop your ideas for innovating your processes.
  • An open architecture for applications that opens up the vendor’s planning platform to allow you to co-develop with a third party.
  • Will the system allow you to adopt existing processes that are often offline and bring it into the S&OP framework?

Application Deployment Models. This is oriented around the distinction of on-premise or in the cloud.

  • Cloud solutions are maturing and moving forward.
  • Cloud becomes more important as you think about speed, scale, and multi-enterprise environments that involve customers and suppliers.
  • The environment selected is also important when you think about bringing planning closer to execution with cloud-based respond planning capabilities.
  • Cloud can also be more conducive to supporting the requirements for multi-enterprise collaboration.

When considering the criteria you use to evaluate S&OP technology platforms, it’s important to consider whether you need a system of record, a system of differentiation or a system of innovation to reach maturity with planning processes. It’s likely that you will identify a mix of needs, but it’s also important to realize that the more innovative tools will most likely utilize cloud as the delivery framework. The key is to consider the technical architecture and the way the vendor is thinking about innovation.

Selecting S&OP technology should be predicated on how the solution can deliver business value based on alignment and agility because the value comes from moving up through those processes and through the stages of S&OP maturity. The three criteria presented here will allow you to look beyond the basics of integration and functionality to help you select technology that can have demonstrable business impact—today and well into the future as your needs and capabilities evolve.

This blog is based on a webinar with Tim Payne, Lead Supply Chain Analyst at Gartner, Selecting the Right Planning Technology: Time to Revisit Priorities, available to view on demand here.

S&OP Technology Drives the Alignment that Enables Agility


Alignment and agility go together. The overall goal for S&OP as agility increases is to align on sales, orders, and shipments, but additionally to be able to align on market data, such as distributor pull through, retail sales, supplier inputs, and market drivers.

Each goal along the way to S&OP maturity will require orchestration with technology that helps to create visibility and alignment. Beginning with demand and supply, then integrating inventory, manufacturing and finance to determine what tradeoffs in the models could occur based on fluctuations or disruption.

Supply chain executives must be able to manage the plan against the execution by establishing balance between the “S” and “OP” sides of the equation. This is best achieved when cross-functional collaboration is elemental to the process and breaks down the individual cycles to align and reconcile them against the plan.

In other words, everyone must be on the same page and understand the impacts of the decisions made against each functional area. With this in place, the transition can be made from measuring and tracking volume and balancing demand and supply to analyzing profitability. Technology enables these transitions in maturity to occur.

Today, only about 20 percent of organizations will say their S&OP process is balanced between sales and operations. The organizations that lean toward one side or the other in the S&OP equation tend to have a more functional organization that really hasn’t established alignment or defined agility.

Doing so requires technology that can help you orchestrate a progressive and balanced path to S&OP maturity. Technology designed specifically to integrate cross-functional data and provide visibility across all of the inputs to S&OP replaces a disparate collection of spreadsheets, business intelligence and traditional supply chain reporting tools.
S&OP technology provides a central cross-functional planning environment that enables…

  • The S&OP process to become an input to budget, but without introducing constraints on the process, to ensure that companies have the ability to become more market-driven and to maximize opportunities that are more profitable.
  • A move from looking at inventory levels to assessing inventory form, such as finished goods, return inventory, and obsolete inventory. This visibility enables companies to hold back supply to wait for demand, thereby increasing agility.
  • Development of an S&OP process that allows you to look at inventory functions, such as cycle stock, safety stock, in-transit inventories, seasonal bills, promotional inventories, and new product launch builds to decide which forms of inventory to hold and which to push.
  • Visibility into costs that enable better management of operating margins. One of the key elements of agility is to be able to determine cost so that when you do the modeling of demand and supply volatility you can answer the question: Can we have the same cost, quality and customer service?

It is difficult for companies to become agile when visibility is limited across functions involved in the S&OP process. While companies may have processes in place to manage their supply chain, they will not establish more effective and efficient means of managing the outcomes without S&OP technology.

Technology is the key to the balancing of demand and supply and insights that create the understanding of how the form and function of inventory can impact profitability based on “what-if” analysis against operating margins.

Coordinating Alignment for S&OP
S&OP requires a tremendous amount of cross-functional coordination with marketing, sales, supply chain, finance and IT. Alignment across these functions is critical to reap the benefits of S&OP. The value that results from alignment that drives S&OP includes increased revenues, forecast accuracy, and customer service and decreased inventory and costs, to name a few.

Establishing a supply chain center of excellence is a becoming a best practice for orchestrating this alignment. Thirty-seven percent of respondents to a Supply Chain Insights survey say they have a supply chain center of excellence. But only 56 percent of them say they’re successful in managing it.

If your organization wants to accelerate S&OP maturity with agile practices, alignment must be part of the plan. A center of excellence enables the establishment of defined metrics, process best practices, planning and strategy. As you can see, S&OP maturity is about agility and reliant on alignment for successful outcomes. Technology is the facilitator that simplifies the complexity involved.

Who Has the Best Supply Chain? And Is That the Right Question to Ask?


How do you “rank” a supply chain? How can you compare the supply chain of a consumer packaged goods company to that of an automaker or a pharmaceutical company? Each one faces unique challenges, courts diverse customers, and encounters different risks.

Gartner makes its annual assessment with its Supply Chain Top 25. It’s a relative industry standard after ten years, but faces a notable critic in Lora Cecere of Supply Chain Insights, whose thoughts on the Gartner Supply Chain Top 25 can be found here and here.

Lora recognizes that a valid need does exist to have a “measuring stick” for supply chains, while also questioning the goal of identifying supply chains as “the best.” So she and Supply Chain Insights set out to assess global supply chains with a different goal in mind: measuring improvement. As a result, they developed the Supply Chain Index, which is based on analysis of financial balance sheet and income statement data for the period of 2006-2013, as available, and cooperative research conducted with Arizona State University.

Two years of that research culminated this week in Supply Chain Insights’ “Supply Chains to Admire” report, which uses Supply Chain Index data to analyze the progress of companies within 13 industries for performance and improvement. The “Supply Chains to Admire” were determined to be operating at top performance levels and still driving improvement.

So who made the list? Congratulations go to these “Supply Chains to Admire”:

  • Anheuser-Busch InBev N.V.
  • Apple Inc.
  • Audi AG
  • BASF SE
  • Cisco Systems, Inc.
  • Colgate Palmolive Company
  • Eastman Chemical Company
  • EMC Corporation
  • General Mills, Inc.
  • Intel Corporation
  • Nike, Inc.
  • Ralph Lauren Corporation
  • Seagate Technology PLC
  • Taiwan Semiconductor Manufacturing Company Limited
  • TRW Automotive

Supply Chain Insights created a chart to show the differences between its approach to assessing supply chains and that of Gartner’s:

SCI-vs-Gartner

In her Supply Chain Shaman blog, Lora lists lessons learned from the research:

  • Despite a rise in demand and supply volatility, companies are becoming more resilient in 11 out of 15 companies studied. However, due to a variety of factors, companies are losing ground on driving progress on both inventory turns and operating margin. Supply Chain Insights believes that this is largely due to rising complexity.
  • Companies are not doing as well as Lora thought they were doing on driving balance sheet improvement. There are a lot of projects, but many companies are struggling to see these results on the balance sheet. Nine out of ten companies are stuck at this intersection.
  • Lora is surprised at how many companies are raising improvement in one of the three metrics, but not driving performance improvements in the total portfolio. This is often due to the lack of understanding of the supply chain as a complex system. Supply Chain Insights finds that companies will establish metric targets in isolation and throw the supply chain out of balance.
  • There are a lot of misconceptions about inventory. It is a hot spot of misunderstanding. Inventory is one of two primary buffers in the supply chain. A buffer absorbs volatility. With the rise of demand and supply volatility, buffers are more important that ever. However, most companies are still looking at inventory levels, and there are a host of crazy consultants running from company to company advocating cutting inventory to free up cash. Cutting inventory without right-sizing the form and function of inventory throws the supply chain out of balance. Each industry has a very different potential, and it is important to not generalize the answer.
  • Excellence is easier to say than to do.

Today Supply Chain Insights wraps up its Global Summit, during which Lora and her research team delved further into the “Supply Chain to Admire” methodology and results. The event, which was held in Scottsdale, AZ, and streamed live on the web, also featured an agenda packed with compelling presentations from supply chain thought leaders.

Were you at the Supply Chain Insights Global Summit (or watching online) this week? What did you think of the “Supply Chains to Admire”? Share your thoughts in the comments section!

New Documentary Examines the Evolution from “Supply Chain” to “Value Chain”


The traditional notion of supply chain management takes a linear approach to moving goods from the supplier’s supplier to the customer’s customer. Anyone involved in the industry knows that today’s marketplace dynamics are anything but linear. So a “supply chain” becomes a bit of a misnomer. The term “value chain” was popularized in the 1980s and gained momentum in the late 1990s as business became increasingly global.Traditional SC

A value chain involves conversations among multiple partners in the chain that may not be directly “next to” each other. This model has evolved as modern, global business necessitated that manufacturing and distribution become more collaborative and mutually beneficial for all parties.

Value chainTIA NOW, who provides programming on the latest information and communication technology (ICT) insights and trends, recently published a documentary on this topic entitled, “The Value Chain: Building Value in the Chain.” Here’s a description of the film, which explores the evolution of yesterday’s supply chain to what’s now known as the value chain.:

No matter where you are in the supply chain of the ICT industry, collaboration between your suppliers and customers increasingly dictates the success of your new products and services. The value chain is changing with each cycle, from chip maker to end user and everybody in between. So how does increased collaboration help strengthen your company’s position in the marketplace? What is driving a more communicative value chain towards multi-vendor systems and increased demand for heterogeneous technologies and applications?

EJ documentaryEJ Tavella, Chief Evangelist and Vice President Strategic Sales and Solutions at Steelwedge, is featured in the documentary as an expert on supply chain management in the Silicon Valley.

EJ discusses the old way that businesses managed their supply chains, stating, “When you looked at most of the people I worked with in the Silicon Valley, they thought of their supply chain as one of their golden jewels. They didn’t want to share information. They wanted to make sure that how they did it was specific to their business. They would share information, but share it sparingly. You’d see companies that would specifically give one set of plans to a supplier because they wanted them to perform to that, while they had their own set of internal plans.”

Drawing on the depth of experience of numerous supply chain experts interviewed in the film, the documentary goes on illustrate how the value chain concept has driven more cooperative business processes, to the benefit of everyone involved. You can view the documentary here.

Steelwedge has championed supply chain collaboration for more than a decade, developing technology that extends your planning process to your partners and customers to provide an outside-in perspective. Steelwedge customers can securely share forecast and supply planning assumptions with key partners to dramatically improve everyone’s planning accuracy.

Have you been in the industry long enough to experience the shift from “supply chain” to “value chain”? Share your thoughts on the evolution in the comments!

S&OP Agility is About Maturity


Agility in the supply chain is the ability to recalibrate the plan while maintaining comparable cost, quality and customer service. According to research by Supply Chain Insights, 85% of supply chains have experienced a disruption and 90% are grappling with skyrocketing costs and supply volatility. The ability to address these issues to maximize opportunities and profitability grows as supply chain management increases in agility. Getting there is reliant on the maturity of sales and operations planning (S&OP) processes.

Maturity in S&OP processes depends upon developing the ability to drive a response quickly within the supply chain when an event impacts demand or supply. While many supply chain executives may define agility as the ability to shorten cycle times, they’re overlooking the possibility that they may just be empowering their teams to do the wrong thing faster. Responsiveness must be based on decisions made with insights derived from cross-functional alignment and integrated data.

Efficiency must lead to effectiveness. In a poll of 66 supply chain executives conducted by Supply Chain Insights, 89% of them rated agility as highly important, but only 27% of them said their companies had achieved it. This is the gap that needs to be closed to enable supply chains the ability to minimize impacts from disruption and volatility.

S&OP Maturity Is an Evolution

Because S&OP encompasses many disciplines across a company, it takes time to increase agility. As your S&OP maturity evolves through each stage, there are three questions to answer:

  • What is the goal? It’s imperative to get stakeholders to agree. Goals will also change as maturity increases. For example, a recent Supply Chain Insights survey found these goals in place for supply chain executives in regards to maturity:
  • How do you measure it? Measurements must direct improvements to performance. Focus on the metrics that matter, such as revenue profitability, cash-to-cash inventory turns, and customer fulfillment.
  • What defines success? Balance must be achieved for S&OP so that the plan can be connected with execution.

Answering these three questions can become extremely challenging when you consider that companies, on average, have four S&OP processes, not just one.

Agility Requires the Components of S&OP to Work Together

To get to the answers, companies must focus first on the definition of S&OP. The “S” in S&OP, Sales, is really about focusing on the market drivers that shape demand. To get to these insights, companies need to build the technology and process capabilities that enable supply chain executives to look at the design of the trade-offs in the value chain in order to conduct “what-if” analysis. The “&” in S&OP is about designing the value chain to optimize tradeoffs, minimize risk, balancing cycles and orchestrating demand. This, in turn, allows the “OP” or operations part of the planning to put those tradeoffs into practice with more informed decisions about the most effective means to make, source and deliver. The combination of all three of the components of S&OP enables the improvement of the organization’s capability to increase agility, as well as to improve alignment.

As agility increases, supply chain executives will also be able to gauge higher results for the five qualitative factors that help assess your organization’s success in closing the variance between forecast and actual equilibrium between demand and supply. If you’d like to learn more about whether your S&OP process delivers agility, watch this webinar with Lora Cecere of Supply Chain Insights.

Using S&OP to Reach Equilibrium – 5 Qualitative Factors


EquilibriumEquilibrium is the state at which market supply and demand are in balance. It’s common sense to want to produce the amount of product that the market will bear, but that has traditionally been a difficult goal to achieve given the nature of change in today’s markets. Sales and operations planning (S&OP) as an integrated business process has been around for more than 30 years. Success, however, still has varying levels of attainment.

Traditional supply chain planning has been focused on improving the work conducted within organizational silos that contribute to operations. From raw materials to production to sales and service, there are many steps and processes that cover the supply chain from end to end. Coordinating these and gaining visibility of the “big picture” is the outcome that S&OP brings to help companies close the variance between forecasted and actual equilibrium.

While there are plenty of quantitative factors that apply to S&OP, including improved inventory management and more predictable revenues, it’s important to consider the qualitative aspects of how a successful S&OP process can transform your business environment.

5 Qualitative Factors for S&OP:

1. Improved Teamwork: Collaboration is one of the key elements of a well-executed S&OP process. Rather than working in organizational silos, people begin to work cross-functionally, applying the insights from one part of the business to how they may impact another. This collaboration also helps direct reports view the business through the “glasses” their bosses use, helping them to see further than the immediate situation they deal with on a daily basis. This improved understanding can help teams to better achieve both short- and longer-term goals for the business.

Question: Has teamwork in your company visibly improved since you’ve implemented S&OP?

2. Decreased Firefighting: If you can’t get demand and supply to balance routinely—not all the time—then your S&OP process is not what it should be. If the norm is expedited firefighting on a daily basis, it’s likely the result of a lack of cross-functional communications. Those communications should enable teams and departments to proactively make adjustments based on timely information communicated from another area that has direct implications to responsibilities in another. Cross-functional collaboration is necessary for the identification and resolution of problems and issues.

Question: Has firefighting decreased since S&OP was put in place?

3. Fewer Surprises: With S&OP driving a consolidated operational plan with improved teamwork and decreased firefighting, issues can be identified more quickly to keep them from becoming real problems. There’s no uncertainty about which numbers to use for decision making because everyone is working from the same numbers. And, with the ability to look down the road, past the immediate time frame, your teams can see things coming and become more proactive and predictive.

Question: When surprises occur such as demands spikes, or supply crashes, does your S&OP process allow for mid period adjustments to be made quickly?

4. Forward Visibility: A best practice for S&OP is to have 18 months of forward visibility. This length of time is important because it covers an entire fiscal year, including the span of time for planning. When you have a forward, rolling organizational plan, each month during review it is adjusted. This way, you not only see things coming, but there is much less work to do during the traditional planning exercise because the plans are being scrubbed continuously to account for changes over time and their projected impact.

Question: Does your annual financial planning process use demand plans and supply plans from executive S&OP or does all of the data it uses come from other sources?

5. One Set of Data: Even though different departments need to view numbers differently—for example, finance in dollars, supply chain in volume, and operations in hours—it’s critical for S&OP that all departments are working off the same set of numbers. When each business unit is calculating from the same starting point, then equilibrium or balance is more likely to be achieved. Without it, the variance between forecast and actual will continue to produce a noticeable gap.

Question: Are all departments working from the same set of numbers?

These qualitative factors are important indications about how well your company will be able to use S&OP to reach equilibrium between demand and supply, and each of them plays a role in how well your company will be able to reach beyond the basics to support strategic initiatives.

Do you have any other qualitative benefits that you measure in your S&OP process? Let us know in the comments.

The Top 6 Capabilities of an Ideal S&OP Solution


According to recent Gartner research, companies that are at the forefront of sales and
operations planning (S&OP) have significantly improved their overall business performance. These companies attribute a more than 7% improvement in cash flow and 6% improvement in gross profit to a successful S&OP process. Moreover, these companies enjoy twice the improvements in areas like working capital and total supply chain costs than their counterparts. These staggering statistics further demonstrate the potential benefits associated with a successful S&OP process. So what prevents your company from
successfully implementing a mature S&OP process and reaping the same benefits?

While role of executive sponsorship and open collaboration between cross-functional teams plays a key role in S&OP success, the primary reason that most companies cannot advance beyond Stage 2 of the Gartner Five-Stage Sales and Operations Planning Maturity Model is a lack of enabling S&OP technology. We’ve written about the five stages of S&OP maturity before, but here’s another look at Gartner’s S&OP Maturity model:

Gartner 5 stages

So what are the key components of a technology solution that can advance you past Stage 2 maturity? The following list features six capabilities that are a must-have in an S&OP software solution:

  1. A single unified data model for global scenario management across supply, demand and finance with ability to drive and reconcile demand, supply and finance plans from it
  2. Rich collaborative capabilities, so various team members can work together on a shared view of the data
  3. An easy-to-use platform with an Excel-based front end, so teams can start using the solution without any training
  4. Online analytics that enable scenario modeling about potential future events and then help the team pinpoint the best possible trade-offs within its specific business constraints for better and faster decision making
  5. Mobile and Web-based access, so team members can access information and collaborate wherever they are
  6. Cloud rather than an on-premise solution for two reasons: a) The solution must be able to bring data from multiple sources (both, external and internal) for global scenario management across supply, demand and finance – cloud offers a better architecture for it, and b) the ability to deploy the solution quickly across the organization so everyone is aligned, which is the hallmark of a cloud model because no hardware and software purchase is needed, no data center setup is required and no CapEx needs to be approved and allocated.

 
Addressing all six must-have capabilities listed above, the Steelwedge cloud solution is used by respected enterprises across the world to improve their S&OP process. Key platform and application capabilities include:

The following benefit curve highlights that companies plateau on the Gartner S&OP
maturity model if they continue to run their S&OP process using multiple spreadsheets.

SW Benefit Maturity Curve

Steelwedge not only enables them to get on the right trajectory, but it also accelerates time to value with its single data model, rich planning and analytics capabilities and cloud-based architecture. Companies have improved the maturity levels of their S&OP process and experienced significant improvements in their operational metrics–check out some of our success stories here.

 

Supply Chain Represents Opportunity to Get More Women in the C-Suite


Women in the C-SuiteThe fact that women are under-represented in the highest positions in corporate America isn’t new. But the numbers continue to improve. A 2013 Forbes Insight study found that the total number of female CEOs globally is up to 14% from 9%. And 24% of senior leadership positions globally are occupied by women, a 3% increase over the previous year. The report indicates the top five positions where women enter senior management include chief finance officer (31%), human resources director (30%), corporate controller (14%), chief marketing officer (13%) and sales director (13%).

So where does supply chain fit in here? According to SCM World research, only 5% of top-level supply chain positions at Fortune 500 companies are filled by women–compared to 15% all executive officer positions at Fortune 500 companies. This statistic is relatively dismal, but with women representing 37% of students enrolled in university supply chain courses, the number of female senior supply chain executives is likely to increase in the future.

A recent Fortune article makes the point that getting more women in supply chain management leadership positions will translate into more women in the C-suite. Because supply chain management touches so many aspects of the business, supply chain executives have visibility into a broad spectrum of company dynamics–putting them in a prime position to ascend to the C-suite.

Elevating women within the ranks of supply chain management leadership requires attention at all levels of an organization. Veterans in the field need to nurture the potential of rising female talents in the industry. Human resources and hiring managers should make a point to look to diversify the gender base at entry-level hiring. With a focused effort, more women will emerge as supply chain leaders, and make their way to the C-suite.

Steelwedge is proud to count some leading women in supply chain management as our customers and partners. Check out their thought leadership in some of our recent webinars:

“GoPro Captures a Single Source of Truth with S&OP Technology” featuring Jennifer Ubamos, Senior Sales Process Manager, GoPro

“Building S&OP Shock Absorbers for your Business” featuring Lisa Aleman, Director, Sales and Operations Planning and Control, Radisys

“A Practitioner’s Guide to Successful S&OP and Demand Management” featuring Seema Phull, Partner, NorthFind Partners

How does your organization hire and promote women to supply chain management leadership positions? Let us know in the comments!

Does Finance Drive Your Annual Planning Cycle? Why S&OP is a Better Way to Build Your Budget


Budget“I hate this time of year! Finance wants my numbers next week. I don’t know what our sales or production will be next year. I guess I’ll use this year’s numbers and adjust a bit. There’s got to be a better way.”

Sound familiar? The annual budget planning cycle is a necessary yet painful time for many manufacturers.  Finance requires a budget for the next fiscal year and draws inputs from various contributors including Sales, Engineering, Research & Development, Operations, Human Resources and Marketing. The process is intended to yield a more accurate budget for which each department head will be held accountable for next year’s performance.

What would you do? If you’re like most department heads, you’ll under-forecast sales and overestimate production costs and resources required. This, in turn, puts the burden back on Finance and senior leadership to enforce reasonableness, creating multiple iterations of plan adjustments and justifications.

There IS a better way…

Sales and operations planning (S&OP) enables companies to eliminate this painful cycle. Instead of Finance governing an annual event, S&OP refreshes future projections with a defined cadence, typically monthly. For example, an S&OP planning horizon of 18 months allows planners to see a full 12-month forecast for next year six months prior to start of next fiscal year.

If you’re thinking, “So now we’re repeating the budget planning every month? That sounds like 12 times the work,” please keep reading.

Why a budget driven by S&OP is better

The essence of S&OP is collaboration. Cross-functional participation is mandatory, and senior leadership support is critical. Once you’ve established an effective and efficient S&OP process, the annual budget flows right out of S&OP.

Here are some of the key benefits of an S&OP-driven annual budget:

  • Leverages continuous collaborative planning
  • Increases cross-functional participation in developing budget
  • Ensures participants are more informed and less apt to make rough guesses
  • Incorporates both top-down and bottom-up forecasting
  • Increases acceptance of company rather than Finance budget
  • Pulls Finance into S&OP process and out of budget governance
  • Improves budget accuracy
  • Ensures budget feasibility via S&OP demand and supply reviews

Using the Budget

Once the budget is set for the new year, what’s next? The budget should serve as a comparison to better understand deviations. If actual sales results are lower than budget, why? If production costs differ from budget, why? What can we learn from these deviations to improve future plans?

Business agility requires quick realignment of plans and “what-if” scenario planning. A Finance-driven budget disconnected from other planning systems means that Finance does not have the right tools to quickly adjust to operations plan changes, calculate expected revenue and margins based on the new plan and use that information to create a pro forma P&L. A pro forma statement would immediately tell the team if the proposed operations plan can meet or beat revenue and margin targets and give them the comfort they need to approve the plan. Without the right tools, Finance has to go through a tedious, manual process to identify potential shortfalls in revenue and margin from the proposed operations plan.

S&OP should be a great “friend” to Finance. Yet, many financial leaders stick to a painful, inefficient annual budget process. It’s time to pull Finance into the S&OP process and let them say hello to their new friend.