Passing over the arctic circle aboard my favorite Boeing Triple Seven aircraft after a long journey to visit customers, prospects and the growing Steelwedge team across Asia and Europe, our Japan initiative is top of mind.
Spain is in crisis and the social tensions have only just begun. Greece is suffering with no solution in sight. German is powering forward. China expands. The Unites States is adjusting and muddles forward. And Japan? It is the nation that has suffered more knock-out blows in its long history than any other place on earth. Sometimes self-inflicted, sometimes not. And yet Japan has a long and profound history of reinvention. Continue reading
Ed. Note: In today’s guest post, Eric Deutsch, principal with Oliver Wight consulting, provides some additional insights into their method of sales and operations planning, answering some of our most-asked questions. You can also see earlier thoughts on S&OP here. For more from Eric, see our June webinar, Developing Corporate Muscle Memory with IBP
- Are you working with any aerospace companies and what is different about handling them? Yes, several aerospace companies have implemented S&OP. According to my colleague Jim Correll, “Aerospace companies have the same challenges that other companies have when it comes to IBP. Adapting IBP to the multitude of organizational structures that we encounter in aerospace companies and other types of industry is always a challenge. What we do find is that forecasting in aerospace companies that are suppliers to the large airframe manufactures and military contracts is easier because their schedules are typically much firmer than in other industries.”
- In a Consensus forecast, how do you reconcile high expectations of the Marketing people with the statistical forecast? Especially with highly variable demand, both intermitent and highly volatile.First, there is a place for statistics, and it typically doesn’t work well in highly variable, volatile, and sporadic environments. If the highly variable demand is associated with low volume/revenue products, you may want to ask yourself “Why am I in this business? What will we do to get these products moving?” If the highly variable demand is associated with high revenue “big hits”, then you have to get closer to the customer and get more demand information from them. Second, you want to turn “expectations” into “PLANS” and hold people accountable for results. As words, “forecasts”, “guesses”, and “expectations” have no accountability behind them and shouldn’t be used to drive business decisions. A “plan” (i.e. Demand Plan, Supply Plan) means that you have activities in place to achieve that number (plan the sale and sell the plan) and that you should be held accountable to execute on those activities to achieve the plan. Every month, you “re-plan” in IBP by reviewing the latest information, changes since the last cycle, and gaps to strategic objectives. It’s amazing how much better people become at planning when they are held accountable for hitting the plan…not over, not under, but HITTING the plan. Sometimes, folks are rewarded for exceeding the sales plan. “We hit 125% of plan!” Great for the top line…but often the supply chain suffers because they were scrambling to fulfill demand that nobody told them about, typically at a higher cost. Plan the sale and sell the plan and use shared tactics (e.g. inventory, lead times, capacity) to handle variability.
Ed. Note: In today’s guest post, Eric Deutsch, principal with Oliver Wight consulting, provides some insights into their method of sales and operations planning, answering some of our most-asked questions. For more from Eric, see our June webinar, Developing Corporate Muscle Memory with IBP
You seem to use the terms S&OP (sales & operations planing) and IBP (integrated business planning) interchangeably. What is the difference in your minds? Is there a difference?
There is a difference, and it mainly has to do with process maturity. An integrated business planning process (IBP) shares fundamental elements with sales and operations planning (S&OP) from its evolution (e.g. Demand/Supply/Inventory balancing, disciplined monthly process, etc.), but has evolved to include more robust financial integration, more robust and routine scenario planning, integration with supply chain partners, and integrated strategic planning over a longer horizon. George Palmatier, innovator and pioneer in IBP, says it simply: “A major difference between S&OP and IBP from a leadership/management perspective is that the process is the primary process used to run the business. This includes strategic management dealing with the essence of the business. It is not just a supply chain management process.” We often use S&OP and IBP interchangeably when we are speaking to audiences at mixed levels of process maturity, especially when we are speaking to commonalities between the two. Continue reading
Ed. note: This is the second in our two part Q&A with Lora Cecere, founder of Supply Chain Insights and the Supply Chain Shaman blog. In our May webinar, Lora unveiled the results of a new study on supply chain agility and the role of S&OP in improving an organization’s response capabilities. Following the webinar, Lora took a few questions from the audience but we weren’t able to get through all of them during the session. We threw out a Short-Answer challenge…and boy did she respond! -R
- What are the main problems when using Excel spreadsheets to enable the S&OP process?
The models lack the depth to effectively model the trade-offs of the supply chain effective frontier.
- What is best collaboration and decision making model for a global sales and operations business?
It depends on your maturity, industry requirements and the scope of operations. We would need to know more.
- What is the best way for an organization to start an S&OP process?
Define a supply chain strategy and start by modeling your effective frontier. Implement APS tools to develop a feasible plan.
- What would be your biggest suggestion to someone new to this field?
Educate. Educate. Educate.
- Why do you need S&OP at all?
To align the organization for greater demand volatility and supply risk.
- For companies that have never had a S&OP experience, how should we approach the subject to reduce resistance from those who do not understand the process?
I would start by helping companies to understand it through simulation activities.
- How do current technology support Integrated Business Planning process?
The advanced modeling technologies better allow the modeling of financial plans.
- How is S&OP implemented differently in a job shop where a forecast is not feasible?
Who says that a forecast is not feasible in a machine shop? While companies in make-to-order businesses cannot effectively forecast specific products, they can usually forecast contract requirements based on pending contracts and the service obligations of current contracts. Is this not a forecast?
Ed. note: At Steelwedge’s May webinar, Lora Cecere, unveiled the results of a new study on supply chain agility and the role of S&OP in improving an organization’s response capabilities. Following the webinar, Lora took a few questions from the audience but we couldn’t get to all of them, so we threw out a short answer challenge. Answer 16 questions from the webinar as succinctly as possible. Here are the first eight in the series. -R
- What is the most surprising thing you discovered researching the importance of agility?
That only 13% of companies effectively tie S&OP planning to agility.
- How do you achieve agility when faced with long lead times (1 yr+)?
I believe that the longer the lead times the greater the impact that agility techniques can have on the supply chain. This is accomplished by modeling demand and supply volatility and building playbooks to anticipate these impacts on supply chain reliability. A mature S&OP process helps companies to align against variability.
- How can you visualize the process of sales and operations for long-term future, if this is so volatile?
Through role-based dashboards.
- What is your perspective of impact of “external changes” on stable industries such as mining, oil, gas etc? Customers simply need coal, oil or gas they do not care how these products are e.g. innovated,packaged, delivered etc.
I believe that this needs to be handled through market-to-market modeling in S&OP. Buy modeling demand shifts (e.g. the changing price structures of fuel alternatives) and market supply variability (the levels of stockpiles), companies can do what if analysis to mitigate market risks.
- In your opinion has S&OP technology with process and change management finally become the recommended approach, and if so why?
It depends. There needs to be a system of record for companies that have multiple S&OP processes.
- We have mixture of S&OP by Microsoft Excel and ERP. How do you rate the “flexibility” of specific supply chain software to cover specific needs?
ERP is inflexible, and excel is not deep enough. Neither are good alternatives.
- We use S&OP for supply / demand balancing of resources but find the complexity of the person’s skill set impacts our decisions. Any thoughts on how to balance the understanding of the detail against the need to make effective decisions?
This happens through the selection of technology that aligns with the skill sets with the what-if modeling. If there is still a gap, consider business process outsourcing.
- What are the critical success factors in implementing a S&OP/IBP in a large organization?
The most critical element is the building of a supply chain strategy and educating the executive team on why this matters.