Category Archives: Agility Webinar Q&A

Global Planning Q&A with S&OP Expert Tom Wallace

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Tom Wallace

On May 29, 2013, Tom Wallace, sales and operations planning (S&OP) author and educator, and Steelwedge Vice President, Nari Viswanathan, presented a webinar entitled “Is Your Global Planning Like Whack-A-Mole?,” as part of the Steelwedge 2013 Agility Webinar Series. Hundreds of people joined the webinar to learn more about successfully navigating the often turbulent waters of global planning.

Due to the strong response, Tom and Nari were unable to answer all of the questions that were submitted during the live Q&A at the end of the webinar. We’d like to thank Tom for responding to additional questions posed during the webinar here:

Q: During the webinar, you spoke about how BASF, the world’s largest chemical company, shifted from local volume orientation to global value orientation, and as a result, increased visibility across the supply chain. Would you recommend the BASF model for a company with one manufacturing plant and a global customer base?

A: No, I would not. This company does not need global sales and operations planning because it has supply centralized in one area. One needs both demand and supply operating globally to justify the additional effort and complexity involved in global S&OP.

Q: What does BASF consider as optimization? Could that be SKU rationalization?

A: No, it’s not SKU rationalization. It’s allocating production in the most cost-effective manner consistent with customer service goals, inventory targets, and so forth.

Q: You referenced several companies as best-practice examples of global planning practitioners. How were the S&OP implementations done in these companies? With a consultancy firm? By themselves?

A: With Procter & Gamble, I helped them a bit, and the Oliver Wight group did the heavy lifting from a consulting standpoint. I’m not aware of how the other companies implemented; they did it before I worked with them.

Q: Isn’t the core of sales and operations planning forecast accuracy improvement?

A: Absolutely not, and it’s a good thing, because the forecasts will hardly ever be accurate. S&OP enables a company to cope with inaccurate forecasts better than any other process. Actually sales and operations planning almost always enables a company to improve its forecasts, not the other way around.

Q: Sales and marketing should be accounted for in improving forecast accuracy, right?

A: I believe that sales and marketing should be accountable for the validity of the forecasts. Others may be involved in a project to improve forecast accuracy.

 

Secrets to Top Line Revenue Success in High Tech

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The high-tech industry is characterized by fickle consumers and demand, market volatility and a move towards highly-customized solutions. These market forces create immense pressure on managing a global supply chain. In last week’s Steelwedge Agility Series Webinar, experienced Chief Supply Chain Officer, Dennis Omanoff, addressed the hit-and-miss realities of using sales and operations planning (S&OP) to make a difference in high-tech business. As he stated:

“We are in a world today of tremendous opportunity and the challenge now is how to unlock this box.”

Dennis explained that if you focus less on the sales order and more on the value of getting it right - you can:

•        Maximize revenue

•        Build customer loyalty

•        Create stockholder and shareholder value

According to Dennis, “The best way to drive that value is by powering better data visibility.” He added, “Breaking down paradigms of how companies share information and what companies share, we all win together.”

This includes a shift in:

•        Leadership/internal engagement

•        Customer engagement

•        Connecting to the “other side” of the order: Supplier engagement

•        Information visibility

Yet, according to statistics from a fall report by SCM World, only a few organizations have embraced this shift and maximized that value from their S&OP.

Here is a look at where leading global manufacturers are CAPTURING VALUE FROM S&OP today.  Does this look like your situation?

If you look at the above chart, only 10 percent of global organizations have externally aligned with suppliers and customers, etc. What seems to be missing is any mechanism for placing a meaningful value on the flexibility that customers demand from their suppliers. Think of the opportunity to drive value here!

By rethinking existing, siloed processes and developing new ones that anticipate demand, we can react more quickly to the unexpected. Are you ready?

If missed this webinar,  you can check out the replay here.

Have you unlocked the potential of your S&OP? If so, we’d love to hear from you.

How S&OP-Ready Are You?

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This week, one of Steelwedge’s flagship customers, Jack Lyon, the VP of Operations at Enterasys, led a thought-provoking webinar discussion on the benefits of S&OP for delivering long term growth. Enterasys has enjoyed an enviable streak of q/q growth for the past 3 years, and credits their S&OP foundation for powering better business agility to support that growth.

Equally interesting was the participant engagement via live polling during the session. Test yourself on these S&OP readiness questions, then see how you fared vs. the replies from more than 300 registrants spanning from CIOs to VPs of Supply Chain, Sales and Marketing, and Demand Planners.

What is your biggest planning challenge?

  1. Global volatility: 14%
  2. Demand visibility: 18%
  3. Supply excess: 3%
  4. Collaborative planning and engagement: 29%
  5. All of the above 35%

At Steelwedge, we’ve seen a big evolution in this answer over the past 10 years alone. What started as a heavy focus on managing supply constraints, has morphed with the increasing dependency on trading partners and suppliers around the globe.  Today, there is a necessary focus on collaboration—not only within the “four walls” of the company, but also including partners and customers.  As business becomes more global, companies lose control and visibility of their supply chains due to outsourcing.  And they are increasingly realizing the need to trade out control for better alignment with their partners in exchange for better visibility.  Connecting the dots gives them what Enterasys has–agility to grow.

How long have you been doing S&OP?

1.     Not doing it: 5%
2.     Considering it: 14%
3.     Less than a year: 24%
4.     Less than 10 years: 40%
5.     More than 10 years: 17%

This identified the Gordian knot of S&OP. A practice that has been around for 30 years, S&OP is still fraught with challenges.  81% of the webinar participants have been practicing S&OP –and nearly 1/5 for have been at it for more than a decade.  But they are still looking for how to optimize the practice.  Part of the challenge is the rapidly—and constantly—changing global marketplace. Part is crossing the chasm in S&OP maturity—like Enterasys did—from operational reacting and demand/supply matching (where Gartner expects the majority of companies are stuck today) to more strategic, proactive and agile collaboration and pre-emptive orchestration of their business.

As Jack said:

“ You can’t do S&OP without a solid strategy and executive level sponsorship/engagement.  But, equally, you can’t do S&OP well without technology to transform the process and provide real-time data to get you to the end game quicker.”

Without a cohesive technology framework to support an evolving S&OP process maturity, companies spin their wheels year after year.

What technology are you using for S&OP?

  1. Nothing: 3%
  2. Spreadsheets: 60%
  3. Existing ERP, SCM and/or CRM: 18%
  4. S&OP specific technology: 11%
  5. All of the above: 8%

This portrays the biggest technology dilemma companies face: what to do with the ubiquitous spreadsheet?  The reality today: both laggards and leading companies use spreadsheets.  And many use them to mainly bridge process gaps left from one-size-fits all technology. But spreadsheets alone don’t do the trick. They are not scalable, forcing S&OP teams to try and aggregate, manually, a view that can take a week or longer—every month—to produce. At the same time, spreadsheets can contain a process unique to a business, that can’t otherwise be leveraged in a centralized S&OP automated tool.

At Steelwedge, one of our design principles is to power agility, and allow for configuration within our integrated, single platform system that can automatically populate, aggregate and harmonize data collected from across the company in dozens of spreadsheets, as well as to extend our platform to create apps right on top so that businesses can fold in the processes unique to them.

As we learned from Enterasys , there is no one size fits all approach to S&OP, nor is there a way to build it and be done. It is a journey. Done well, the journey drives continuous, incremental value that can get and keep your business growing, regardless of the market situation.

Where are you in your planning journey? We’d like to hear from you. dderrico@steelwedge.com

 

Guest Perspective: Peter Bolstorff Answers Your Questions

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A recent Agility Series webinar with Supply Chain author, Peter Bolstorff on the
7 Principles of Highly Effective Planning drove more questions than there was time to answer.

The highly attended, interactive webinar highlighted that successful supply chain planning is not just a function of “doing more” leading practices. The best supply chain planning organizations have picked appropriate leading practices as dictated by the markets they serve – integrating those practices with their chosen technology platform to achieve competitive advantage. Actionable research from Peter’s project experience suggests that, in addition to S&OP, the best supply chain planning organizations have adopted seven principles:

  1. Systematic management of “master data”
  2. Synchronized S&OP, tactical planning, and execution processes and horizons
  3. Mature collaborative processes for  key customers and suppliers alike – reconciling forecast,
    orders, and yearly volume
  4. Data-oriented understanding of the inputs to the forecast
  5. Intense focus on “point-of-sale” or “sell through” data (versus sales orders and “sell in”)
  6. Disciplined product lifecycle management process
  7. A continuous improvement approach to understanding consumer or user behavior.

Following are a few  follow-up questions from the webinar with perspective our webiner host and this week’s guest blogger, Peter Bolstorff:

1)      What is the net impact of forecast error that drives the importance of accuracy?  In one of my recent projects, the business improved its forecast error (MAPE) measured at a 90 day offset from 49% to 19% over nine months.  Service improved seven points from 92% to 99%, excess inventory decreased by 25%, factory costs decreased by 10%, lead-time decreased by 15%, revenue grew by 10%, and cuts to retailer orders virtually went to zero.

 

2)      What are the main S&OP Improvement Measures and Goals?  Companies that have developed mature S&OP processes have both customer and internal facing measures.  The most popular include delivery performance, forecast error (MAPE), lead-time, overall inventory turns, excess and obsolete inventory as a percent to the total.  Common aspirational goals include 99% perfect line fulfillment and 15% SKU weighted MAPE.  Lead-time, inventory turns, and excess and obsolete are dependent on markets, sourcing strategy, and competition.

 Stay tuned for more on this topic with input from co-host of this session, Ed Lewis.

Guest Perspective: More S&OP Q&A’s with Oliver Wight

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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

  1. 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.”
  2. 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.