Category Archives: Integrated Business Planning

Need to Handle Change? “There’s an App for That”

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Based on a recent Steelwedge survey of more than 160 business leaders:

-89% are either experiencing or seeing signs of external volatility/change impacting their business and
-91% are planning on internal change (products, channels, services, markets) to also create planning challenges

Given that the majority of respondents face the need to manage some sort of change within their demand-supply networks, why is it that their S&OP processes are based on the paradigm of “business as usual?”  Why is the emphasis on a very rigid, prescriptive approach to managing the S&OP process when business does not behave in that manner?  It is disheartening, but not surprising to see the schism between the corporate strategic goals and the goal of the S&OP process.

But this too, is beginning to change.

During a series of integrated business planning seminars in Europe last week (Feb 7th, 8th and 9th), we discussed these issues with an audience of manufacturers and distributors from London to the Netherlands and we got the same perspective on anticipating change. In fact, since Europe is reeling under a tough financial climate, they expect to see significant amounts of change and volatility happen. It was our observation that European IT organizations are more entrenched in traditional, inflexible ERP systems which constrains their ability to respond rapidly to market conditions.  Add to that, the challenge of managing a proliferation of stand-alone systems for demand planning, supply planning, and business intelligence that require significant integration to work together.

Business leaders however are looking for flexible tools that can accommodate inevitable change in their businesses. They are not trying to retrofit their existing process to a one size fits all approach through inflexible ERP and SCP applications but looking for ways they can augment industry best practices with innovations of their own.

At Steelwedge, we believe that S&OP technology should not only enable –but flex with– process. In other words, when new elements are added to the business like new products, new services, new channels, or other changes, it should be easy to identify the impact of each of those on the overall business.

Better yet, just like with your iPhone, wouldn’t it be great when it comes to your business decision making to identify a need and know: “there’s an app for that”?  We think so.

With the Integrated Business Planning platform we can build simple open architecture apps that address new changes to business processes. For example, we saw an emerging need across many of our consumer and discrete manufacturing customers for a demand policy optimization tool which stratifies the corporate product catalog into products that can be statistically forecasted versus those that have to be dealt with in a collaborative manner. The demand policy optimization app was built in a matter of weeks using the Enterprise Enabled Excel user interface and integrated with the overall workflow.

This is a rapid deployment approach taken to the next level where end users and partners can now adapt to changing business conditions and flex their S&OP process.  This is just the first of many apps that are bubbling to the surface as companies make the transition to more resilient planning tools and apps that help them manage change.

Across the industry we are seeing the shift towards adopting S&OP for growth rather than for getting control.  Are your plans agile enough to accommodate growth?  I’d love to hear from you.

 

Valentine’s Day and Your Day Job: What Does Your Planning Say About You?

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Last week, I had the pleasure of listening in on a thought-provoking discussion led by Chris Turner, co-founder of StrataBridge Consulting on the S&OP Control Paradox.  Chris dropped a series of compelling statistical breadcrumbs about the rapidly changing path for creating and operating a competitive global business.  His numbers showed the aggregate impacts of natural disasters, oil prices, internal complexity and technology adoption on businesses of all kinds.  But his main point wasn’t about WHAT is driving integrated business planning in global organizations: Chris urged the audience to take a hard look at HOW they were putting their planning to work.

Integrated Business Planning, which brings together strategic and operational planning into a single line of sight, got its start in the 1980’s as Sales & Operations Planning, with large companies looking to balance demand and supply planning for better organizational control.  For business in that era, having a solid annual  plan that controlled inventory, production and distribution from one view of demand made absolute sense.  But in today’s world of changing customer demand, growing global supply chains with intricate interdependencies, and massive disruption, can we afford to “lock in” our planning at the cost of limiting growth?

It’s true that great planning should provide visibility and assurance in forecast accuracy.  Great S&OP groups have the potential to be the corporate heroes when cross organizational consensus forecasting yields aligned demand and supply, lower inventory, better customer satisfaction and higher margin.  But is your planning set for only the ideal world, or are you agile enough to flex your planning to accommodate real world changes and mitigate risk while optimizing new opportunity?

This week, as lovers and a huge number of consumer businesses place their bets on reliable supply chains to deliver over 150 million cards, 180 million roses and 36 million boxes of heart-shaped chocolates, it’s a good time to ask yourself: are your personal and business plans set up to give you control or better differentiated, competitive advantage?

Time is the New Currency

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This week, the Wall Street Journal pegged it: Global companies took years building supply chains. In 2011, natural disasters took just days to break them all apart. Like it or not, VUCA (volatility, uncertainty, complexity and ambiguity) is the new normal, and more than ever before, time is the new currency.

Here’s what I mean by that: with the rapid outgrowth of linear supply chains into multi-enterprise networks, loss of control and visibility have become the top challenges for many supply chains. Proliferating risks in the demand-supply network and increasing lead-times due to expanding networks makes flexibility the key to overcoming challenges.

This was indeed a hot topic at the latest trade show I attended, Supply Chain Logistics 2011, where the theme was agility and flexibility.  Leaders of supply chain strategies and leading global companies were on hand to discuss, debate and deliver ideas about how they—and the industry at large—can tap different approaches, such as Integrated Business Planning, to ensure they are more agile. It is imperative that they are able to beat the clock and deliver better returns to their companies in a world where VUCA reigns and no one has the luxury to sit out the storm and wait for smoother seas.

Well known risk management expert, Yossi Sheffi of MIT drove a fascinating discussion on resiliency. He used case studies to highlight examples of enterprise resiliency in the face of unexpected “Black Swan” disruptions. Gerry Smith, Global VP of Supply Chain at Lenovo, brought home the message with real-life examples of the challenges Lenovo faced during the Japanese Tsunami and the Thai Floods of 2011.

Think of it this way: you advance your planning process with flexibility; you protect your business with agility. While both flexibility and agility have short-term and long-term results, it is no longer enough to focus primarily on the short-term benefits. There is a limit to the strategies and tactics that companies can adopt in the short term within the lead-time.  To optimize the new time currency, you must be able to look at strategic scenarios and analyze longer term tradeoffs based on the market conditions within the lead-time. This mix of strategic and operational scenario management has become mandatory due to the rising complexity of supply chains.  Sales & Operations Planning provides the ideal balance: an antidote to volatility.

What do you think? Are you capitalizing on time?

Visit the Steelwedge community on LinkedIn to share your views or to discuss the topics in this blog post.

Raise a Cup of Kindness

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As we exit another wild, unpredictable year filled with economic, political and environmental upheaval—resulting in changes wrought of inspiration, desperation and perspiration, a virtual salute.

Indeed, as a global community there is much to be lauded, much to be learned and much to be leery from 2011. Cultural revolutions from the Middle East to Wall Street to Main Street; regional economic fissures, that have produced a global network of fiscal fault lines; and a heaping helping of Mother Nature’s wrath have both threatened and united us. It is the same in our industry, where finance, sales and operations teams are increasingly aligning to better recognize, respond and recalibrate to these same global dynamics. We are all learning the lessons of better alignment and agility in our ability to thrive.

Like it or not, VUCA (volatility, uncertainty, complexity and ambiguity), is our “new normal.” Nassim Nicholas Taleb, the author of one of my favorite books, The Black Swan, explores the idea that an event—positive or negative—that is deemed improbable, like the appearance of a Black Swan, can cause massive consequences.

I am inspired by what I’ve seen in 2011 from our customers, from our peers and from our Steelwedge team in approaching and resolving their own Black Swans. I’ve seen 100-year-old businesses face recession-driven loss in demand, and realign to come out tighter, stronger and better; I’ve seen consumer electronics powerhouses stare down the reality of ever-shortening product lifecycles with laser-focus on smart new product development; I’ve seen a Phoenix rise from the ashes of the automotive industry through powerful focus and improved management; I’ve seen manufacturers rebound after losing a supplier of 90% of a core part in the devastating tsunami; and I’ve seen hard choices made clearer, and sooner with better empirical data.

So, though we may not know the next Black Swan coming just around the corner in 2012, I raise a cup of kindness to what we’ve seen, what we’ve done and who we’ve met that have changed us for the better in 2011.

We too have paddled in the stream,
from morning sun till dine;
But seas between us broad have roared
since auld lang syne.
And there’s a hand my trusty friend!
And give us a hand o’ thine!
And we’ll take a right good-will draught,
for auld lang syne.

 

S&OP Beyond the Basics: Q&A Part 2

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As part of our commitment to drive engaging dialogue in the industry around the best and ‘next’ practices, Steelwedge recently teamed up with Sales & Operations Planning expert Tom Wallace to host a webinar. ‘Taking S&OP to the Next Level’ is based on the new book, Sales and Operations Planning: Beyond the Basics. You can watch a recording of the webinar here if you missed the live event. Given that S&OP is a top priority for companies to tackle volatility, the Steelwedge webinar drew a huge attendance and just as many questions! Due to time constraints, our experts couldn’t answer all of them.

In this blog post, Tom Wallace answers some key questions from his perspective.

Q. Is S&OP ideal for large organizations which have their own manufacturing, inventory & products? Is S&OP applicable to a service company?

Yes to both. Some of the most successful users of S&OP are large organizations with manufacturing, inventory and product: BASF, the largest chemical company in the world; Procter & Gamble, the largest consumer packaged goods company; and Staples, a very large on-line retailer. S&OP has been shown to work well in organizations that don’t make physical products as well: banks, central engineering staffs, IT departments and the like.

Q. Should the same forecast drive both manufacturing and profit and loss?

Absolutely. The forecast, once authorized, becomes the one and only one statement of future demand. Only with this can you achieve a “one-number process,” which means running the business internally with one set of numbers.

Q. How do you balance continuous improvement to the S&OP process against over-engineering the process?

Listen to the people actually using the process, including senior management. The best way I know to drive continuous improvement is, at the end of each executive meeting, ask each person present to rate the meeting on a scale of 10 and give 50 –or fewer– words why, finishing with the leader of the business. Those people will tell you where to improve and where not to.

Q. What is the best approach to organize promotional activities in the forecast process?

Within the 5-Step Process of S&OP, Step 2 is Demand Planning; this includes the addition of promotions and related activities by people from organizations like Marketing, Sales Promotion, and Merchandising. The promotions are added to the forecast early, well in advance of the consensus forecast going to Step 3, Supply Planning.

Q. What are the main pitfalls if you are in an S&OP process implementation?

The primary pitfall, much greater than all others, is to fail to educate the people in S&OP. Note the use of the word “educate” rather than “train.” That’s deliberate: training tells people how to run the software; education addresses how to run the business using this new tool.

Please write to us at info@steelwedge.com should you have any questions or need elucidation on any of the concepts mentioned in this blog.

Have a Happy New Year!