Steelwedge Software

S&OP continues to be the Holy Grail for manufacturing companies pursuing break through financial and operational performance.  One of the key requirements for any successful S&OP process is reporting and analytics.  While many technologies are available to provide flexible reporting, few applications are available that embrace Out-of-the-Box reporting and dashboards designed specifically for S&OP. 

Steelwedge has worked with leading manufacturing companies to develop a rich set of S&OP dashboards, reports and metrics that represent the Best Practices. While certain companies and industries have their own unique reporting requirements for S&OP, the following reporting categories are critical to any successful S&OP Process.

1. Revenue & Margin Tracking

2. Forecast Accuracy

3. Inventory Tracking

4. Customer Service Levels

5. Demand Supply Balancing

Revenue and Margin reports that project into the future and track actuals against plan, are one of the most fundamental reporting requirements for any successful S&OP process.  These reports are typically available in a variety of formats that include: quarter-to-date and year-to-date actuals versus targets, year over year comparisons of monthly, quarterly and year-to-date totals, rolling 3 month totals, and cumulative revenue and margin totals versus plan. 

Forecast & Accuracy is another key reporting requirement that compares actual demand versus forecast. The most common measure used for measuring forecast accuracy is Mean Absolute Percent Error (MAPE).  In addition, companies measure MAPE at different time lags to track how plans change and accuracy improves over time.  Reports that capture planning assumptions at different time lags are commonly referred to as Waterfall Reports. Understanding forecast error over lead time is important in managing risk through the use of safety stock and flexible capacities.  Finally, companies also track forecast bias to help mitigate and provide visibility to consistent under or over forecasting results.

Inventory Tracking is another key report in the S&OP process.  Companies typically look at inventory from a variety of measures including: overall investment expressed in units and dollars, days or months supply, turnover, and inventory age reports. Most companies compare actual inventories against specific inventory target levels established to meet their desired customer service requirements at the lowest investment and cost.

Customer Service Levels can be measured in a variety of ways including: order fill rates, unit fill rates, order fulfillment lead time, order fulfillment reliability, backorder levels and duration.  Increasingly customer service has become a lever for competitive advantage and therefore a key metric to track as part of the S&OP process.

Demand and Supply Balancing Reports are required to address the most fundamental challenge in S&OP around managing critical resources to resolve key constraints or shortages and excess supply.  In this regard, companies typically look at a variety of demand supply scenarios including unconstrained, constrained, and optimized plans. Critical decisions around supplier contracts, allocation, overtime, plant closures and expansions are evaluated as part of these reports.

In addition to the functional reporting categories mentioned above, S&OP reporting also requires several unique capabilities including: multiple aggregations and views, scheduled and exception based reporting and automated “email” distribution. The ability to create different aggregate views of reports that span from planners to executives, Product Line to Business Unit, and across functional areas including sales, marketing, operations and finance is a key requirement for S&OP reporting.  While this requirement is well understood, it remains to be one of the biggest challenges in implementing a successful S&OP process. Additionally, generating exception based reports that compare actuals against plan and alert planners and executives to performance that falls out of thresholds is a key requirement to ensure the most critical issues are being resolved in the day tot day planning process. Finally, creating an environment to automatically distribute scheduled and exception based reports through email is critical to enabling the most advanced S&OP process.

The Steelwedge application was designed as a single platform to support S&OP reporting across different levels of planning and across functional areas within an enterprise.  The solution was architected provide a collaborative sales forecasting solution and an overlay onto existing functional applications needed to enable the S&OP process. Additionally, built in email enabled workflow allows for secure distribution of reports throughout the enterprise.

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The concept of a Planning Bill of Material (PBOM) has been around for many years to manage the relationships between independent and dependant demand items.  Planning BOMs are used to forecast demand for components and options available for configured products.  For example, a configured laptop may have an option for a wireless card that is either specified at order entry or purchased as part of an end item off the shelf. In this case, the attach rate is a function of how often the wireless card is purchased when a laptop is purchased.  Another example might be the RAM option for a computer.  In this example, RAM is included in all laptops, however, the consumer has an option to select a certain quantity of RAM (e.g. 128, 512, 1.2…).  In the case of RAM, the attach rate represents the percentage of time each quantity of RAM is selected when a laptop is purchased and the attach rate for the different options of RAM must add to 1.

One of the advantages using PBOM is the ability to streamline and reduce complexity in the planning process so that rather than plan for multiple end items and components, planners can focus there attention on forecasting more aggregate level platforms or product groups and use attach rates to forecast the component level details associated with the platforms.  Another benefit of using a PBOM is to improve the overall accuracy of the forecast.  In many cases the actual demand level for component/options may be relatively low which makes it difficult to accurately forecast demand.  Forecast accuracy at the aggregate level tends to be higher compared to component/option levels since volumes are relatively larger which results in higher accuracy using statistical methods.  Once the aggregate level is determined, attach rates can be used to predict the component/option level demand which improves the forecast accuracy for the component/options or mix.

While the use of PBOMs offer several advantages for planning component/option level detail, there are several limitations to the approach.  (1) The accuracy of the component and option level forecast is greatly impacted by planned attach rates (2) Attach rates tend to be static and not reflect trends in the market (3) Manual tracking and managing of the attach rates can be unwieldy (4) Updating attach rates based on trends and actual demand data is typically not feasible. Systems that employ Planning BOMs expect a user to maintain the percentage (ratio) relationships between the Parent items and Component items in order to accurately assign demand values.  With thousands of records to maintain, this is a huge effort, typically behind schedule, and overly generalized, resulting in poor product mix accuracy.

One of the key differentiators for the Steelwedge application is its Statistical Bill of Materials or SBOM.  While the SBOM builds on all the advantages of the PBOM, the S-BOM automatically calculates the attach ratios as frequently as nightly for every new sales order line booked, using  By managing these ratios at the detail level, very accurate aggregations can be presented at the customer, region, product family, etc. levels that drive a very accurate product mix prediction, and the ability to achieve higher customer service levels while maintaining  lower overall inventory levels.  Manual overrides at any level can be used to manage new product/option/component introductions, end-of-life, supersession, and cannibalization. In addition, the SBOM looks at trends and dynamically updates and plans for trends in the future using time-phased assumptions versus the typical static assumptions used in a PBOM.

Steelwedge jointly developed its SBOM technology based on customer input in industries that manage complex products.  In addition, to helping companies that manage complex products, the SBOM technology can help customers  streamline their planning process and improve accuracy by allowing planners to focus on planning at a group or category level and using the SBOM to determine detailed level SKU forecast and product mix decisions.    

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Integrated Business Planning is poised to become the next big thing beyond S&OP. One of the key themes for IBP is linking Operational Plans to Financial Plans.  This linkage enables companies to understand how financial budgets and assumptions can impact operational plans and execution and visa versa.  One of the fundamental requirements for linking financial and operational plans is the ability to translate between units and revenues/margins.  This is certainly easier said than done.  As companies are faced with variable customer-specific pricing structures, rapidly changing prices, cost and promotional activities, simply using a static average selling price and COGS does not provide the level of accuracy needed to understand the true relationship between units and revenue. 

One of the key differentiators in the Steelwedge solution is the ability to translate plans between units and renveues.  Steelwedge provides the ability to manage pricing information at various levels in a product hierarchy required to capture the true relationship between operational plans and revenue projections.  In addition, Steelwedge provides the ability to model pricing and cost information in a time-phased manner.  Once the operational plans are translated into revenue and margin projections, finance, operations and sales can begin to compare and reconcile plans on a periodic and exception basis. 

To achieve the vision of IBP, companies must have the approporiate enabling technology to perform the basic building blocks for planning.  Accurate unit to revenue conversions is one of many building block that must be done well to realize the vision of IBP. 

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In a recent MarketScope for S&OP Report by Gartner, Steelwedge was positioned as one of three top S&OP vendors and as solution that delivers needed functionality for both sales forecasting and S&OP processes.

The Gartner MarketScope Report for Sales and Operations Planning profiled a total of eleven vendors in the S&OP space based on proven customer implementations, demonstrated S&OP functionality, and global coverage. Each vendor was assessed based on comprehensive evaluation criteria including Market Understanding, Product Strategy, Innovation and Customer Experience. Each vendor was given an overall rating. Steelwedge was one of the three top vendors rated Positive in the study. The other leading vendors?  Not SAP, not JDA, not  Logility, not TXT…

“Steelwedge is pleased to be listed as one of the top vendors in Gartner’s S&OP MarketScope Report by Gartner — coming on the heels of being called the ‘Leading Pure Play S&OP Vendor’ by AMR, we feel our hard work and dedication to helping companies implement world-class S&OP solutions is getting the recognition it deserves”, said Glen Margolis, CEO of Steelwedge.

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S&OP presents many challenges to business enterprises to implement and sustain a world-class S&OP process.  One common thread is the need for effective collaboration.  What sounds simple, in general terms, is often difficult when the details come into play.  Details may include different goals and incentives for disparate functional groups and individuals and inadequate tools to facilitate meaningful collaboration.

Functional groups have unique goals and performance indicators.  Sales may be driven to achieve high revenue targets while the Operations group may focus on minimizing labor costs and inventory levels.  The key point here is NOT that all groups and individuals should share the same focus and effort.  To the contrary, best practice enterprises heavily leverage the unique talents of their employees.  Sales sells and Operations drives the supply chain.  That said, it is critical that the enterprise has a single, consensus plan that is feasible and all parties agree to execute against that plan.  Companies that fail to achieve one agreed plan, are prone to falling well short of optimal inventory levels, customer service targets, availability of desired inventory and company financial goals.  A less tangible, but very important by-product of a missing consensus plan is a culture that pits individuals and groups against one another rather than acting as a cohesive team.

From my work at Steelwedge with several clients, it’s been very pleasing to see how the Steelwedge tool promotes cross-functional interaction.  Users exchange quantitative and qualitative inputs in an environment that pulls together information in a way that had not previously been available.  Beyond data visibility, users are gathering field input, validating assumptions and driving an enterprise plan rather than multiple, isolated departmental plans.

At the end of the day, solutions depend on people, process and technology.  If the process and the technology facilitate collaboration, the people become more productive…and happier, too!

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