Note:  On Tuesday, June 22, the University of Tennessee and Steelwedge were pleased to feature author and educator Dr. Paul Dittmann in a webinar entitled, “Transforming the Supply Chain Into a Competitive Advantage.”  Dittmann is 30-year supply chain veteran and co-author of the recently published book The New Supply Chain Agenda.

Paul’s fascinating presentation is a must-watch for business people wanting to learn the finer points of  supply chain strategy and sales & operations planning. Click here to view the session on-demand.

Following the live event, Paul was kind enough to respond to audience questions and you can find his answers below.

(To learn more about Paul Dittmann and the University of Tennessee Knoxville’s Demand and Supply Integration Forums, click here.)

What are the key metrics to measure supply chain performance?

We currently we have an issue related to forecast accuracy. The sales team creates a forecast based on the budget, even when they know the number that they put in forecast is not achievable. Is there a way to solve or accommodate this issue?

Is there a way to unleash a company’s potential when the budget for technology is limited?

With supply chain being one of the heaviest users of technology within a company, how is it best to balance a single provider versus best of breed for information systems?

Your survey indicated that in only 48% of companies sales is heavily involved in SIOP.  This means that in 52% of companies, sales is not heavily involved.  I would be interested to see how successful a “Sales” and Operations Planning Process can be without sales involvement?

How do you suggest incorporating customers and suppliers into the supply chain strategy?

Is there a successful formula for creating a supply chain strategy?

Should the business plan demand be included and compared with the S&OP Demand as part of the process?

How do you address sustainability as it relates to supply chain strategy?

Do you know of any company that is getting the in house union involved in the supply chain process?

The companies in your survey database seem to large companies.  Can this same process be used with much smaller companies?

How do you suggest a company would set up a supplier collaboration effort when the company is dealing with a fragmented supply chain?

How do you start by eliminating the excess inventory from reoccurring again?

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Note:  On Tuesday, May 4, we were pleased to feature author and educator Tom Wallace in a webinar entitled, “Myths, Misunderstandings and Misinformation About S&OP.”  Drawing from his decades of experience as a forecasting and sales planning leader, Tom revealed ten myths that can quickly derail an S&OP process and damage corporate performance and profitability.

Tom’s fascinating presentation is a must-watch for business people wanting to master the finer points of Executive S&OP. Click here to view the session on-demand.

If the number of questions that were submitted during the webinar are any indicator, Tom’s presentation certainly  got the audience thinking!  Tom was kind enough to respond to each of these questions following the live session and you can find his answers below.

(To learn more about Tom Wallace and Executive S&OP, we encourage you to visit www.tfwallace.com and consider picking up his book Sales and Operations Planning: The How-To Handbook, 3rd Edition.)

How to Launch Executive S&OP

Webinar Participant: ­Where do you start on creating an Executive S&OP? 

­Tom Wallace: With top management agreement to do a 90-day live pilot. (How-To Handbook, Third Edition, Pages 75-80.)

Webinar Participant: What is the best way to convince the team to attend the meeting and to express how important they are to the entire process?

Tom Wallace: Get top management to convince them. Seriously, if the leader of the business and his or her staff are truly committed to Executive S&OP, most of them will willingly go through the learning process and do their parts.

Webinar Participant: ­I work with small and midsized manufacturing companies. It is hard enough selling them on Manufacturing Resource Planning (MRP). Where do we start to get them to understand S&OP? 

Tom Wallace: Conduct an executive briefing. Get a decision from top management to do a 90-day live pilot. Then, if that looks good to them, and it almost always does, proceed to cut over the rest of the families to Executive S&OP.  (How-To Handbook, 3^rd Edition, Pages 69-73) ­

Webinar Participant: Based on the myths of a company not willing to change for S&OP and education being the solution, what’s the best way to teach your executives and what material do you show them?

Tom Wallace: I’ve mentioned the Executive Briefing, and that’s by far the best way to get started. However, they’ll need more input than that and there are a substantial number of books and videos to help you with that at www.tfwallace.com.

Webinar Participant: ­How do you handle a pilot program when compromise may often include items or pieces (demand or resource constraints) outside of that pilot?

Tom Wallace: If possible, select as your pilot family one with little or no shared resources. If you can’t avoid that, then estimate the impact of the “outside the family” demand to show an approximation of the full picture on the resource.­

Webinar Participant: Does Tom have a perspective on implementing S&OP in a services / distribution environment versus traditional manufacturing?

Tom Wallace: it’s more similar than different. The basics are the same: demand, supply and the related financials. (How-To Handbook, Third Edition, Page 166-167)Overcoming S&OP Challenges

Webinar Participant: Tom has been preaching Executive S&OP for some time now – what does he think is the single most important element of a successful implementation?

Tom Wallace:The three most important things in real estate are location, location, location. The three most important elements are people, people, people. They’re the A item. Your success with the process will hinge almost totally on the quality of the job done with  getting the people down the learning curve on the why’s, what’s and how’s of Executive S&OP.

Webinar Participant: ­Once you’ve established buy-in for the need for an S&OP process, what are some of the larger challenges / obstacles that you’ve faced and how have you overcome them? ­

Tom Wallace: Most of the problems are mindset issues: reluctance to change, aversion to conflict, lack of organizational self-discipline, and discomfort with accountability. These are almost always fixable by two things: a) strong leadership from the top and b) education and learning.

Webinar Participant: ­In a regional environment (e.g. Latin America region), what is the best approach? Should we start S&OP from the regional level and force it down to the markets or start with one or two markets with a pilot?

Tom Wallace: Demand planning should be done at the market level. If the markets have their own manufacturing, they can then do the entire Executive S&OP process. If most markets do not have manufacturing, then typically the S&OP process occurs at the regional level using demand planning input from the markets. (How-To Handbook, Third Edition, Page 167-169­.)

Tom Wallace: We have a mature S&OP process but have difficulty achieving conclusive results after the Executive S&OP. Any thoughts?

Tom Wallace: Forgive me, but I suspect that while your process may be mature, it sure doesn’t sound effective.The essence of this process is decision making. To fix it, you might self-administer the Executive S&OP Effectiveness Checklist, which you can pull off our website: www.tfwallace.com. Go to downloads/free downloads. (How-To Handbook, Third Edition, Page 211) 

Leading the Executive S&OP Process

 Webinar Participant:­Who leads the individual steps like the pre-meeting and the executive meeting?

Tom Wallace: The overall owner of Executive S&OP is the leader of the business. The steps are often facilitated by the S&OP process owner. 

Webinar Participant: Who should be the process owner of S&OP?

Tom Wallace: Someone who knows the business, has good peer relationships, good communication skills with top management — those kinds of things. It doesn’t matter much which department he or she comes from.

Webinar Participant: ­Who and at what level is the “executive”? You used P&G and Dow as examples, but who is the top level person participating in the executive process.

Tom Wallace:The “executive” is the leader of the business. The “business” is that point at which demand and supply align and bottom-line accountability resides. In large companies, this is not at corporate but rather at a business unit level. The results of the various business S&OPs are rolled up and presented to the CEO, CFO etc. to serve as inputs to the quarterly earnings call.­

Webinar Participant: Is it the supply chain team (that leads the process)?

Tom Wallace: Supply chain is only one functional area that plays a role in the Executive S&OP process. There are others of equal importance.­

Webinar Participant: Why is product development not involved even before data gathering? Isn’t it already too late at demand planning time onwards as sales people have already submitted the forecast? ­

Tom Wallace: Product development is involved in developing new products. Their entry point to Executive S&OP is demand planning, i.e., bringing in the status and schedules of the various projects. Sales people submit forecasts as one input among many into the demand planning step. (How-To Handbook, Third Edition, Pages 34-36.)

Defining the Executive S&OP Process

Webinar Participant What is time commitment for the people collecting the data and organizing the meeting for execs, and how do you get away from continual pull cycle of info only and drive more improvement to streamline utilization of resources prior to the meeting? 

Tom Wallace: This varies a great deal on company size and what kind of software is being used. Companies using Excel as opposed to S&OP-specific software will typically spend more time on these activities. Regarding the second part of your question, you might consider getting one of your internal 6 Sigma Black Belts involved in reworking the process.

Webinar Participant:­What’s the main difference between the executive meeting and the pre-meeting regarding info?

Tom Wallace:The pre-meeting is more detailed, both in terms of data and the depth of the discussions.­

Webinar Participant:­How often does the pre-meeting occur between demand planning and supply planning?

Tom Wallace: Never, in my experience. 

Webinar Participant:­Is a monthly timeframe the right cycle?  In your experience, what issues have you seen in a quarterly S&OP process?

Tom Wallace: Virtually all businesses I’ve ever seen are simply too fast-paced to refresh their demand and supply plans quarterly. My advice: don’t even consider doing it quarterly. It won’t work.­

Webinar Participant: What is the best practice planning cycle time of the S&OP process?

Tom Wallace:Most companies will conduct their Exec Meeting around the 15th of the month.

Webinar Participant: ­What kind of range for the number of product families is appropriate for Executive S&OP?

Tom Wallace:Somewhere in the range of 5 to 10, or a half dozen to a dozen, the reason being that these are the items typically discussed in the executive meeting, which should not exceed two hours routinely. Many companies use sub-families to get additional granularity where needed and these would be more prevalent in the pre-meeting and earlier steps. ­

Webinar Participant: ­Does S&OP planning function the same way for distribution based organizations? 

Tom Wallace: Yes. In implementation, you may need to work a bit harder to determine which supply elements will be tracked in the supply planning step.­

Webinar Participant: ­Can you clarify the level of detail for Executive S&OP? It seems to be volume, but things like new product plans and margins involve mix. 

Tom Wallace: Often mix data enters into the process but it must be aggregated to a volume level to serve Executive S&OP.­

Webinar Participant: ­Should the result of an S&OP session be a consensus forecast or a production schedule? 

Tom Wallace: Both, as well as updated financial plans and perhaps revised schedules for new product launch. And, updated hedge to support risk management­

Webinar Participant: I am constantly battling the separation of these distinct processes now lumped as one and referred to as ‘sales and operations management’.  All this tends to do is lead to confusion and unnecessary battling over terminology.  It is part & parcel of the misunderstanding about the amount of time required for this most important process. How do we change or get the correct terminology mindset back?

Tom Wallace: We’ve developed the term “Executive S&OP” as a defensive measure against the morphing of Sales and Operations Planning to include pretty much all of what used to be ERP. Executive S&OP term is gaining traction, but it’s not happening quickly.

Webinar Participant: ­Where is the boundary between S&OP and Integrated Business Planning (IBP)? 

Tom Wallace: I’m not sure what IBP is. I’ve been told by a senior person within the Oliver Wight group, the organization that coined the term, that it’s quite close to Executive S&OP.­

Optimizing Executive S&OP Performance

Webinar Participant: ­Do you have any concrete tips on how to get to a “single number”? We often struggle in talking about financial forecast versus sales forecast.

Tom Wallace: They should be one and the same. Sales forecasting is done in units and then “translated” into dollars. This is why finance people need to have hands-on involvement in the demand planning step. (How-To Handbook, Third Edition, Page 66­.)

Webinar Participant: How can we best quantify the success of S&OP since many other factors determine overall success such as days on hand and delivery percentage?

Tom Wallace: Some people apportion a percentage of the improvement to Lean, some to Six Sigma, some to Executive S&OP, etc. Others take the position: “If we’re getting the improvement, we’re not going to care about exactly where it’s coming from. We know that if S&OP is working well, it’s making a big contribution.” Since it doesn’t cost much to implement the process, many people don’t feel the need to relate actual results to what was in the cost justification.

Webinar Participant: What will be best way to increase time horizon discussed during Executive S&OP?

Tom Wallace: 1) Once per year, they go out into the future 15 or more months when they do the annual plans. All we’re saying here is to do that every month. (It’s not as much work as it may sound, since you’re only adding three months of forecast every three months.) 2) Even if the forecast is uncertain 12 or more months out, it’s  more accurate than zero — which is the default forecast if your horizon is four months. Forecasting over the medium and long range should not be by SKU but rather by aggregate, market-facing families that can be much more validly forecasted, in most cases using external data.

Webinar Participant:  How can Operational S&OP make be tied effectively to Kanban or min/max strategies? These strategies defeat the purpose of a time-phased forecast leaving S&OP as an executive review focused on volume.

Tom Wallace:Executive S&OP sets the volume plans (e.g., sales rates, run rates, etc.) For Operational S&OP, the specific, detail-oriented processes such as Kanban and others operate with their own logic within the framework of the volume plans set by Executive S&OP. (How-To Handbook, Third Edition, Page 17-18 .)

Webinar Participant: ­Which aspects in S&OP need to be looked at closely to help with highly volatile demand products? How can you best stop forecasting from being viewed as useless exercise?

Tom Wallace: Start with a live 90-day pilot. If you get good results, then make sure that everyone understands that the forecast played an important role and that it’s not a useless exercise. As you bring the rest of the families into Executive S&OP, pay close attention to the forecasts and work hard at making them better and better. And as they get better, make sure everyone knows.  

The Future of Executive S&OP

Webinar Participant: What improvements do you foresee in S&OP in the next 5-10 years?  What is your vision?

Tom Wallace:Executive S&OP will continue to grow in capabilities, and will be used in more ways to support running the business very well. Its job is to help top management, and companies will continue to find creative ways for that to happen. S&OP-specific software will help in this, particularly with simulation. By 2020, it will be the de facto standard for managing those parts of the business that deal with demand, supply, and related financials.

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Those following Supply Chain Industry Analyst Lora Cecere’s new Supply Chain Shaman blog (http://www.supplychainshaman.com) have read with keen interest her observations about SAP’s progress in the area of Supply Chain Planning.  Lora points out that while  SAP has made tremendous progress in many areas it is also struggling with integrating its many components – specifically Lora says that the “integration of business intelligence and performance management is moving [too] slowly.”    Her notes on the growing disappointment with SAP APO – from within and outside the SAP organization – are also worth noting (http://www.supplychainshaman.com/2010/04/inside-insider:

“I leave the event with two major disappointments.  The first is that the integration of business intelligence and performance management is moving slowly. …too slowly for this curmudgeon analyst.  I was hoping to see the results of the Teradata/SAP Business Objects integration and the launch of a new generation of predictive analytics.  While there is some progress in Performance Management, it is largely traditional reporting/dashboards.

The second is that SAP APO—SAP’s supply chain planning suite—was  largely business as usual. At the event, I saw small, incremental changes, but no major innovation like I saw in MII, PLM and transportation management.  I keep crossing my fingers. I would love to see  SAP have the courage to blow up APO and start again.  Who knows if it works for PLM, maybe there is a chance to bring innovation to a solution — and the larger Supply Chain Planning (SCP) market– that sorely needs to be redefined.”

As SAP friends and partners know, SAP has some truly outstanding employees and the SCM Product Group continues under the brilliant leadership of Lori Mitchell-Keller.  Yet, overcoming legacy products and dated, mis-guided inertia is difficult for even the most effective of executives.  The great news is that a whole new generation of cloud-based supply chain planning and S&OP applications that integrate tightly into the SAP suite are now available.  These applications are changing the game and will ensure that SAP users are well supported well into the  next generation or whenever it is that SAP is finally able to overcome its legacy and move forward.

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As Tiger Woods slowly recedes from visibility in today’s fast paced, polyphonic, multi-media environment, I am driven to identify some sort of meaning in it all.   And, in a world in which bits, bytes and terabytes of data stream before us daily this is no easy task.  Living in an age when global conflict shares a table with global social networking, creating personal connections has become the Holy Grail.  On occasion connections do occur.  When this happens the information that fog my life temporarily lifts.  So, ending a long day immersed in Sales and Operations Planning (S&OP),  I ponder — do S&OP, Tiger Woods and Elephants share something in common?

At its best, a highly collaborative, data-driven Sales and Operations Planning process creates visibility.  The consequences of bad choice become clear.  And, elephants sitting in the room – or perhaps obsolescent inventory lying in a warehouse – cannot be avoided.  In good S&OP scenarios are created, alternatives examined, and the path forward is understood.  Often, the process of S&OP itself surfaces important issues that might otherwise have been missed.  Were there early indications of bad choice in Tiger Wood’s behavior?  Was his life story of discipline and perfection to good to be true?  Was there an elephant in the room all along that we were all ignoring?

We all love a hero.  And of course, we seek to avoid unpleasant experience.  While the world worshipped Tiger, Tiger was spending his energy struggling to contain a boiling maelstrom of problems. There indeed was an elephant in Tiger’s room and neither he nor the rest of the world was willing to confront this painful fact until the elephant crashed through the house.  The good news is that life will go on for the rest of us and Tiger will survive the storm.

However, in today’s troubled economy, corporate executives cannot afford to ignore the elephant’s in the room.  There is no room for bad choice.  Constant vigilance and decisive action are imperative.  Sales and Operations Planning is a process that can elucidate the elephant in the room.  Moreover, Steelwedge S&OP drives better decision making and good choice.  Did a major customer in a remote region of the world just cancel a major order?  If so, how should we react?  Should we discount aging inventory before promoting new products?  Can we improve profitability with a different price structure?  The answer to these questions is the fuel that powers successful corporate governance.  And, indeed the story of Tiger Woods, Elephants and S&OP provides an important message.

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Steelwedge Software Inc., the leading provider of software-as-a-service Sales and Operations Planning (S&OP) solutions, today announced that it was named one of the top 500  software companies.  This year’s inclusion in the Software 500 marks the third straight year Steelwedge Software, Inc. has been ranked.

“The 2009 Software 500 results show that revenue growth in the software and services industry was healthy, with total Software 500 revenue of $491.3 billion worldwide for 2008 representing 8.8 percent growth from the previous year,” said John P. Desmond, editor of Software Magazine and Softwaremag.com.

“The Software 500 helps CIOs, senior IT managers and IT staff research and create the short list of business partners,” Desmond says. “It is a quick reference of vendor viability. And the online version to be posted soon at www.Softwaremag.com is searchable by category, making it what we call the online catalog to enterprise software.”

“Our continued growth is further validation that our customers experience substantial business benefits from the Steelwedge S&OP solution,” said Glen Margolis, CEO and founder of Steelwedge Software, Inc. “We will continue to innovate and provide our customers with the Sales and Operations Planning (S&OP) solutions they need to increase their revenue and competitive advantage.”

The Software 500 is a revenue-based ranking of the world’s largest software and services suppliers targeting medium to large enterprises, their IT professionals, software developers and business managers involved in software and services purchasing.

The ranking is based on total worldwide software and services revenue.  This includes revenue from software licenses, maintenance and support, training and software-related services and consulting.  The financial information was gathered by a survey prepared by King Content Co. and posted at www.Softwaremag.com, as well as from public documents.

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The relationship between sales forecasting, demand planning, and lean principles has been analyzed, evaluated, and debated for decades.  However, in light of recent market volatility, this debate is final reaching resolution – executives overseeing even the most lean, JIT-focused supply chains, need to planning.

Chris Chiappinelli, a blogger associated with the Managing Automation Blog offers the following :

“Just in Time, in its purest form, is a thing of beauty. Read Toyota’s description of it on their website — it sounds like poetry in motion. But the marketplace doesn’t care for poetry. We don’t want to place our order and watch the gears — perfectly meshed though they may be — smoothly churn out our product. We want our hamburgers pre-cooked and waiting for us under a heat lamp. In that world, Just-in-Time has no place. It’s a museum piece, a relic of a more patient era. In this world of pre-heated hamburgers and mass customization, Toyota and its counterparts are forced to produce not to actual demand, but to expected demand. And that, my friends, not only belies JIT; it creates a huge amount of risk.”

“A New York Times article illustrates just how far from its roots Toyota strayed:Previously, plants operated under the sales force’s direction of “you make them, we will sell them,” said Real C. Tanguay, president of Toyota Motor Manufacturing Canada. Now the philosophy is, “if we can sell them, then you will make them,” he said.”  “Oh, how the mighty have fallen. Who would have predicted that a Toyota executive would ever sum up the company’s philosophy as, “You make them, we will sell them”?”

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Steelwedge enables customers to better understand and anticipate demand through forecasting, collaborative engagement of field sales, and analysis of changes in sales pipeline opportunities.  In today’s world, these are vital processes.

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