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:
- Systematic management of “master data”
- Synchronized S&OP, tactical planning, and execution processes and horizons
- Mature collaborative processes for key customers and suppliers alike – reconciling forecast,
orders, and yearly volume
- Data-oriented understanding of the inputs to the forecast
- Intense focus on “point-of-sale” or “sell through” data (versus sales orders and “sell in”)
- Disciplined product lifecycle management process
- 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.