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!

Sales and Operations Planning (S&OP) is a function that corporate executives often fail to recognize as a key contributor to success.   From a revenue perspective, an accurate S&OP plan allows for high levels of customer service.  When demand is predicted accurately, it can be shaped and met in a timely and efficient manner.  Of course, accurate forecasts help organizations avoid stock outs and lost sales.  The impact of an inaccurate S&OP plan on profit margins is also profound.  Raw materials and components are more cost-effectively acquired on the basis of advance planning instead of last minute, rush orders.

The impact of excellence in S&OP is profound.  In a number of cases, clients working in tandem with the Steelwedge team to develop, improve or automate their S&OP processes have seen increases in product margins of upwards of five percent and reductions in inventory levels of over fifteen percent.   In spite of such tangible benefits, many companies fail to prioritize this critical executive process.  Although no management function can be reduced to seven items or even seventeen items, there are certain basic S&OP improvement lessons learned that can be generalized across clients and industries.

Each of these steps is summarized below:

Each of these seven steps offers substantial opportunities for improvement.  In coming weeks we will discuss these steps in greater detail.  What barriers does your company face to adopting these steps?

Paul Intrieri, Director of Business Development, represented us at the APICS/IBF Best of the Best Conference in Chicago last week…

“I’m happy to report that there seems to be no end in sight to the swell of large enterprise interest directed at both raising corporate competency around Sales & Operations Planning, and accepting how mission critical cross-company collaborative planning is to enterprise competitiveness.

We had the opportunity to speak to leaders in most every major industry vertical including Pharma, CPG, Chemical, Communications and Technology, Raw Materials, Healthcare and more - from as far away as northern Europe. Many innovative tweaks to the classic 5-step process were discussed and a common theme became evident. As much as there is no one textbook practice that can fit all companies or business units in a company, clearly S&OP is being embraced as the process “to run your business by”. That said, with the speed, complexity and high variability of today’s global markets, it was also clear that planning off spreadsheets is just neither dynamic nor robust enough to enable enterprise class S&OP or the informed exception-based proactive executive decision making it is intended drive. From our standpoint it’s nice to be in a place where we can say yes to virtually every request we fielded. Scenario modeling, financial integration and reconciliation, new product launch tools, item through aggregate level transparency and reporting are all things we provide standard and that were part of every conversation I had.

I would say that  if you’re like the many companies we encountered in Chicago and need to get away from planning off spreadsheets we’re a perfect solution to consider.”

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. Finance seeks to manage cash flow, minimize costs and maximize profit. Units of measure may differ from one functional group to the next. Some plan in units, others in dollars. Forecast horizons can vary from current quarter to planning horizon to fiscal multiple year projections.

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!

A multi-billion dollar global manufacturer is struggling. Two divisions of the company are at odds on how best to achieve world class forecast accuracy. Regional sales account representatives provide forecasts well above historical sales levels. Why? Because inventories made available to each country are insufficient to meet market demand. The result: predict more sales to try to influence supply decisions and receive a greater portion of supply for your region. One division has decided that a centralized approach is best and is no longer considering regional sales input. The other division is moving to a collaborative S&OP approach where regional input is requested, evaluated and incorporated in the overall plan.

Which method do you think will produce a better plan?
Which method will distribute limited resources better?
Which method will yield higher profitability?

Time will tell for this organization. Yet, we can make a prediction today. Experience would suggest that a well-designed, collaborative S&OP process will produce better results. Here’s how we look at how Top-Down and Bottom-Up S&OP drives better results.
1. Bottom-Up Inputs: Bottom-up forecasts are accumulated from many contributors. A distributed sales force may have hundreds or thousands of contributors. Each contributor has a specific area of expertise such as a specific customer, product or geographic area. The contributor enters her forecasts for her specific area of responsibility. Forecasts from all contributors are summed to capture an overall bottom-up forecast.
2. Top-Down Inputs: Top-down projections apply a more centralized view. A small number of forecasters will look at various inputs and generate forecasts. Influencing factors may include market data, economic indicators, and general product and customer trends.
3. Balancing Top-Down and Bottom-Up Forecasts: The beauty of top-down and bottom-up planning is their ability to look at the world from differing vantage points. The folks in the “ivory tower” know important information, but they don’t know everything. The folks in the field have keen insights into their unique areas, but they only see their small piece.

Recommendations:
1. Gather Objective Inputs: The collaboration challenge is to capture the small pieces without tainting the field forecaster’s view. In other words, don’t tell the field forecasters the top-down targets. When field forecasters are told what their forecasts are expected to be, they tend to send back values right in line with the top-down values. Such tainted bottom-up forecasts miss the point of gathering field intelligence.
2. Balance Inputs: An effective marriage will capture top-down and bottom-up forecasts separately.
3. Manage by Exception: Look for forecasts with the most significant (unit and/or revenue focused) difference between top-down and bottom-up forecasts. Is there an opportunity the field sees that the top-down approach did not capture? A management by exception S&OP tool will make comparisons quickly to enable users to analyze critical differences and refine the ultimate consensus driven forecast.
4. Provide Feedback: Tell forecasters how they’re doing. Measure forecast accuracy and bias. Track performance at various levels, including individuals. Forecasters who consistently over or under forecast (bias) should know that the organization knows. Such bias may be intentional or unintentional. Either way, behavior needs to change to produce reliable projections to which the organization can deliver.
S&OP really does lead to improved bottom-line results. Break down the walls of distrust and embrace collaboration.

Steelwedge introduces Release 5.1 with Executive Sales and Operations Planning Dashboards Steelwedgecontinues its rapid growth as five new customers select SPPM Release 5.1 — the industry’s leading cloud-based Sales and Operations Planning (S&OP) solution.

Youtube Video Link: Steelwedge Sales and Operations Planning release 5.1

Steelwedge Software, the leading innovator in Sales and Operations Planning (S&OP) solutions, today announced a new product release for its Cloud-based Sales Planning & Performance Management (SPPM) solution featuring configurable Executive S&OP Dashboards, enhanced best-practice based Executive S&OP workflow capabilities, and expanded scalability.

Steelwedge SPPM Release 5.1 represents a significant milestone in the product’s maturity and development life cycle.  The primary focus of Release 5.1 was to further enhance usability, scalability, elevate a business user orientation and extend the supportability of the platform.  In particular, enhancements and new capabilities have been developed for Release 5.1 in the following areas: User Interface, Dashboards, Workflow Scheduling, Configuration and Platform.

One of the most visible changes in SPPM Release 5.1 is the new web based Executive S&OP homepage which has evolved into a more powerful business user work center designed to help a user plan, monitor performance and manage by exception. The new homepage includes an intuitive tabbed structure.

Release 5.1 also incorporates a new, best-in-class statistical forecasting engine – the Steelwedge Optimized Forecasting Engine (SOFE), enhanced Excel-based S&OP Templates and powerful customer-level S&OP Master Data management capabilities.

“Steelwedge Release 5.1 enables Steelwedge to further strengthen our leadership position in the S&OP marketplace”, said Steelwedge CEO Glen Margolis, “Existing Steelwedge customers and prospects are extremely excited about the new release because it will have a significant impact on their financial and operational performance.”

“With Release 5.1, Steelwedge has continued to assert its leadership position as the best-in-class S&OP solution – Steelwedge has enabled us to reduce our inventory by over 18%.  We are confident that the new release will enable us to even further improve our business operations” said the COO of a leading high technology manufacturer and Steelwedge customer.

As a Certified SAP Partner, the Steelwedge S&OP solution release 5.1 seamlessly integrates into SAP ERP and APO to drive Executive Sales and Operations Planning processes.  Recent Steelwedge customers adopting Release 5.1 include General Electric, Intuit, Contech and Hospira.