Tag Archives: collaborative S&OP

New Funding to Fuel Growth – An Interview with Steelwedge CEO Pervinder Johar

At Steelwedge, we believe that ongoing investment in innovation is the key to growth. As a result, we are very pleased to announce that the company has secured $22.5 million in fresh capital to invest in R&D and expand our go-to-market strategy.

The round was led by Camden Partners, a private equity firm based in Baltimore, with Mainsail Partners, Shea Ventures and CEO Pervinder Johar also participating. This funding news follows the opening of Steelwedge’s new technology, sales and services hub in Austin, Texas, as well as a host of company milestones. Now 450 global employees strong, we recently landed a spot on the 2014 Deloitte Technology Fast 500 list for a 500 percent revenue growth over the previous four years. In that period we added a number of blue chip customers including HP, Lenovo, GoPro, Nissan and Monsanto, and joined forces with key partners such as Salesforce.com, KPMG and PWC.

Pervinder Johar, Steelwedge CEO

Pervinder Johar, Steelwedge CEO

This week I sat down with Pervinder to get his take on supply chain planning and Steelwedge’s vision for continued momentum:

What’s your view of the current state of supply chain planning?

Because of the incremental approach many long-standing vendors have applied to the development of their supply chain offerings, too many companies are struggling to make real-time decisions using disjointed and patched together technologies that simply don’t work in a holistic way. Years of adding a new module here and a new capability there without any master plan have created these “Frankenstein” systems — large suites comprised of dozens of components that don’t really integrate well. As a result, there are often multiple silos within a company’s supply chain operation, and the information needed to make decisions as well as the relevant context around that information is continually getting locked in one silo or another. This breeds what I like to call “supply chain amnesia,” where important information is lost to other decision-makers down the line.

Why is Steelwedge different?

Steelwedge is focused on curing “supply chain amnesia” by allowing companies to plan and re-plan their entire supply chain, in real-time, in an integrated and collaborative way. Combining Big Data, analytics, mobile and Cloud technologies, Steelwedge is the only supply chain vendor incorporating in its platform the proven, scalable technologies that consumer and social media leaders like Facebook, LinkedIn and Twitter use. We want our customers to have one place to go to plan their entire supply chains — not just small pieces of it — through a user-friendly interface. We want to enable seamless and open collaboration between internal departments like Sales, Marketing and Finance and between companies and their suppliers, distributors and customers.

I see Steelwedge becoming a dominant player in the supply chain planning market, much like Salesforce.com has become the leader in CRM. This huge potential for growth is why I signed on as CEO and it’s also why I’m investing my own capital in the company during this current round of funding.

How is your previous supply chain experience informing your vision for Steelwedge? 

I served nine years as CTO at Logistics.com and, after its acquisition, at Manhattan Associates, and helped the company become the dominant player in the supply chain execution space. Today, Manhattan’s market cap is approximately $3.7 billion.

And at HP, I helped transform one of the largest and most complex supply chains in the world. In the course of building HP’s supply chain into a competitive differentiator, I engaged a host of traditional and new supply chain vendors in search of the next generation platform. None of them had a truly integrated solution that allowed companies to plan their entire supply chain in real-time.   Smaller vendors were all addressing the problem from different angles, solving only a piece of the puzzle. Large vendors were amassing large collections of un-integrated modules after years of acquisitions and product launches.

So the question in my mind was: who had a platform that could grow to support the next generation of supply chain planning?  Steelwedge stood out. While at HP, HP selected Steelwedge and I was a customer. I understand the software, its value proposition and the immense possibilities for the platform.

We are in a fantastic position to innovate and grow. Some competitors are too large and slow to really innovate without causing substantial disruption to their business model and install base.  Others are too small to have a good financial foundation to make the necessary investment. We are nimble and agile but at the same time we have a blue chip customer base that is co-innovating with us, transforming their supply chains and the way they interact with their business ecosystems. It’s a good place to be.

An Investment in the Future of Supply Chain Planning

Written by Jason Tagler, Managing Member of Camden Partners

Today I am excited to announce that Camden Partners has invested in Steelwedge Software, the leader in cloud-based supply chain planning and S&OP solutions.  With this capital commitment, we are investing in the future of supply chain planning.  There are four main points which highlight why we are incredibly excited about this opportunity:

The future of supply chain planning is in the cloud.  Customer relationship management (CRM), enterprise resource planning (ERP) and human capital management (HCM) are software sectors in which cloud-based companies now dominate.   Salesforce, Netsuite and SuccessFactors are examples of companies that embraced the cloud early in their respective markets and went on to become the clear leaders in those markets.  Likewise, Steelwedge was on the front end of adopting the cloud in the supply chain planning (SCP) market.  Today Steelwedge is the only pure play Cloud provider in the supply chain planning space. We believe this early adoption of cloud technology positions Steelwedge to be the dominant leader in the future of supply chain planning.

The market is huge.  According to Gartner, the market for supply chain planning software is expected to grow about 10% per year and be nearly $5B by 2017.  When IT and Services are included in the market size calculation it triples to nearly $15B by 2017. Today, this large and growing market is primarily being served by legacy and on-premise solutions.  Steelwedge has proven its ability to win large blue chip customers such as GoPro, Nissan and HP, and we believe the company is well positioned to capture greater market share moving forward based on innovative product developments and continued focus on the success of its customers.

Steelwedge is investing in innovation.   One example is the company’s plan to open a state-of-the-art R&D office in Austin, Texas later this year.  The plan includes building an Innovation Lab where product managers and software engineers can work directly with Steelwedge customers to build the solutions of the future for supply chain management.  We believe this initiative will result in breakthrough product innovations to address the biggest challenges in supply chain management.

Another example of the company investing to be the dominant player in supply chain planning software is the company’s cutting edge platform.  Steelwedge’s platform leverages some of the same technologies developed by Facebook and Twitter to accelerate and scale the analysis of big data and present it in a way that can be acted on in real time.  Those technologies take advantage of the distributed computing nature of the Cloud and allow for infinitely scaling computational power, in-memory processing and data storage via generic servers in the Cloud. As global supply chains become increasingly complex, this ability to scale data and processes at a reasonable price  becomes even more critical and a big differentiator vs. other companies like SAP and Oracle that are taking the specialized appliance route.

We are investing behind strong leadership.  As with any investment we make at Camden, the leadership of the team is paramount to a successful outcome.  Recently appointed CEO Previnder Johar brings leadership, supply chain expertise and the experience managing companies through explosive growth.

I am thrilled to join the team in the capacity as a board member at Steelwedge and look forward to having a front seat as the future of supply chain planning unfolds.

Boost S&OP with Top-Down and Bottom-Up Strategy

Rick Blair

Have you lost faith in Sales forecasts?
Does Sales consistently over or under estimate future sales activity?

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.

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.


Using S&OP to Reach Equilibrium – 5 Qualitative Factors

EquilibriumEquilibrium is the state at which market supply and demand are in balance. It’s common sense to want to produce the amount of product that the market will bear, but that has traditionally been a difficult goal to achieve given the nature of change in today’s markets. Sales and operations planning (S&OP) as an integrated business process has been around for more than 30 years. Success, however, still has varying levels of attainment.

Traditional supply chain planning has been focused on improving the work conducted within organizational silos that contribute to operations. From raw materials to production to sales and service, there are many steps and processes that cover the supply chain from end to end. Coordinating these and gaining visibility of the “big picture” is the outcome that S&OP brings to help companies close the variance between forecasted and actual equilibrium.

While there are plenty of quantitative factors that apply to S&OP, including improved inventory management and more predictable revenues, it’s important to consider the qualitative aspects of how a successful S&OP process can transform your business environment.

5 Qualitative Factors for S&OP:

1. Improved Teamwork: Collaboration is one of the key elements of a well-executed S&OP process. Rather than working in organizational silos, people begin to work cross-functionally, applying the insights from one part of the business to how they may impact another. This collaboration also helps direct reports view the business through the “glasses” their bosses use, helping them to see further than the immediate situation they deal with on a daily basis. This improved understanding can help teams to better achieve both short- and longer-term goals for the business.

Question: Has teamwork in your company visibly improved since you’ve implemented S&OP?

2. Decreased Firefighting: If you can’t get demand and supply to balance routinely—not all the time—then your S&OP process is not what it should be. If the norm is expedited firefighting on a daily basis, it’s likely the result of a lack of cross-functional communications. Those communications should enable teams and departments to proactively make adjustments based on timely information communicated from another area that has direct implications to responsibilities in another. Cross-functional collaboration is necessary for the identification and resolution of problems and issues.

Question: Has firefighting decreased since S&OP was put in place?

3. Fewer Surprises: With S&OP driving a consolidated operational plan with improved teamwork and decreased firefighting, issues can be identified more quickly to keep them from becoming real problems. There’s no uncertainty about which numbers to use for decision making because everyone is working from the same numbers. And, with the ability to look down the road, past the immediate time frame, your teams can see things coming and become more proactive and predictive.

Question: When surprises occur such as demands spikes, or supply crashes, does your S&OP process allow for mid period adjustments to be made quickly?

4. Forward Visibility: A best practice for S&OP is to have 18 months of forward visibility. This length of time is important because it covers an entire fiscal year, including the span of time for planning. When you have a forward, rolling organizational plan, each month during review it is adjusted. This way, you not only see things coming, but there is much less work to do during the traditional planning exercise because the plans are being scrubbed continuously to account for changes over time and their projected impact.

Question: Does your annual financial planning process use demand plans and supply plans from executive S&OP or does all of the data it uses come from other sources?

5. One Set of Data: Even though different departments need to view numbers differently—for example, finance in dollars, supply chain in volume, and operations in hours—it’s critical for S&OP that all departments are working off the same set of numbers. When each business unit is calculating from the same starting point, then equilibrium or balance is more likely to be achieved. Without it, the variance between forecast and actual will continue to produce a noticeable gap.

Question: Are all departments working from the same set of numbers?

These qualitative factors are important indications about how well your company will be able to use S&OP to reach equilibrium between demand and supply, and each of them plays a role in how well your company will be able to reach beyond the basics to support strategic initiatives.

Do you have any other qualitative benefits that you measure in your S&OP process? Let us know in the comments.

Got Cloud? The Most Advanced Supply Chains Do

What do companies who have an advanced supply chain do differently than their less mature counterparts? A recent report from Gartner (in partnership with Supply Chain Digest) provides one clear insight into a competitive differentiator:

The more advanced a company’s supply chain is, the more likely it is to have acquired cloud-based systems.

The results from the survey of nearly 500 supply chain professionals show that 18% of level 1 supply chains (least mature) are using some type of cloud/software as a service (SaaS) solution for supply chain management, versus 57% for the most mature level 4 companies.

SCM Cloud AdoptionGartner anticipates significant expansion in both “private” and “public” cloud deployments, however it still expects that by 2021, approximately 60% of all supply chain software deployments will be traditional license models–a small decline from current levels. Supply Chain Digest editor Dan Gilmore disagrees, writing, “I believe Cloud will take a bigger share by then, as I have argued in the past.”

Another recent report from SCM World demonstrated that cloud solutions improve supply chain performance. SCM World identified Sales & Operations Planning (S&OP), Transportation Management Systems (TMS), Spare Parts Management and Store Shelf Optimization as the most cloud-friendly supply chain processes with the most capability to deliver the network effect throughout a supply chain. According to the report, “the network effect is maximised for functions that are best served when a large number of suppliers and/or customers benefit from rapid access to information that can streamline business.”

Rapid access to information is the fuel that drives collaboration within the supply chain. It’s no surprise that 46% of the SCM World respondents said that greater supply chain collaboration leads to problems being solved twice as quickly. Because cloud-based platforms facilitate more effective collaboration,  companies with large-scale supply chains are adopting cloud solutions in increasing numbers in an effort to increase agility and improve response time to their most challenging problems.

As a the leader and pioneer in cloud sales and operations planning, Steelwedge has been advocating for years that S&OP belongs in the cloud. So, we’re always pleased to see reports that validate the success of cloud applications for supply chain and S&OP. What do you think? Will cloud solutions for supply chain management expand more rapidly than Gartner predicts? What else does the future hold for supply chains in the cloud? Let us know in the comments.

Steelwedge Sales Pipeline Bridge: Now on Salesforce1 AppExchange

AppExchangeIt’s an exciting time for Steelwedge, our partners and our customers. Cloud computing is on the rise. More and more companies are not only adopting cloud technologies, but making cloud a strategic priority. As the leader in cloud Sales and Operations Planning (S&OP) solutions, Steelwedge understands better than most how the cloud, coupled with social and mobile collaboration, can transform your business. Simply put, we get it.

With that backdrop, I’m very pleased to announce the launch of Steelwedge Sales Pipeline Bridge on Salesforce1 AppExchange, the world’s leading business apps marketplace. Steelwedge Sales Pipeline Bridge systematically captures the sales opportunities in users’ Salesforce1 Sales Cloud and intelligently filters and transforms sales data into a view that is meaningful to finance, product management, operations and executive management. With Steelwedge Sales Pipeline Bridge, companies can align sales pipeline-based and demand history-based forecasts, enabling them to quickly identify and respond to changing market conditions and improve revenue predictability.

The combination of Steelwedge and salesforce.com, two powerhouses in cloud technology, empowers businesses to connect with customers, partners and employees in a whole new way. Exciting times indeed!

Just today, ZDNet posted an article entitled, “CIO priorities are different around the world, but the cloud is one consistent factor.” It’s a great read and reiterates that, irrespective of industry or geography, cloud technology is top of mind for CIOs trying to take their businesses to the next level. While shrinking IT budgets, consolidation, and continuous changes in technology are here to stay, I believe that cloud helps companies face these challenges head on—protecting profits and delivering agility all at once.

But don’t just take their word for it (or mine!) This infographic, posted recently by CloudTech, demonstrates in one powerful picture, the explosive growth of cloud computing and what’s to come.

  • 2008: Global cloud computing industry estimated to be worth $46 billion. By the end of 2014, it’s predicted to be in excess of $150 billion.
  • More than three quarters of respondents to a recent Forbes survey use some form of cloud computing and 86% of those companies use more than one type of cloud services.
  • Last but not least, studies predict that more than 50% of all information technology will be in the cloud in the next five to ten years!

My take? If you’re not in the cloud, your competitors are probably eating your lunch—or will be soon. But don’t panic, the time is now to make the transition. Take a look at your business, educate yourself, and join forces with Steelwedge and salesforce.com to connect like never before.

You can find more detail on the Sales Pipeline Bridge solution in my previous blog post or visit http://www.steelwedge.com/solutions/sales-pipeline-bridge/ .

As always, questions and comments are most welcome. I look forward to hearing from you!

Does Your Planning Process Leverage Your Sales Pipeline Intelligence?

Bruce Richardson, Chief Strategy Officer, Salesforce.com

Bruce Richardson, Chief Strategy Officer, Salesforce.com

Undoubtedly, companies have a lot of good information in their CRM systems. But they often don’t know how to best use it to manage their entire business, from Sales to Supply to Finance. What they need is a planning tool that enables them to extract, understand and translate the knowledge captured in the sale funnel, along with other demand signals, into actionable insight on how to deliver on-target results.

This topic will be addressed during a Steelwedge-sponsored SupplyChainBrain webinar entitled “What Do Cloud, Your Sales  Pipeline and Your Demand Plan Have in Common?” on April 22, 2014 at 12:00 EDT. Salesforce.com Chief Strategy Officer Bruce Richardson will provide guidance on how to fill the “missing link” in the sales and operations planning (S&OP) process—leveraging the intelligence contained in the sales pipeline to inform the consensus demand planning process.

During this webinar, Richardson will explain how companies can:

  • Provide visibility and insight into significant pipeline changes, assumptions and expectations
  • Aggregate pipeline information for supply/demand balancing and operations planning decisions
  • Translate pipeline confidence into accurate revenue and margin projections for better Integrated Business Planning

The webinar will conclude with a Q&A session during which attendees will have the opportunity to submit live questions to the speakers. Click here to register.

Featured Presenters:
Bruce Richardson, Chief Strategy Officer, Salesforce.com
Ed Lewis, VP, Product Marketing, Steelwedge Software

Program Moderator:
Robert Bowman, Managing Editor, SupplyChainBrain

We hope you can join us for what will prove to be a compelling and informative session. In the meantime, let us know in the comments section if—and how—you’re leveraging sales pipeline data in your planning processes.

Game On! Sony Plans for Biggest PlayStation Launch Ever With Steelwedge

Sony PS4In the world of video-game consoles, the Sony PlayStation is undoubtedly leading the pack. In January 2014, PlayStation 4 (PS4) sales were nearly double that of its nearest competitor. The release of new game consoles comes years after their preceding versions, so significant planning goes into the launch by their manufacturers.

Sony Computer Entertainment America (SCEA) launched the much anticipated PS4 in November 2013. There was high complexity inherent to readying the system in time for the make-or-break holiday season; allocating to the right reseller channels; assembling the right combination of accessories and game bundles; and ensuring the product launches at right price point. Sony used Steelwedge integrated business planning software to connect all the crucial people,  processes and data to help it navigate their biggest launch ever—delivering an anticipated approximately 5 million units in the coming months—without cannibalizing the ongoing PS3 business.

The Steelwedge services team helped fast-track Sony’s internal planning process with the
implementation of the Steelwedge solution in a phased approach. The first phase incorporated demand planning and an executive engagement phase of the total sales and operations planning (S&OP) life cycle.

Phase two involved synchronizing Sony’s new forecasting strength via supply planning and collaboration with Sony corporate suppliers and telescopic planning. Telescopic planning is a Steelwedge feature that enables easy movement between weekly and monthly planning periods, allowing Sony a much closer, more frequent look at impacts to its supply and demand.

“Without the insights we gained from Steelwedge on channel and bundling optimization and well as potential PS3 cannibalization, we wouldn’t had as powerful a launch plan,” said Sree Vaidyanathan, SCEA’s  Director of Business Applications. ”Months ahead of the launch, we sold out $1.7 million in pre-orders. We are planning to sell approximately 5M units of the new PlayStation 4 console by April, and we are more confident in that forecast due to Steelwedge.”

Increased visibility from consensus planning at SCEA translates into better:

Profitability. SCEA forecast accuracy improvement from 60% to high ~90% immediately
drives better profitability—ensuring the right goods at right time and right place. Now,
Sony has enough data insight to push platform and SKUs to channels, more intelligently.

Market Share. Better consensus planning, powered by Steelwedge, helps SCEA make better supply/demand tradeoff decisions, due to more reliable data. The faster to market, the better the market share potential.

Scalability. The cloud-based solution from Steelwedge allows Sony to power its process
in scope with its evolving market.

Risk Mitigation. The proven, secure Steelwedge platform limits Sony’s IT exposure to
risks around data, business continuity and security.

To learn more about Sony’s implementation of Steelwedge, read the full case study here. Do you have any best practices to share around using the S&OP process to enable a successful product launch? Share your insights in the comments section!

Why won’t Sales participate in our S&OP process? Five tips to get Sales in the game

Change is a challenge. Implementing sales and operations planning (S&OP) is a massive challenge. We put recurring processes in place with meetings scheduled months in advance. We gather vast amounts of data and force it into predefined buckets. And we expect diverse functional groups to talk with one another and arrive at a consensus plan. But despite the most diligent efforts, every practitioner of S&OP—even those who are even best in class—encounters obstacles to true collaboration.

So, what’s blocking collaboration? Each functional group may have differing responses to these questions, based on their priorities:

  • Are we planning in units or dollars?
  • What’s our planning horizon?
  • What level of detail is needed?

In the table below, goals differ between functional groups. Sales wants to maximize revenue, thinks in dollars and is focused on the near term. The Operations group wants to know what to manufacture, when it’s needed and where it needs to go. Operations is focused on minimizing operating costs, thinks in units and is looking at the medium term. Meanwhile, Finance is trying to maximize profit, manage cash flow, thinks in both units and dollars and is focused on a much longer horizon.

Goals of Sales, Finance, Operations

So then, is it surprising that Sales does not want to participate? Here’s what we’re asking from Sales:

  • Provide your forecast much further into future
  • Tell us specific products you will sell
  • Tell us number of units of each specific product
  • For each product specific unit projection, tell us into which months they fall
  • And, by the way, if you don’t sell to meet your forecast, we’ll have a conversation about that, too

So what’s a salesperson to do? Well, the first inclination is to resist. “I gotta be out in the field, lookin’ my customer in the eye. I don’t have time to give you a detailed forecast.”

As an organization that sees the value of sales and operations planning, we must conquer the “Get me outta here” reaction. Mandating sales participation may be necessary, but that’s not enough. The organization needs to allow salespeople to do what they do best…sell. That means making S&OP easy and helpful to Sales.

Here are 5 tips for bringing Sales into the S&OP partnership:

  1. Provide a starting point. Salespeople are much better adjusting a forecast than creating one from scratch. The starting point can be a statistical forecast based upon historical demand.
  2. Make it easy to enter forecasts. Allow salespeople to enter their forecasts in a user-friendly tool. The tool should allow users to view actuals and forecasts at desired level of aggregation. That is, allow roll up of values by customer, by region, by product family or other levels as defined by planning hierarchies. Then spread the aggregate forecasts across the all other levels using sound business logic. The planning tool does the heavy lifting, not individuals.
  3. Share the value of a better S&OP plan. A more accurate consensus plan will translate into better customer service levels and improved customer satisfaction. Yes, it really works, and increased satisfaction usually bodes well for increased sales.
  4. Set realistic and achievable sales targets. S&OP requires one plan that the organization agrees to execute against. Sales should use the same approach to set sales targets. Stretch goals are fine provided it’s clear that these go above and beyond the S&OP plan.
  5. Put the thumbscrews away. Measuring forecast accuracy is a great way to learn from the past and make improvements. It should not be the means by which to call out underachievers. If a salesperson’s actual sales are significantly and consistently under or over forecast, look into what may be driving that behavior. Does the company demand stretch goals and set commission plans at levels that are unlikely to be achieved? Is the salesperson reluctant to share leads for fear of being held accountable if she does not close the deal?

Sales participation is critical for S&OP success. Make it easy and non-threatening and the challenge may become less massive.

Avoid the Most Common S&OP Mistakes: Here’s Our Top 5

Knowing is half the battleIn the wise words of G.I. Joe, “Knowing is half the battle.” And in the battle for sales and operations planning (S&OP) success, knowing where the potential pitfalls lie will serve every company well. Some of those pitfalls were recently outlined by Steelwedge Vice President of Industries Danny Smith in a Manufacturing Business Technology article entitled “The 5 Most Common S&OP Mistakes And How To Avoid Them.”

Recognizing that knowing what not to do is just as important as knowing what one should do, Danny described the following mistakes that companies frequently make in their sales and operations planning initiatives:

1) Lack of executive ownership. The biggest problem I see is the executive leadership team not owning the S&OP process. If executive leadership isn’t fully engaged, the process won’t be as successful. If they aren’t engaged, find out why. Maybe you aren’t giving them the things they need to run the company: forward-looking, global visibility; timely, concise information that is digestible to them (e.g. their KPIs) and that is actionable; the ability to ask “what-if” questions so they can put boundaries around their risk. A good technology platform can help tremendously here. After all, the best people and process can only take you so far. Technology serves as a lever to speed up the process and shift the focus from calculations to analysis.

2) No cross-functional engagement. The whole point of S&OP is getting the entire organization moving in the same direction. That’s hard to do without the involvement of all the key stakeholders in the process. Research around S&OP failures right after the global downturn showed that a third of the respondents didn’t have Sales engaged in the S&OP process. That was the good news! Almost half didn’t have Operations or Finance engaged. Lack of a way to translate between different functional views of information tended to leave one or more participants out of the process. Sales would input revenues by account, Operations would need demand in units by product, and Finance wanted to see net margin. To really make S&OP work, you need to have the same information, but expose it to each stakeholder in the form they need and understand. Even if you start with a quick win/small project, extend the scope to just across the functional boundaries to provide the needed translation.

3) Focusing only on one consensus number. An S&OP mantra for years has been getting to a “one number plan,” but this simplifies things too much. And worse, it limits the value of S&OP for executives. Executives are paid for predictability. It’s their job to identify and proactively mitigate risk – to avoid the danger before it’s a reality. S&OP can be a great tool to help (i.e. GPS telling you to avoid a route due to traffic) but only if you don’t fall into the “one number” trap. Instead, you need to plan in ranges – worst case, best case and expected – all along the S&OP process. The ability to identify the impact of things not going to plan is priceless. As Eisenhower once said, “Plans are nothing; planning is everything.”

4) Complexity! Follow the “keep it simple” principle, especially with metrics. I’ve seen companies become paralyzed trying to make the right decision when they have to evaluate hundreds of metrics; the complexity prevents them from being able to ask the right questions. Pick your big 10-15 metrics (see Figure 1) and go with them. Track them, make performance transparent so everyone understands where they are, and learn from them.

Figure 1: Simple KPIs

Figure 1: Simple KPIs

5) Lack of documentation. How do you learn from your mistakes? You have to capture all the institutional knowledge and assumptions that go into your plans. Provide a mechanism to capture this information from every participant, and make it easy for them to contribute. For example, if you collaborate as a group using social media, automatically capture those chats and the context and embed it into the plan assumptions so you can understand the context of decisions or changes six months later. Remember, those who don’t learn from history are doomed to repeat it.

Do you agree with Danny’s top five S&OP mistakes? What lessons have you learned in your journey to sales and operations planning success? Weigh in with your “war stories” in the comments.