The Steelwedge S&OP Service Delivery Platform dramatically enhances the ability of our clients, partners and users to rapidly configure, integrate, implement and train users on a process-driven collaborative Steelwedge S&OP solution.

S&OP has quickly become a management necessity for companies operating complex, global supply chains in today’s climate of uncertainty and risk.  Executives facing pressure to manage volatility and risk have embraced Steelwedge to align demand and supply decisions with revenue, margin and customer service goals.  Companies that have rolled-out best-in-class S&OP practices have realized big gains, including a year-over-year gross profit margin increase of 48 percent, according to a recent study published by Aberdeen Group.

“In today’s volatile world, companies need to rapidly respond to changes in supply and demand as never before.  The Steelwedge S&OP Service Delivery Platform is truly a breakthrough for companies desiring to rapidly implement and adopt a flexible S&OP solution that drives corporate agility.” explained Glen Margolis, CEO of Steelwedge. “This new technology platform enables companies to quickly and cost effectively adopt globally collaborative S&OP processes.”

To learn more about our cool new technology, visit our web site.

At Steelwedge, we agree that IBP developments are fast becoming imperatives and that S&OP must not be viewed as a mere supply chain activity but as a strategic management process that considers all elements of the business across a 24-month planning horizon. In fact, by its current definition, many of our S&OP customers are enjoying the full benefits of best-in-class IBP with the help of our technology. Although we see IBP as a logical next step for many companies practicing S&OP, we remain focused on helping our clients design, automate and support processes that are the “right fit” for their business. Adherence to best practices and industry norms is important, but we recognize that some companies can meet their goals with entry-level S&OP while others operating in highly complex and competitive markets may require much more.

Despite the occasional confusion, we see the enthusiasm of business practitioners, consultants and technology providers as a hopeful indicator for long-term prospects of S&OP/IBP. Avoid the war and get on board with S&OP, IBP or whatever you want to call it!

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.

Story

A man was walking with his four year old daughter.  The girl was full of energy, her attention easily caught by many interesting street activities.  The father instructed the girl to stay on the sidewalk.  After the girl repeatedly roamed off the sidewalk, the father became quite stern, scolded the child and demanded that she follow his instruction.  The girl, tears in her eyes, turned to her father and asked, “what’s a sidewalk?”

Clear Expectations

Do the members of your organization really understand what is Sales and Operations Planning?  Do they have the tools needed to efficiently and effectively run S&OP?

The Strategic Services team at Steelwedge Software has experience with a wide range of companies.  Some companies say they have an S&OP process but it may consist of a Sales forecast thrown over the wall to Operations.  Others say they do not have an S&OP process yet they have many elements that make up the foundation of successful S&OP.

Top 10

Here are the top 10 most critical elements we see in building a productive S&OP process.

10. Cadence – Defined monthly process with consistent participation

9.  Top Management Support – Executives mold, participate and highlight importance of process.  Executives should refrain from dictating the process and expected outputs.

8.  Product Lifecycle Management – New product and end of life modeling; timely visibility to new product launch dates and resource implications

7.  Performance Measurement – feedback loop enabling continuous improvement

6.  Analysis – Using resource time for analysis rather than data gathering and manipulation

5.  Easy access to critical information – one repository with frequent updates and quick access

4.  Units and Dollars – Aligned unit and revenue projections; agreement on unit of measure conversion method

3.  Tool Enabled Collaboration – a forecasting and planning platform that allows individuals to see exactly what they need while contributing to the consensus driven process

2.  Collaboration – a willingness to place organization goals ahead of personal goals

1.  Clear Expectations – clearly defined objectives, roles and responsibilities

How does your organization stack up?  Do S&OP participants know what’s expected?  Do they really understand what is a sidewalk?

“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.

Does this sound familiar?  The launch of yet another change initiative triggered by a compelling presentation from external consultants, software vendor or even the latest best selling business book. However, after years of initiatives being unleashed on organizations, senior managers should understand that certain success factors must be in place to enable successful change.

1. Provide Strong Leadership

Sales and Operations Planning (S&OP) transformation initiatives are rarely sustainable unless they are led from the top.  There is a direct linkage between the success of a change management program and leadership capabilities.  An effective leader must demonstrate vision, courage & conviction

• A willingness to take both personal and business risks.
• A demonstrated commitment to change, not simply demanding it of others.
• Organizations such as Motorola and GE that have implemented exceptionally successful change programs include the development of key elements in their leadership training.

2. Develop a Compelling Vision

Developing a clear vision is important in making a culture change a reality.  With an inspiring vision, people can visualize exciting possibilities and begin to act in accordance with them.  Keeping the vision in the forefront of an organization’s thinking will ensure that energy and focus are sustained.

• What will the organization look like during and after the change program?
• Why should individuals and teams be engaged?
• What’s in it for them?
• What are the concerns that will emerge and how can they be addressed?

These are all critical questions that a powerful vision can address.

3. Ensure Team Commitment

• Whether it’s the CEO or department heads, committed managers are a key to successful change programs.
• Managers who only pay lip service to change are one of the swiftest ways to undermine transformation.
• Building a supportive team is an essential part of the early stages of any effort to restructure, re-design, retool or improve.  John Kotter, in his best-selling book Leading Change, refers to such a group as a “Guiding Coalition.”

John Kotter chose his terminology carefully.  The word “guiding” defines the group as one that will not actually be implementing change, but rather removing barriers and creating an environment where responsibility is spread throughout the business.  Any change program that will be sustainable must involve the full organization.

4. Build a Coalition

A “coalition” (from the Latin coalitus, meaning to grow together) is an alliance.  It is a group that has completely aligned objectives.  Putting in place a credible group that acts as one and drives change relentlessly is critical.

• Unfortunately, many senior teams struggle to act as a coalition, often pulling in different directions. The biggest threat to any change initiative is when this is done underhandedly, with leaders saying one thing in the boardroom but really challenging the decisions in the corridors. In a true coalition, there is not only unity of thought on the overall objective, but also an environment where differences of opinion on lesser issues can be aired constructively.

• Real change can be particularly threatening to managers. After all, they reached their positions by doing things in a certain way. At a fundamental level, senior people have to review their roles, responsibilities, attitudes, behaviors, personal leadership styles and above all – their relationships with each other.

• Some of this is uncomfortable. Experience shows that a true coalition will learn how to work through conflict to get a shared view as to the best way forward. Training and development play a critical role in facilitating this “growing together” of the coalition prior to launching any initiative.

• Middle managers need to be on board early. Directors have a key role to play in leading from the top, but the attitudes and behaviors of middle managers also are vitally important. During the initial stages of a change program, there can be a great deal of excitement and activity. Keeping middle managers fully informed can ensure there isn’t a feeling of being marginalized.

• An ignored manager can end up undermining and blocking the change progress. Process improvement teams with good local management support tend to go from strength to strength. Conversely, such teams fizzle out and have to be rekindled when managers aren’t interested or see teams as a threat to their role.

5. Identify and Train Change Facilitators

Engaging people throughout the organization in change activities is a departure from the old directive style of leadership. The best way to enable broad-based action through teamwork and securing the success of change teams is by trained facilitators. (The word facilitator comes from the Latin facere, meaning to make easy or simple.)  Armed with powerful tools of problem-solving and an ability to inject energy and enthusiasm, these individuals can be the catalyst of any change initiative. By seeking volunteers from the organization who, with training, can be capable and credible agents of change, the backbone of change will be in place.

Meanwhile back in the boardroom, the coffee has been cleared away and the meeting is beginning to wrap up. Then, one by one, board members begin asking questions:

• “How will we communicate this to the business?”
• “How can we engage our middle managers?”
• “Has anyone thought about how we can resource it with trained facilitators?”
• “What exactly do we expect this will achieve – what will the business be like in two to three years as a result?”
• “What capabilities will I need to develop to make this change program a success?”

6. Communicate and then Communicate Again

All organizations know that communication takes time and effort – but the investment is worthwhile.

It is critical for people to be reminded of the vision but also how far they have come. This helps maintain morale and belief in the change process. Positive evidence that things are changing will combat any cynics.

Communicate ten times more frequently than you think is necessary.

• Recent research shows that on average the total amount of communication going to an employee during a three-month period is 2.3 million words or numbers, transmitted in meetings, notice boards, bulletins, etc.
• The typical communication of a change vision during a period of three months is approximately 13,400 words or numbers.
• So on average the vision communication captured only 0.58 percent of the company communication market share – nowhere near enough.

Communication is not through words alone – it’s the dance and it’s music too. Clear messages are sent through actions. It never ceases to amaze that companies struggle to re-launch an improvement program after just having concluded a downsizing where change facilitators were first on the list to go.

7.  Measure Performance, Track Process, and Ensure Accountability

Ownership and Accountability is the key to any successful initiative.  While ownership requires empowerment, accountability requires the development and use of key performance metrics that enable everyone to monitor progress and identify bottlenecks.

So what’s next?  Time to finish breakfast and get to work on building your world class Sales and Operations Planning (S&OP) Process (S&OP Process)!

Note: This article was created based on work by Steelwedge (www.steelwedge.com), John Kotter, the Kaizan Group, the Six Sigma Institute and others.