SDCExec.com Online Exclusive

Executives at CSCO Summit Agree: There Is No “One-Size-Fits-All” Model for S&OP

It’s easy to get caught up with all the industry jargons and acronyms relevant to the supply chain. S&OP (sales and operations planning), SI&OP (sales, inventory and operations planning), IBP (integrated business planning), FS&OP (finance sales and operations planning), CPFR (collaborative planning, forecasting and replenishment)—there are a plethora of terms out there. Factor into that the number of companies that create their own terminology for specific processes and it can be a project just to keep up, let alone keep your business running according to plan.

But as each business may have their own definition of S&OP, there are definitive underlying themes here at stake, resonated by the numerous industry leaders and presenters in attendance on day one of the Chief Supply Chain Officer Summit in Chicago. First, companies need not focus so much on the use of such terms as they apply to their business.

“They should be careful in becoming too religious on the use of such terms,” explained Robert Shanley, CSCO conference moderator and sales executive for The Innovation Enterprise Ltd. (IE). “S&OP is a journey—it’s about telling the story and defining the process. Governance and organization models will change as your demand develops. You have to think about the process capabilities and understand the information needs as supply chain capabilities evolve. Continuous improvement is building a systematic information process across the end-to-end supply chain.”

Second, there is no one-size-fits-all approach to S&OP (which ties into the evident need for technology and software solution companies to continue providing customized solutions and capabilities).

“You have to figure out what works for your company today,” confirmed Manu Khurana, Director, Integrated Supply Chain, McCain Foods. “Regardless of industry or product, if you understand the process, it can be implemented anytime, anywhere. Think about your level of maturity, pick a starting point and evolve.”

As a result, planning and forecasting methods will differ for each company, i.e., S&OP models in the traditional sense that work for a distributor may apply differently to other industry sectors such as banking or manufacturing (especially if outsourced overseas).

But regardless of industry and acronym, effective planning and forecasting processes do not work unless a company is willing to 1). Track that data for analysis and 2). Collaborate on certain business aspects and capabilities in order to connect the different areas of their business to operate with a unified goal in mind.

Industry factor differentiations

Market volatility; internal developments such as headcount changes; prediction of peak demands; scaling capacity; and capabilities to keep better quality assets on the books and reduce overall balance sheet size are just a few of the different challenges that the financial services industry faces, according to Charles Hoop, Director, Cost Strategy & Strategic Sourcing, UBS AG, a Swiss financial services company with offices here in Chicago.

“Different products in the capital market are changing,” said Hoop. “We get increasing amounts of pressure internally and externally to better understand our supply base. To address such changes, there are a couple of steps you have to take in parallel. You have to enhance your spend analysis and understand how you are spending that money. In addition, some form of predictive analysis and adaptive cost management is also necessary,” he said.

Integrated business planning (IBP), which “seeks to integrate business planning, financial planning and supply chain planning,” according to Khurana, is one such model which can potentially address some of the challenges of the financial services sector.

“An IBP environment is typically not run or owned by the supply chain,” she confirmed. “The process owner is actually the leadership team. The evolution to IBP will be successful if we have that operational sales and processing down—to the point where we know how to consume the peaks and values to say ‘we know how to do this; now, let’s get into the financial aspect of it,’” said Khurana.

For Milwaukee Electric Tool—a 90-year old company which most recently experienced a resurgence over the past five-to-six years with the introduction of two new business lines (hand tools; and test & measurement tools)—some components of traditional S&OP processes also work a bit differently.

For example, while some manufacturers who have manufacturing points in the U.S. can meet inventory goals in a short time-frame, for Milwaukee Electric, the lead time tends to be longer because a lot of their work starts largely overseas, explained James Merwin, Director of Supply Chain Planning for Milwaukee Electric Tool.

“The S&OP process is mainly to drive collaboration and manage gaps, such as those in the SKU level,” said Merwin. “This is a 90-year-old company. Predominantly, all of our business was in the U.S. and if forecasting was done, it was done at the quarter level. Five years ago when I joined the company, there were those who did the demand planning but then handed that off to the supply chain planners. We transitioned away from that plan to move to a supply/demand plan. Now, we tell our staff, ‘get up out of your seats. Go walk around and talk to other departments. Talk to the engineers and understand what is in their heads and what they foresee for the year ahead to better understand how it affects the production and supply chain,” Merwin continued. “Connecting the product managers with finance and the sales managers with finance—it’s not a simple thing to do but it gives all the stakeholders a point of contact across all horizons. And the consensus across shareholders on strategy and approach is critical.”

Examining the retail scale

Other factors that supply chains must factor in to formulate planning strategies to achieve company growth include:

  • Connecting supply and demand
  • Upfront involvement—outside of S&OP—to help improve supply chain functions
  • Driving ownership of the company horizon across all business operations

 

For retail scenarios, some issues that S&OP helps to overcome can be in the realm of insufficient shipping history; a real-time view into store activity; and future retail inventory forecasting.

Kimberly-Clark, which utilizes solutions from Terra Technology, Promax and RSI, was able to establish demand cycles, improve predictive analytics, gain better visibility of gaps and drive execution at a faster pace as a result of implementing the providers’ technologies as part of its overall business strategy, according to Scott DeGroot, Director, Customer Supply Chain Strategy, Kimberly-Clark. In addition, Kimberly-Clark maintains a demand signal repository (DSR) to consolidate data from retail point of sale (POS) systems and distribution centers.

“We had 10 different ways that information and POS data moved throughout our enterprise,” said DeGroot. “It was very important for us—from an IT perspective and a supply chain perspective—to manage this information. And the demand sensing repository tool helped us. It drives better execution at the shelf. Now, we can easily see when we have a violation of the planogram and we can see if stores are not getting enough inventory based on their POS.”

But while the benefits of such technologies do exist, DeGroot confirmed that there are indeed educational challenges and some hesitancies in the space to adopt such technologies to improve S&OP, forecasting processes, supply chain collaboration and shelf-back replenishment.

“If a retailer is not willing to act on data, the situation can become frustrating very quickly,” said DeGroot. “The opportunity exists if we share a vision with our customer and trading partners to help them. But that opportunity exists only if customers are willing to do certain things and if they have certain capabilities. They have to have access to inventory data at the store—whether on a daily or weekly basis. Put all that together and we can come up with great analytics.”

At the end of the day, it all comes down to “business process synchronization,” confirmed Gaurang Pandya, Vice President, Industry Strategy, JDA Software. “It’s all about driving improvements within an enterprise. Typically, what happens is people create a plan but then forget about it. You need to make sure that once you execute a plan, it is working for you and if not, that you can figure out a way to get back on track if you experience any variants in the plan.”

Is your plan working for you?

Regardless of acronym, the goal of effective strategy is to create a single operating plan that connects to all areas of your business operations, on an ongoing basis. To better help you devise a plan—or improve your current plan—Pandya provided a number of best practices at yesterday’s CSCO conference to get you on your way.

1). Tie together silos of information to form a unified, connected plan to effectively implement S&OP processes and address missing supply chain gaps.

2). Have a centralized team which is empowered to make decisions whenever tradeoffs need to be made across different cycles. This team should be responsible for the orchestration of the processes; defining all the metrics and KPI’s for performance measurement; maintaining a dashboard to be proactive so users can act and make corrections to the plan; and ensuring that there is governance around escalation paths on an ongoing basis.

3). Gain forward visibility with constrained optimized demand planning.

4). Institutionalize a “process playbook” to get execution strategies out of the planner’s head and into a manual—a living and breathing document—to create a library of techniques that you can practice and return to. “People need to know the levers so they can go through all the different scenario analyses’ so they can be practiced,” said Pandya.

5). Link CPFR and S&OP processes together to utilize POS to stock the shelves and have a connected supply chain right from the shelf.

6). Have a solution to create productivity and squeeze planning lead times to ensure you are making the right decisions for the top line and the bottom line of your supply chain.

Loading