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.