Supply
Chain Digest’s Dan Gilmore
recently spoke with Gaurang
Pandya of i2 on
several themes related to S&OP.
Gilmore:
It is often said that "most
companies do S&OP, but few
do it well." Is that an
accurate summation of current
conditions?
Pandya:
I think so. The definition and
understanding of the S&OP
process varies across almost
all companies. For some, it
is merely a sales forecasting
process, for others it is a
more tactical process of making
sure that demand is met. More
often than not, neither considers
the implications the tactical
decisions will have on the overall
business targets. There are
varying levels of maturity and
very few companies would qualify
for what we see as the top 2
levels, which are “consumer
driven-demand synchronization”
and “consistent profitability.”
Gilmore:
What separates those companies
achieving high levels of S&OP
excellence from those that are
mediocre in this discipline?
Pandya:
Leaders focus on developing
a plan aligned with overall
business goals – things
like profitability, market share,
revenue, etc. They then focus
on executing that plan to achieve
consistent results. They achieve
this by such processes as establishing
performance metrics that are
tied to financial metrics at
each level of the organization;
establishing process playbooks
to deal with supply or demand
“upsets,” enabling
then to sense and shape supply
and demand; using financial
instruments for risk and reward
analysis; enabling joint decision
making on planning and execution;
analyzing the effects of trade-offs
such as promotion versus logistics
costs and production versus
warehousing costs; and finally
taking a Six Sigma approach
to minimize process variability
Gilmore:
"Discipline" is
really the right word to use
here, isn't it - meaning both
S&OP as a process, as well
as the discipline it takes to
do it well?
Pandya:
I agree. First, for S&OP
to be successful it is imperative
to have executive level process
ownership to bring together
the different “silos”
of the organization and have
a cross functional focus. Secondly,
adherence to the process and
the execution of the process
and the decision-making requires
absolutely requires strong “discipline."
This discipline has to be inculcated
top down and ingrained into
the culture of the organization
for success.
Gilmore:
What do you really see as
the role of technology support
for S&OP excellence?
Pandya:
As in other areas of the supply
chain, technology remains a
key enabler. Combining the right
process with the right people
to leverage the technology that
supports process execution leads
to success of all three components.
That
said, I think technology plays
a major role in several ways
for S&OP.
First,
it enables a company to synchronization
for a single version of truth.
Every function and stakeholder
within the S&OP process
has its own plan. However,
the objectives and metrics,
plan contents, granularity,
and planning cycle frequency
are different for each. The
S&OP process aims to synchronize
the plans in the context of
overall business goals.
The
synchronization needs to be
bi-directional across different
levels of granularity to ensure
that each planning cycle closes
the loop with the next level
as well. Technology is required
to create a “system of
record for the plan” for
synchronization and enabling
cross-functional visibility
to potential exceptions.
Second,
you need tools that support
proactive Performance Management
for making the plan happen and
to drive process improvement.
Proactive performance
management really is essential
for creating an empowered organization
and for making the plan happen.
The organization must be able
to establish balanced scorecards
at all levels, from the highest
level of business to the individual
level, to ensure alignment across
the enterprise. We believe these
scorecards should contain role-
and domain-based indicators
associated with performance
metrics. The metrics should
be monitored continuously, and
alarms should be raised based
on defined thresholds, with
capabilities for notification
and escalation of alerts for
resolution. Technology is a
key enabler for these capabilities
and advanced capabilities such
as the ability to determine
and analyze the root causes
of the deviation with advanced
capabilities such as guided,
decision-tree logic.
Third,
technology plays a key role
in creating feasible plans
that meet the business goals
and can be executed. To
be realistic and executable,
every plan within the S&OP
process should consider the
constraints of the enterprise
and should meet the business
goals as well. To manage the
risk of potential supply or
demand upsets, a structured
process for scenario planning
is also necessary in order to
identify, create, analyze and
compare scenarios for impact
or resolution analysis. The
complexity of the constraints,
business environment and sophistication
drives the need for appropriate
advanced planning technology.
Gilmore:
Technology can also help
take time out of the process,
can’t it?
Pandya:
Yes, I think technology is critical
to manage the S&OP process
to reduce latency. As I
said previously, technology
is a key enabler to orchestrate
the S&OP process, align
metrics, and manage authority,
accountability and responsibility
across the functional silos.
But it also takes time and latency
out of the process. Technology
can provides the capability
to automate data management
processes, provide dashboards
for managing the activities
within the S&OP process,
alerting individuals on failure
modes, and integration to multiple
planning and execution systems.
With technology, the S&OP
process cycle times can be reduced
to make the process continuous
– in contrast to the existing
snapshot-driven monthly or quarterly
processes in which more often
than not, decisions are made
on outdated information leading
to decisions that may not be
executable.
Gilmore:
I also think sometimes companies
think even supporting technologies
for S&OP is something you
can just buy in a box, but that’s
not quite right, is it?
Pandya:
It’s clear achieving
S&OP excellence is a journey
that involves continuous process
innovation across the organization.
Any technology or solution supporting
the S&OP process needs to
have the capability to mature
with the process with rapid
time to value, ROI and minimal
disruptions to existing technology
infrastructure. For example,
as with quite a few companies
out there, one could use excel
to support the S&OP process
to begin with. However, limitations
of information latency, consistency,
synchronization, planning and
optimization, and process management
will stunt the maturity of the
process and at some point either
the process will break down,
people will burn out, or the
company will need to build
or buy supporting technology
to drive the process.
From
an industry perspective, across
industries and even across enterprises
within an industry, a one-size-fits-all
approach cannot be adopted for
S&OP solutions. No matter
what the industry, from a solution
perspective, enabling an S&OP
process requires flexibility
– in planning, optimization
and performance management and
process orchestration. I think
given the nature of the process,
the solution requires the ability
to address varying levels of
complexity from a data and process
management perspective, leveraging
existing solutions and tools,
and to integrate with multiple
systems in a heterogeneous environment.
In order to reach the
highest level of excellence,
the supporting technology should
have the enabling capabilities
to support the best practices
and the flexibility to support
the change in business process
at the speed of business with
quick ROI and lower TCO.
Gilmore:
Can you provide us any other
insights on S&OP that you
think many readers may not be
aware of?
Pandya:
The i2 Supply Chain Leader
magazine articles on S&OP
best practices. You can find
it on our web
site.
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or disgree with our guest expert's
perspective? What would you
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