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About a month ago, someone in my family had to have a Wii Fit. We already had the Wii console so just needed the Wii fit add on. I thought OK, I will just check where I can pick one up or maybe order it on-line. Looking at all the standard places I would normally buy something like a Wii Fit here in the US (Walmart, Best Buy, Target etc.), I found that everywhere I looked it was out of stock, both in the local stores and on-line. I ended up having to order it at a significant premium price from a distributor who was fortunate or smart enough to accurately speculate on the high demand versus short supply of this product. Obviously, there was advance information in the market that this product was going to be in short supply.


I do not know what the details are around the supply of this product, whether the forecast was low or manufacturing capacity was just not there, or if it was just a distribution issue, but it got me thinking about what can be done by OEMs to mitigate this type of situation. The situation being that at some point, the forecasted demand was a lot different than the actual demand. As I was taught years ago, the first rule of forecast is that they are always wrong. My conclusion is that since the forecast is always wrong, the solution has to be in quickly responding to the changes or variances between the forecast and the actual demand.


I recommend you read the short white paper “ Are Yesterday’s Solutions Conflicting with Today’s Challenges?”, by Charlie Barnhart when he was with Technology Forecasters. While the paper was written a bit ago, the premise remains very true. In this paper, Charlie describes a response management approach to dealing with change (such as variations between forecasted demand and actual demand) especially in an outsourced manufacturing environment and given shrinking product life cycles and rapidly shifting customer preferences. Also, some interesting points are raised in the white paper as to why increasing inventory is not a viable solution. As stated in the paper,


"Response Management provides organizations the ability to rapidly test and score options for responding to change by identifying what's possible today with today's resources".


What are your thoughts? Do you have any insight into this particular supply issue with the Wii Fit or similar ones? Do you feel that the response management approach described in the white paper can effectively mitigate forecast errors?

Originally posted by mjeffrey at

Collaboration is without a doubt a key component in many companies’ strategic initiatives. The touted benefits ( the good) are significant and they extend well beyond the financials, to include service improvements and risk sharing. While some companies have begun the journey with collaborating with their customers, others have elected to start on the supply side. In virtually all cases, the challenges of making collaboration successful are a series of painful lessons in the dynamics of people, process, and technology.Attempts to initiate collaboration without a careful consideration of all three elements ( the bad) can lead to projects that only deliver a fraction of the promise. This in turn leads to faulty conclusions concerning the value of continuing the journey.


I was recently exposed to a project where the customer collaboration project was focused on establishing a clearly defined process leveraging the limits of the existing legacy systems. The ugly result was overtly complex and I seriously questioned it's sustainability. In this case, the relevance of technology as an enabler to simplify and accelerate the exchange of data was being ignored. On the other hand, investments in technology without serious consideration on the impact to the people and processes can be equally fatal.


I would strongly encourage any company traveling down this path to evaluate how new technologies are dramatically simplifying collaboration tasks. My experience in implementing lean systems has shown that high quality results are best achieved when the human component is simple, repeatable, and designed with mistake-proofing in mind. Consider whether the tools currently at hand will meet these standards and if not, then invest in learning what is available to help deliver the full value of the collaboration promise.

Originally posted by kzuber at

Leggo my Eggo

Posted by Kinaxis Mar 29, 2010

As I went into the freezer this morning to retrieve the frozen waffles for my kids breakfast I was warmed by the fact that there were actually waffles to get. The last few months have been very difficult as the ability to procure Eggo Waffles has been difficult. As many of you may be aware, two things have plagued Kellogg's in making these wonderful waffles; one is a floodat their Atlanta factory last fall and the second are production line repairs at their largest bakery in Tennessee. Try explaining that to a 3, 5, and 6 year old. They don't care about the problems, they just want their cinnamon waffles. I think my family is not alone, there are numerous posts on Twitter and Facebook as well as many other blog posts about it. Unfortunately, these shortage problems are expected to last until the middle of this summer.


Each week that I went to the store and saw a sign "Eggo Waffles are temporarily experiencing a shortage" on the freezer door my heart started pounding thinking about the drama I would have to endure at home. This made me think about the whole issue of the supply chain breaking down for this product that is beloved by so many people. I can't remember in recent history (other than Elmo at Christmas) any time where a consumer product was missed so much by so many. How could this happen??


Obviously, you can't predict a natural disaster or even some technical repairs, but you could prepare for both of these unpredictable events if you had the ability to simulate these types of changes and understand the financial and operational impact in advance. With a capability to simulate demand changes or supply changes, a company could put in place backup measures to ensure that if this event occurs theycould minimize thedisruption to their business. Being able to respond to unpredictable events is clearly not unique to Kellogg's; it is something all manufacturers should think about. The world today is very unpredictable with many natural disasters, the state of the economy, political issues, etc.; I think it would be wise for everyone to plan for the unexpected and be able to respond quickly to change… as I would hate to go through the "Great Eggo Disaster" again with any other product.

Originally posted by mrupert at

In getting ready for a trip I went into the drug store to buy travel sized toothpaste and contact lens solution. Looking at the packaging, I started to wonder how accurate a forecast needs to be. (You know you're consumed with everything supply chain when that's what you think about while shopping!)


I'm sure no one was predicting the need for these products in 100ml sizes a couple of years ago. And what if the airlineslifted the size requirement on liquids or reduced it to 50ml? What chaos would that cause the demand planners of the world? Walking to the front of the store I noticed some Olympic wear. As you know, Vancouver just finished hosting very successful Olympic and Paralympic games. I could only imagine the heroics and horrors that were experienced to make these games the success they were. Everything from scheduling materials for the new venues to the clothing, flags, food and everything else required for the games. Will the promotions to sell off Olympic paraphernalia make up for the excess inventories now on the shelves and in the warehouses?


In a discussion threadon the supply chain expert community, Joshua Gao asked what your "Vision of the Supply Chain" is? Well, if we look to the past many things are different from our grandparents’ supply chain. Two of the biggest stand out.First, customers are more demanding. I mean that in a positive sense, in that customers can quickly research products, understand trends in technologies and purchase what they want with a few clicks of a mouse. The second is that supply has become more fragile. Outsourcing, margin pressures and even catastrophic events can cause supply challenges. So this gets us back to the vision of the future and the question, how accurate does the forecast need to be.


In the past, good enough may have worked because there were fewer demand and supply pressures. But today and in the future, is it better to have an accurate forecast or should the focus be on handling the deviation?


If the focus is to manage the deviation and leverage your supply chain as a competitive advantage, then how much effort should go into developing the forecast if you know it is going to be wrong anyway? This is where it would be helpful to get your feedback since the answer may vary based on industry etc. Does the forecast need to be more accurate given the supply chain challenges of today or do you just need some number to start with since you will have to handle change regardless what the forecast states? How close does the forecast need to be, 40%, 60%, 80%?


Just one final request for feedback: if you were involved in any Olympic related supply chain stories, it would be great to hear them. Maybe your story will make the podium and win gold, silver or bronze!

Originally posted by bdubois at

So often we discuss the nitty-gritty of supply chains in terms of inventory levels, customer service, supplier performance, capacity availability, etc. All too often we gloss over the organizational structures required to operate an effective and efficient supply chain. I was fortunate enough to attend an AMR Research call on March 23rd titled " The Supply Chain Top 25: Lessons From Leaders" (which I suspect will require registration to view). Since the presenters were Debra Hoffman and Kevin O'Marah, the focus of the webinar was on the AMR Top 25 and the hard numbers that can be used to arrive at a balanced manner in which to measure supply chain performance.


As part of the discussion, Kevin brought up an extended SCOR model around the concepts of demand, supply, and products/engineering that includes the usual Plan, Source, Make, and Deliver functions of the SCOR model. To the SCOR model, AMR added Customer Management, Post-Sales Support, and New Product Development and Launch (NPDL). AMR has overlaid a maturity model on top of this, as captured in the numbers 1-4. Lastly, they included some enabling skills in the outer circle around the concepts of Governance, Strategy and Change Management, Performance Measurement and Analytics, and Technology Enablement.


AMR conducted a survey to understand which of these functions is included in the supply chain organization in participating companies, the results of which are captured in the diagram below. What is remarkable is that only the ‘Deliver’ function is included in the supply chain organization in more than 75% cases, while the other functions are included in at best 50%-75% of cases. What is amazing is that the ‘Make’ function is most often not part of the supply chain organization. Instead, ‘Make’ usually reports up into the COO though a completely different hierarchy. I was also very surprised that in only 50%-75% cases is the ‘Plan’ function included in supply chain. I was less surprised that ‘Post Sales/Service’ and ‘New Product Development and Launch (NPDL)’ are often not included in supply chain. NPDL has long been a separate function and Post-Sales/Service has long been the "poor cousin" of many organizations, even if in some cases it accounts for a large part of a company's revenue and margin.



The diagram was published intheAMR report: " Supply Chain Talent: State of the Discipline" (see page 10 of report as available here). The report goes into some depth on the skills required in supply chain and their relative importance to the respondents, including the availability of these skills on the employment market, which is captured in the diagram below (see page 13 of report as available here). What I find really interesting is how these 2 diagrams relate to each other in that many of the functions that are included in supply chain less than 50% of the time also score low in terms of the level of skill sought. While this may seem obvious, I still find it surprising that companies in general are not looking for high level of skill in some of the functions, such as ‘Make’, whether they report into the supply chain function or into a different function. This must be a reflection of the high degree of manufacturing outsourcing and off-shoring that has occurred in the US over the past 20-30 years. The notable exceptions to this observation are "Strategy and Change Management" and "Technology Enablement". Kevin O'Marah made the observation that "Technology Enablement" scoring less that 50% indicates that "someone else" is choosing the systems that are used by supply chain to carry out their day-to-day activities. My guess is that it is usually IT that is making these decisions for the business.




I am very pleased to note that my alma mater, Penn State, was ranked #1 in an AMR study of US universities offering programs in supply chain management conducted in 2009. (AMR is currently refreshing this information.)




What I find fascinating having been in and around the industry for about 25 years now, is that supply chain managment has matured from an ill-defined discipline promoted by AMR and some software vendors into a recognized function within companies and programs of study at university. The AMR study includes 19 universities in the study. When I was at Penn State the closest I could get to studying supply chain management was Operations Research and Industrial Engineering. Don't get me wrong, I have been very pleased with the skills I learned from studying OR and IE, but all the real supply chain knowledge I have gained has been through experience. I think these have given me a very sound theoretical knowledge in which to understand what I have experienced, and perhaps even more importantly, extrapolate from what I have experienced into new situations. Believe me folks, I am not that comfortable talking about myself to this degree, but the relevance is in an observation made by AMR in the university study that "… industry has stated its most pressing need: the additional capabilities required for most advanced supply chain organizations demand a different academic experience that educates generalists." So while I am encouraged to see the emergence of so many supply chain programs at universities, let us not forget to give broad knowledge and skills to the graduates of these programs, particularly a grounding in Finance and Economics.



My greatest satisfaction in all of this is seeing some of the amazing supply chain talent in our customers and prospects and the emergence of supply chain organizations in most of the AMR Top 25. Even some companies in the $100M annual revenue range (which are not included in the AMR Top 25) have come up with amazing concepts and ideas on customer or demand segmentations, methods of collaborating in an outsourced environment, and methods of ensuring maximum on-time delivery at minimum cost, to name a just few.



Yet it is quite clear from the first AMR diagram in this blog that we have a long way to go before the supply chain function has a broad enough scope to manage the end-to-end supply chain within an organization, let alone across organizational boundaries.



What is your experience? Are the needs for supply chain management skills being recognized within your company? What about your experience at some of the universities? Did the program prepare you for the "real" world?



Originally posted by tmiles at

Posted on behalf of Rob Bell, Senior Director, Service Ops and IT, Kinaxis.


We are becoming more and more familiar with the key benefits of SaaS:


To deliver these benefits, should a SaaS provider use a multi-tenant architecture? What are the pros and cons of this architecture?


Multi-tenancy, if done correctly, can drastically reduce the costs for the SaaS provider. If an application can service multiple customers on ONE piece of hardware, with ONE OS license and ONE database license it is far less expensive to operate than a multi-instance architecture. In addition, the cost of resiliency investments like server clustering can be kept much lower. All in all, the provider can keep his costs lower… and pass these savings on to his customers. (One hopes!)


The ultimate expression of this model is Google. They have driven the cost to zero for email and personal productivity applications. They leverage a massively multi-tenant architecture that is free to users. Talk about a value proposition. We can all see what's in it for the customers… the very best price going!


But as we all know, Google is providing a 'commodity as a service' which implies a very different business model from other software/service vendors. What about supply chain applications deployed to meet a particular company's needs? What value does a multi-tenant architecture bring to them?


Well if supply chain services were free, the case would be simple. However, there may be factors at play that are more important than cost: security, availability, performance and scalability to name a few. How does multi-tenancy improve value to the customer in these areas?


SECURITY: There is always the possibility of a 'leak' in the security model for a multi-tenant model that could be exploited by a creative individual. Data is living in physical proximity, in the same database. Multi-instance architecture by contrast is more secure by its insular nature.


AVAILABILITY: A reputable SaaS provider takes great care to meet the Service Level Agreement in the contract with its customers. It's an axiomatic part of the operations of a SaaS company. Customers can depend on it. How does multi-tenancy help deliver value to customers here? Other than the risk of a massive hit to the reputation when hundreds or thousands of customers are without service, there's nothing inherent in a multi-tenant architecture that delivers better availability. High availability is all about great design, great equipment and great process. (As I write this I just got notified that our service is down- ouch.)


PERFORMANCE: All multi-tenant architectures are built to govern and limit read/write access to prevent resource over-utilization. This type of design can restrict flexibility whenever user extensions to standard applications are built. This is a clear limitation for customers in the multi-tenant model. Also, there are application areas that don't lend themselves to this type of 'governed' model. Multi-instance might be the only alternative that can deliver satisfactory performance without the risk of compromising another customer's performance.


SCALABILITY: Does multi-tenancy deliver scalability? It's obvious that an application built for hundreds of customers using it simultaneously must be scalable. But, in which dimensions is it built to scale? Users, data size, transaction volume? Again, by nature the multi-tenant model does not deliver this scalability- the application whether multi-tenant or multi-instance must be designed to scale in these dimensions… with the cpu, network cycles, and memory space to back it all up.


UPSHOT: It is clear that well designed multi-tenancy is essential for delivering software service on a large scale where profit margins are thin. However, by its inherent nature, multi-tenancy does not have a customer value delivery advantage in many respects. On the contrary, for delivering a single customer software service, like a supply chain solution or even a social media solution, a great single instance design and operating environment might just be superior, with better security and dedicated resources allowing consistent performance, inherent in the model.


WHAT DO YOU THINK?? When is multi-tenancy an 'anti-feature'? Are you willing to pay more for features or benefits that are only available in the multi-instance model?

Originally posted by lsmith at

A fact of life for many manufacturers is that there are customer orders or forecast for products that are going to be late because one or more of the components will be received late from the supplier. In many cases, the components that are not late are received from the suppliers and held in inventory and the suppliers are paid or in the process of being paid. Furthermore, there may have been sub-assemblies built and sitting in inventory awaiting the late component(s) from suppliers. Since the end products cannot be built and delivered until all the components are received, there is excess inventory being carried.


The obvious first approach is to fix the situation with the late supply, but a lot of times this cannot be accomplished. Many different strategies are in place at some manufacturers to mitigate this type of situation, such as: vendor managed inventory, lean manufacturing, schedule sharing with suppliers etc. but, regardless,I have seen at many of the customers I have worked with a lot of late and past due end product demand.
So when late supply, and therefore late end product demand is inevitable, what is the best way to deal with this situation and reduce inventory? From my point of view, to effectively plan and reduce inventory, there are some key capabilities required:

  1. Ability to identify the gating componentsanddetermine when they will be available. Required here is a tool to easily identify gating components as well as an effective way to collaborate with and get reliable commitment dates from suppliers.
  2. Visibility into the gating components far enough in the future to reschedule the end product demand so that purchase orders and production orders on other components can be delayed in time to realize inventory savings.
  3. Capability to determine if the rescheduling of demand is worth the inventory savings given the administrative effort involved, as well as the change and disruption at the suppliers. This implies an ability to simulate the change and calculate the potential inventory savings as well as the amount of rescheduling that will need to be executed.


I would like to know your thoughts on this subject. If this situation is applicable to your manufacturing operations, how do you deal with it? What tools or applications do you have that assist you in effectively managing late supply against customer satisfaction and inventory levels?

Originally posted by mjeffrey at

A few months ago, I blogged about zombies in the supply chain. Now, it turns out, Zombies aren't your only problem. Now you need to worry about ghosts!


I heard about this issue on TWIT (This week in Tech — a technology podcast). I followed up and found this story from the LA Times. The LA Times story is based on a post in Bunnie Huang's personal blog.


It goes something like this…


Bunnie Huang, Founder of Chumby Industries was called in to look at a quality problem with one of his products, the Chumby one – a handheld digital device. It turns out that the memory card being used in the product failed the quality tests. The failing memory cards were all Kingston branded and all from a single batch. When Bunnie tried to exchange the cards from that batch, Kingston refused because the memory cards had already been programmed.


Not to be dissuaded, Bunnie did some detailed (and I mean DETAILED — check out Bunnie's post to see the extents he went to) investigation and was able to determine that the defective cards were very likely produced on the same machines as the certified Kingston memory. This led Bunnie to believe that the Micro SD cards he had been sold had been run in a "ghost shift". A ghost shift is where a rogue worker walks into the factory after hours and runs off a couple hundred units of a product without the knowledge or consent of the factory. Further, there is no quality control checks made on the finished product, and the products are often made with rejected materials. When presented with this evidence, Kingston decided to exchange Bunnie's defective chips with new ones.


This raises issues for both component buyers, and for component suppliers;


For component buyers, the source of your supply is as important as the brand of your supply. There have been numerous stories outlining the risk and impact of counterfeit components. Similarly, we need to be aware of the risk of supplies that aren't really counterfeit — they are actually produced in the same factory, on the same machines, but are not certified by the brand owner. In Bunnie's case, he was very lucky that the QA process caught the bad parts before they went out to his customers. This won't always happen. The flaws may well show up weeks or months after the customers get their hands on the products. Depending on the nature of the flaws, the impact could be anywhere from an inconvenience, to a full blown disaster (a-la Toyota). When buying components, make sure that your supply source is a reputable dealer. You may end up paying a bit more, but you have a better chance of getting what you paid for.


For component manufacturers, make sure your equipment is being used only to run those components you have authorized. How many customers would have had the perseverance and technical where-with-all to do the analysis that Bunnie did. Most would have chalked up the bad chips to poor quality on behalf of the manufacturer — in this case Kingston — after all, the chips were Kingston branded — right? Companies such as Kingston that have (and deserve) a stellar quality reputation can see that market perception erode if branded rogue products start entering the market.


Do you have a similar story to tell? Have you run into counterfeit products? Respond back and let us know.

Originally posted by jwesterveld at

This month's IndustryWeek's Manufacturing Business Challenge discusses a manufacturer of commercial and industrial lighting fixtures that embarked on an enterprise wide software implementation. Need I say more?


Our very own, Monique Rupert (vice president of professional services) offered her solution to the case-study challenge. And to our great delight, so did Kevin Hume, a principal at Tompkins Associates.


Does the following situation sound familiar?


One year ago my company embarked on an enterprise wide implementation, selecting an ERP system and a suite of software to address our primary business functions. This decision was not made lightly. Lestornia Lighting is a $120 million manufacturer of commercial and industrial lighting fixtures and components (e.g., sockets, lampholders, wiring harnesses, reflectors). We’ve grown incrementally over the past two decades, and our business practices and processes - and the information technology (IT) that supports them - has grown piece by piece as well. I finally concluded that the Frankenstein IT infrastructure we had cobbled together needed to be destroyed. Now I greatly regret my decision.


Literally from the outset of our enterprise implementation, the scope of functionality, customizations, and departments and personnel engaged in the effort have spread like wildfire. Lestornia expected to be operating with our new systems six months ago; now we cannot get a projected date for when we will hit the switch. The escalation of costs specific to software licensing and the implementation have blown beyond anything I’d ever imagined. And with the infectious spread of applications and department-specific functionality and customization, our training and maintenance costs are doubling by the day.


I swear that every person in the company is working on this system and software implementation in some way or another, and no one is focused on making lighting products or focused on our customers. I am afraid that this project will, quite simply, kill Lestornia before we ever see a dime of return from our investment. How can we subdue the new monster we’ve created?



Find out what Monique and Kevin recommended…. Better yet, share your storiesof hard lessons learned…



Originally posted by lsmith at

John Westerveld, a colleague of mine, wrote a great 2-part blog post titled " Top ten reasons YOU should be doing S&OP" in which he gives a great practical example of when S&OP can be of great benefit to an organization. The first reason John selects is alignment across different functions in an organization. This set me thinking on what are the fundamental reasons for a lack of alignment across functions. Of course, in today's multi-tier outsourced supply chains, alignment is also an issue between organizations. Hau Lee at Stanford has written a lot about this in his concept of " Agility, Adaptability, and Alignment" which is driven by "extreme information exchange", according to Lee.




While trying to formulate my ideas about the causes of lack of alignment, I came across a set of postings by Dustin Mattison on his Logipi blog and on one of the LinkedIn discussions, which postulates that the problems at Toyota can be boiled down to organizational structure and culture. This has been manifested by power "fiefdoms", lack of transparency, and therefore lack of alignment between different functions.




There is a great section in “ The Big Switch” in which Nicholas Carr traces the origins of organizational structures and their impact on performance. (I wish I had a more formal source, and I am sure some of our readers can point me to one.) Our organizational structures have been inherited from the military and really date from as far back as Roman times when there was no ability to communicate in real time. Imagine the time it took to get a message from Rome to Cairo? As a consequence, hierarchical structures were developed to ensure a process of central command and control. Loyalty was prized above all else and disloyalty was dealt with very harshly. The 20th century phenomenon of the corporation used the same organizational structures and same command and control attitudes, largely because the means of communications had not progressed since the Roman times, though the penalties for disloyalty (or poor performance) are considerably less harsh.




The business process reengineering efforts led by Michael Hammer, Tom Peters, and Peter Drucker in the 1990’s was the first attempt to correct this by “de-layering” management. But think about it: They were doing this before the wide-spread adoption of the internet, when faxes were still considered state of the art. While the enthusiasm for BPR has waned because when put into practice it focused too much on efficiency (read headcount reduction), the fundamental idea that business processes can be more effective – not just more efficient – has been carried forward by Lean and Six Sigma concepts. And the internet specifically, but technology more generally, is the enabler. This is what can/does provide/enable the transparency Richard Wilding of Cranfield University talks about in an interview with Dustin Mattison, which is so crucial in breaking down the power barriers to more effective sharing of information across functional and organizational boundaries.




And yet we still have senior management (and professors in business schools) to whom IT in general, but the internet specifically, is a learned phenomenon. Before anyone thinks "Yeah, yeah", let me point out that I am one of the people who have "learned" how to use the internet and I am still not comfortable with "tweeting" and "blogging". In short, I am not comfortable with that level of personal "transparency". At the same time, I am staggered at how many mid-tier managers, let alone senior managers, still receive paper-based reports, scribble all over them, and then send the scribbled notes back to an underling who is supposed to act on the scribbled notes. This is all about power and has little to do with effectiveness. They could have just as easily made changes to values in a system and annotated these with some comments. This information would be available immediately to anyone who had to take action or make further decisions based upon the inputs from the senior manager.




Exacerbating the fact that much of senior management does not come from the "internet" generation is the difficulty of using existing IT applications and systems. The fundamental drawback of existing supply chain systems specifically, but operations systems in general, which prevents their wide adoption by senior management is that they lack the ability for people (read senior management) to perform quick and effective what-if analysis. It takes too long for them, and in truth it is also too complex, to create and analyze scenarios themselves, so they devolve this to more junior people who don’t really understand what it was the senior manager wanted to investigate in the first place. More correctly, the senior manager is forced to take a structured approach to investigating and solving an issue whereas in reality problem solving is a very unstructured process governed strongly by exploration and discovery. Even when senior managers have monster spreadsheets available to them, there is:


  • little to no connection to the current situation
  • insufficient level of detail to get a realistic evaluation of the future consequences of their decisions on financial and operational metrics, and
  • very limited ability to explore multiple scenarios.




They have to wait until the month end or quarter end to get a report on what has happened, and by that time it is almost impossible to deconstruct the cause and effect.




While I realize the limitation of my thinking (fundamentally I am an operations person) and recognize the impact – both short term and long term – that Finance, and HR, as examples, can have on the performance of a company, in companies that sell, design, and/or manufacture a physical product, Operations is the core business process that determines the current and future success of an organization.




All of this gets me to a brief discussion of Sales and Operations Planning (S&OP). There are many definitions of S&OP out there and also a lot of discussion on S&OP "maturity" models. At its heart and in its more simplistic form, S&OP is all about demand/supply balancing. In other words alignment between the demand and supply side of the organization. In a multi-tiered outsourced environment, this is not a simple exercise, so my use of "simplistic" is not meant to denigrate this level of S&OP adoption.




The greatest long term benefit of S&OP, even if this is difficult to quantify, is increased transparency and alignment, as noted by John Westerveld and discussed by Richard Wilding. AMR Research calls this "East-West" alignment. And yet there are so many more benefits that are achievable by linking Operations to the Executive, by linking financial measures and objectives such as revenue, margin, cash flow to operational metrics such as orders delivered on-time and in-full, inventory turns, and capacity utilization. AMR Research calls this "North-South" alignment. A number of the analysts such as Ventana Research, Aberdeen, Gartner, and AMR Research (now part of Gartner) have referred to this North-South alignment as Integrated Business Planning. Tom Wallace and Oliver Wight have referred to this an Executive S&OP, and now Accenture is referring to this as " Profit, Sales, and Operations Planning". Whatever we call it, there are lots of benefits.




The principle barrier to tapping into these phenomenal benefits is the organizational power structures we have inherited from a previous era. These will not be easy to break down. But an S&OP process — however sophisticated or rudimentary — will start this process of greater transparency and alignment. I've been participating in 2 discussions on LinkedIn ( Has Sales & Operations Planning (S&OP) improved your forecast accuracy? and What is your biggest S&OP pet peeve?, both of which require membership) and in both discussions there is consensus that the greatest contributor to the successful adoption of an S&OP process is Executive support because this is required to get everyone to "play nicely" with each other. Clearly this is simply a symptom of the organizational power structures. S&OP is challenging these power structures, which leads to resistance. There is plenty of technology out there to assist in this process, but ultimately you will need both for a truly successful S&OP process that contributes massively to your company's future success. But there is no need to wait until you have organizational buy-in. As with all organizational change, showing the people how they will benefit for adopting new practices is the best way of getting their buy-in. So start small and give people information that is useful to them and over time you will be able to ask for information that is useful to you. If this is too slow for you, make a pitch to your executive team to make sure they back you up to get faster adoption. Either way, you should not wait. The benefit to your company is too great to ignore. Help us create the organizational structures of the future.



Originally posted by tmiles at

Yesterday, I gave you a list of 5 reasons you should be doing Sales and Operations Planning; allow me to finish my top 10 list…


1. Alignment
2. Decision Making
3. Visibility
4. Finance Integration
5. New Product Introduction


6. Responsiveness — Responsiveness you ask? Sales and ops is a monthly process (usually). How can a monthly process help me be more responsive? There are two answers to that question. First of all, S&OP typically deals with longer term concerns; procuring equipment, adding capacity, updating of outsourcing strategies. That being said, these activities typically have longer lead times. If you have visibility to planned demand changes and can position yourself to be ready for them, you will be able to better respond when they happen. The other side of responsiveness is asking…why does S&OP need to be monthly? If there is a significant change that requires a change to the agreed S&OP plan, why wait for the next month? With traditional tools like Excel, monthly S&OP plans were almost a requirement because it took so long to put together a plan. With better, more integrated tools, a new Sales and Operations plan can be completed in hours. Imagine being able to react to a change, with the entire company in alignment within hours.


7. Monitoring — A big part of the S&OP agenda is reviewing the key corporate metrics in order to identify and resolve poor performance or preferably to reverse negative trends. This is a key meeting where all the stakeholders are present. When performance issues are raised, this is the team that can get things resolved. I've sat in meetings where a product line manager was called to task for quality metrics that were trending downwards. You can well imagine that immediately after that meeting, changes were made to address quality issues.


Once a Sales and Operations plan is set, many companies have difficulty monitoring performance to that plan until after the period is finished and the monthly metrics are posted. Imagine being able to monitor current and planned performance to your current S&OP plan. Imaging seeing mid-month that your demand plan wasn't going to happen the way you planned. Going back to my comments about responsiveness above, what if you could identify the issue and re-cast the plan mid-month?


8. Risk Management — Risk management is an issue that many companies are starting to deal with (and all companies SHOULD be dealing with). The problem is that many times a company will identify their risks, put together a mitigation strategy, wipe their collective hands and says "we're done!". You're NOT done. The risks are continually changing; world politics, outsourcing strategies; product design; markets all are changing and with those changes, the associated risks change as well. Any risk management process needs a regular review that evaluates the risk management strategy in light of new demand plans, new supply plans and new product introductions. Seems a good fit for S&OP, no?


9. Accountability — When you make commitments at the S&OP meeting, you are making a promise to your peers and to your boss. Your commitment is recorded and is reviewed at the next meeting. Guaranteed, you will do whatever you possibly can to make sure your team comes through. If you don't meet your commitment, you make sure your reasons are documented and that you have a recovery plan in place before the next meeting.


10. Teamwork — This may not become apparent until the team has been meeting for a while. However, as the team works together, as they learn that they can trust one another. As they figure out that they all need to be pulling in the same direction, teamwork will improve. This improvement in teamwork will manifest itself outside of the S&OP meeting as well. Paths of communication will open that were not there before. Problems will get resolved, things will get done.


So…what are you waiting for? Get busy…start doing S&OP!


Already have an S&OP process in place? Reply back and let people know what benefits you are seeing from your S&OP processes.

Originally posted by jwesterveld at

Ok, maybe not you personally, but your company should be doing S&OP. Sales and operations planning has been around since the 80s. Until recently, adoption has been slow, but steady. In the last 5-7 years, S&OP has started to become mainstream. Why? Because when implemented properly, it just works.


Let's think about a world (maybe your world?) where S&OP isn't done.


The high-end DVD player your company makes is not selling well. There is excess inventory in the system, driven by an overly optimistic forecast. The product is good, but complaints are that the price is too high. The marketing team puts together a sale starting in a few weeks to increase demand for the high-end DVD player. They put the sales plan into effect and it works wonderfully. The high-end DVD player sells out in the first few weeks; however, customers and stores are complaining because they don't have any stock. So they go to manufacturing and ask them to build more. Manufacturing is busy building the mid-range DVD player. Why? Inventories on those were low (they were the ones that were selling). Now, however, demand for the mid-range DVD player falls off because those people looking to by a mid-range DVD player decided to buy the high-end player because of the reduced price. In fact, inventories are now too high on the mid-range DVD players. So, manufacturing puts a stop to the mid-range production and ramps up production of the high-end DVD players. As the procurement orders start to go out, Finance raises an alarm because the ramp up in high-end production is impacting cash flow. They are also concerned because of the inventory levels on the mid-range DVDs. An emergency meeting is held, fingers are pointed, tempers flare.


Been there? Done that? Got the t-shirt?


No one wants to be in that position. While S&OP isn't a magic pill that solves all problems, many of the problems identified in the story above could have been avoided if there was a functioning S&OP process in place. Many of the top companies are running sales and operations planning. Your company should be too.


Here are 5 of 10 reasons you should be doing sales and operations planning. I’ll provide the remaining 5 tomorrow so not to overwhelmeveryone in one sitting.

  1. Alignment — Sales and operations planning forces alignment at multiple levels of the company. At the highest level, it represents an agreement between Sales, Marketing, Manufacturing and Finance on the volume of products to be produced over the horizon of the plan. In the vignette above, Marketing would have announced the plan for the sale on the high-end DVD player and Manufacturing would have been ready for it, and would have reflected it in the plan. Finance would have had visibility to the anticipated spend impact and could have raised concerns BEFORE commitments were made. When a sales and operations plan is approved, it represents agreement between the department heads on the plan. Alignment from Sales and Ops goes beyond just the S&OP meeting. With a well functioning S&OP process, the entire company is aligned to a given direction. The Master Scheduler is implementing the decisions made by the S&OP team. The planners and buyers are aligning to the Master Scheduler. Capacity is being increased and decreased in accordance to the plan. Changes to the financial plan are made in advance given the decisions from the S&OP meeting.
  2. Decision Making — One of the huge benefits of a sales and operations planning process is that it brings people together to make decisions. It is a monthly meeting, held on a regular schedule, where issues can be raised, tracked and resolved. As noted in my first point above, the key department heads are present so that the entire company can be aligned behind a decision.
  3. Visibility — The sales and operations planning process provides team members with visibility in a couple of different ways; First, the sales and operations plan looks 12 — 18 months into the future. For people accustomed to thinking in terms of the next month or so, this level of visibility opens the door to a different way of thinking: a longer term view. Second, the sales and operations plan brings together data from different departments and presents it to the team. Now, Operations has visibility to Sales and Marketing's plans. Sales and Marketing have visibility to the supply plan. Finance now has visibility to expected revenues and expenses.
  4. Finance Integration — The company exists to make money. Further, it takes money to make money. It constantly amazes me how many people forget these simple facts. Any successful S&OP process must include Finance to ensure that the financial plan and the operational plan are in alignment. Further, especially when times are tight, companies need to monitor their planned spend to ensure that they have the resources to implement the proposed plan. It's no good planning to ramp up 50% if you only have the resources to ramp up 20%. That being said, given enough lead time, your Finance team might be able to negotiate bridge financing to cover the ramp-up costs until the revenues start coming in.
  5. New Product Introduction— This is often one of the most difficult and risky events companies need to deal with. Forecasts are tricky because there is no history. Pipelines need to be filled. Costs go up with new product introduction. Manufacturing challenges abound; changing processes, new suppliers, technical issues, ramping production, quickly changing versions driving obsolete inventory. You need to make sure all stakeholders are aware when a new product introduction is happening. Marketing needs to be talking to Operations. Operations needs to be talking to Finance. Issues need to be raised and resolved. Sales and operations planning is a perfect place to manage this process. Many companies have an agenda item dealing specifically with new product introductions and many identify new product demand separately on the S&OP spreadsheet. A related topic is end of life. This needs to be managed carefully because the last thing a company wants is lots of inventory (end item and component) hanging around after a product is dead and gone.


Have I sold you yet? If not, tomorrow, I’ll provide you with 5 more reasons….stay tuned!

Originally posted by jwesterveld at

In today’s economic climate, no manufacturer can afford to fund any supply chain management (SCM) project that fails to deliver results. Fortunately, some best practices exist to guide companies through these projects and increase the chances of success.


Kinaxis just publisheda white paper that describes seven success factors for today’s SCM projects, which have been identified by seasoned executives with decades of experience in the field.



Originally posted by lsmith at

I believe it is. What I refer to as SaaS 2.0 will be the "dagger in the heart" of the traditional enterprise software model. The first incarnation of SaaS, which was popularized by, created a totally new value proposition for enterprises. It was a "knife in the stomach" of traditional enterprise software as it triggered a much slower growth rate in big, fat enterprise software sales. SaaS is just a much more efficient model for both the customer and vendor.


I believe what I call SaaS 2.0 will change the enterprise software model forever. Software vendors will take the entire risk of deploying major SaaS based software offerings – before the customer has to commit any monies. The SaaS 2.0 vendors will have to prove the value of their offerings in a production environment – not just some trivial demonstration.


When you think about it – enterprise software vendors have been getting away with the business equivalent of murder. If you think this is an exaggeration — how about getting away with fraud? There have been billions of dollars and millions of man years wasted on failed enterprise software projects. Consumers do not buy any kind of other products (homes, cars, buildings, airplanes, etc.) under such a crazy business model.


CIO's are justifiably sick and tired of an enterprise software model which is ludicrous. CIO's also hate enterprise software offerings which are only useful to a very small user community. SaaS vendors have already addressed this issue.


How could a vendor offer such a riskless value proposition? The SaaS vendor must have a very strong balance sheet(to fund initial deployments), shorter more efficient deployment cycles, and more importantly have an offering which they know works!


Look out for SaaS 2.0 — it is coming!

Originally posted by dcolbeth at

We are hosting a webinar on Wednesday, March 3rd with March Networks and Aberdeen Group. To register for this free webinar click here.


Here is more about it:


"Using Segmentation Strategies for Better Demand and Supply Balancing in the Mid-Market", presented by:

  • Jeff Range, VP, global operations and customer service, March Networks,
  • Nari Viswanathan, VP and principal analyst, supply chain planning practice, Aberdeen Group, and
  • Trevor Miles, director, industry and applications marketing, Kinaxis.


Mid-market OEM's are faced with unique challenges in today's world of outsourcing. An effective balance between demand and supply in this environment is crucial, yet difficult to achieve. Learn how March Networks has used product segmentation processes and systems to overcome some of the supply chain challenges presented by outsourcing.


This 60-minute webcast presentation will be held on March 3, 2010, at 1:00 pm EST .

Originally posted by lsmith at

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