Lalit Panda, until recently was the Global CIO at D&M Holdings Inc., an audio electronics manufacturer with brands such as Denon, Marantz, Boston Acoustics etc. Lalit has a special combination of supply chain and information technology skills with considerable global experience. He has worked for global corporations like Sony, Harman International and Coats Viyella in various roles heading Supply Chain, Logistics and Information Systems. He has degrees from the Massachusetts Institute of Technology, Indian Institute of Management, Ahmedabad and National Institute of Technology, Calicut, India with a Six Sigma Certification from Georgia Tech. Lalit has lived and worked in various parts of the world and has led transformational IT initiatives spanning all functional areas, but especially in Supply Chain and Operations.
Why is Sales & Operations Planning (S&OP) important in an organization?
The sales and operations planning process is the fundamental backbone for the organization’s ability to deliver products on time to customers and in the right quantity, while managing the financial metrics of the business. Unless this process is coordinated between the demand side and supply side of the organization it is likely the organization is not likely to generate the efficiencies and exploit all of the sales opportunities that come across.
Having a very efficient and coordinated sales and operations planning process is absolutely critical to the healthy operation of global corporations.
How are S&OP systems different from ERP in organizations?
ERPs are transactional systems that enable the business to run their operations. They generate a lot of data.
S&OP systems are really planning systems. You look at different options and trade-offs. In supply chains there are always trade-offs to be evaluated and also to get data across different scenarios and determine the best option for the organization to execute. Sales and operations planning systems enable the organization to evaluate multiple choices and alternatives and come up with a plan that is most optimal, given the constraints they are operating under.
ERP allows the transactions to take place. What happens is that the S&OP system generations the plan and it is executed within the ERP. The planning process is substantially different from the transactional processes that are there within the ERP. This is why they need to be in different environments where people can try out different strategies and see the impact on the financial and operational metrics.
What are the challenges of implementing S&OP systems successfully?
The first challenge is obviously process. There are a lot of different touch points in the sales and operations planning process. There are various stakeholders and different sources of data. Getting them all aligned and getting a common understanding of the goal and processes behind these key activities within the organization is the first step.
I would not recommend that an organization start an S&OP implementation without fundamentally re-thinking and evaluating how they do their sales and operations planning process, and determine where are the efficiencies in transferring data from the demand side to the supply side and vice versa. They should also determine who should be owning the S&OP system. For example, in some organizations sales tends to head S&OP. In other organizations supply chain is at the core of the process. In other organizations the supply side takes ownership as well.
Determining where the responsibility lies and where the process hand-offs and data exchange happens, is very important. Until a clear blueprint and map is created, it may be inefficient to go and implement a system. Once you have a blueprint then you can look at how the layer it onto a sales and operations planning system and that should help in executing it.
How do S&OP systems enhance business value?
The core process of the organization for generating revenues, controlling costs, reducing working capital is centered around this S&OP system. It enhances business value firstly because it delivers better customer service levels. Secondly, it does it at the most cost efficient manner possible. Thirdly, it enables the organization to work as a coordinated well oiled machine transferring data and being responsive.
In the current environment of competition world-wide, unless you have this working very closely and dovetail between the different elements of it, it is very difficult to deliver shareholder value by getting better financial metrics.
S&OP systems have this basic role to play to make that process more efficient and effective.
What advice do you have for organizations contemplating revamping their S&OP Process.
Lalit says the first step is to get everyone on the table and map the current process so that everyone has a common understanding of how the current process works. Also, stress the inefficiencies and identify the areas where opportunities to improve are there. You may also do some best practice comparisons with other organizations.
Then you start thinking about where the value is. Is it in terms of getting better availability at the customers or the regions? Is it more in terms of getting better manufacturing efficiencies? Look at the various aspects of it.
Everyone knows supply chain is like a water bed, you can’t push it to one side and expect the whole to operate efficiently. It has to be all across the chain. The sales and operations planning process fundamentally supports that process. To have a good solid process in the future it is important to first lay out the framework where you are, determine where you want to go, and then figure out where the enhancements need to be made.
After that there are several tools out there in the market. There are very good tools to help you accomplish this optimization of the whole process. Then it should be justified with the business case in terms of increased revenues, increased margins, reduced costs and improved efficiencies.
It is a journey. The S&OP process continues to evolve. There is a maturity level across S&OP organizations. The maturity level where you are at needs to be assessed. A plan needs to be made for how to improve it and get it further along to the stage where the organization is extremely responsive to demand changes in the market in an optimal manner.
About Lalit Panda
Sr. Executive with unique mix of Global IT & Supply Chain experience
& transformational record in complex global firms.