I interviewed Sanjay Desai who discussed S&OP Process in an Organization Part II.
Continuing our discussion with Sanjay Desai this is the Second Part of a Two Call series on Sales and Operations Planning. So, Sanjay can you give us an introduction about yourself?
I am Sanjay Desai, a supply chain professional who started the journey with UniLever India in their Mumbai Plant as Warehouse Blue Collar Worker during 1983. Over last 34 years, worked my way up in diverse organisations/ multiple geographies and handled end to end Supply Chain functions. Worked for some of the best Fortune 500 MNC’s like UniLever, AVENTIS, Exxon-Mobil, Apple Computers, Dell Global, SH Johnson, Thermo Fisher Scientific and finally HUNTSMAN as Director Supply chain GrAPAC. Happy to talk to you today Dustin, thanks a lot.
Is it necessary for an organization to engage so many resources to implement S&OP process? Can an organization embark on a similar process but not so exhaustive and achieve same results?
It is a very logical thinking. Historically inmost organisations there are various weekly meetings, like (Sales call, Demand Supply alignment, /Weekly MPS planning, Weekly Pricing forum) All these meetings more or less strive to achieve the same objectives in an independent manner, and they have selective participation from leadership. These weekly meetings are not necessarily integrated hence they don’t sustain.Eventually, these meetings become mundane, boring and lose their essence. And that is the difference. Whereas S&OP is much more structured, it is integrated across functions and itaddresses KPI from an “Outside In” perspective. In these weekly meetings, we will burn lot of resources, time and money but we will not reap benefits proportion to the capital deployed.
Which are the success factors of this process that an organization must follow to successfully implement it and sustain long term?
Support and active participation from highest Commercial leadership as well as cross functional S&OP Core Team members. If the highest leadership is not signed-up, then it is not possible to garner support from cross functional leadership and then S&OP process becomes ineffective.
S&OP core team should always remember that it is a strategic process which looks at Future biz scenarios. Hence it should be engaged accordingly, meaning, it should not become a Post mortem or a mudslinging ground for cross functional teams. While there always be little amount or Rear-View Mirror driving, S&OP process is largely effective when it remain futuristic.
Pre-preparation is the key & participants should come prepared with data/ analysis.Here the core team will align on action plans which are communicated downstream
S&OP meeting should take decisions and provide direction for execution. Outcomes of this meeting should be instituted in day to day operations by Supply chain, Finance and Customer facing functions.
What are the benefits of engaging S&OP? Are these benefits quantifiable and do these benefits differ with factors like Industry segments or product type?
Yes, there are hard benefits and soft benefits. Example of some hard benefits
- Improved forecast accuracy- 15-30% (Or reduction in BiAS)
- Successful product launches - 15-20%
- Inventory reduction - 7-15%
- Manufacturing downtime - 5-10%
- Revenue growth - 5-7%
These benefits are realized in Organisation who successfully implemented S&OP and achieved a certain level of maturity. Also note that these benefits will fluctuate directly in proportion to level of S&OP maturity of the organization.
Soft Benefits. These benefits are very generic regardless of Industry types
- Enhanced team work across multiple functions
- Structured decision making supported by clear communication
- One set of numbers enterprise wide with a “window into future”
- Tight linkage between strategic plans v/s daily execution engine
How can an organization can determine the maturity of their S&OP process and what steps the organization can take to improve maturity?
Yes, there are couples of ways to do it. First one is to conduct maturity assessment at least once a year and compare this analysis with best in class organizations. Secondly, Organisation should perform a periodic audit and benchmark the results with best in class companies’data. Such data is available readily in the market with agencies as well as chamber of commerce. These two exercises will provide a platform to make continuous improvements in the downstream execution process.To conduct an assessment, there are about 10-12 questions that one needs to answer. The answers help to gauge how an organizations process stacks up against the process maturity of best in class companies. Each question has a mark assigned.
Sum total of all questions marks are categorized in 4 levels of maturity
- Best in Class
Is it easy to implement this process and what are the common challenges that an organization may face?
It is definitely not easy to implement a full-fledged S&OP cadence. It requires a lot of rigor at leadership level. At the same time, it is not a rocket science either. It requires change management at enterprise level and also changing the way cross functional teams work with each other. Explained other way, implementing S&OP is 60% Change management, 30% Process development and 10% System & Tools.
Some of the broad challenges that an organization may face to make S&OP successful
- Lack of senior leadership buy-in
- Lack of objective (strategy) statement
- One size fits all planning
- Devil is in detail (S&OP is high level)
- S&OP turning into post-mortem meeting
- Getting fixated on past performance (i.e. forecast error not Bias)
- Not taking decisions and communicating the actions after each S&OP
Can you give examples of some of the best MNC who have embraced this process and resulted into significant gains over a period of time.
- Johnson and Johnson – Pharma MNC with 4 industry segments
- Cisco Systems – IT / Technology MNC with large product offering
- Mondelez - Food / Confectionary MNC
- Owens Illinois (OI) – Glass manufacturer with multiple plants/ products to offer
These Organisations have multiple divisions and customer segments in various geographies/ These Organisations have complexity but they nurtured and used their S&OP process to overcome their challenges.
Do you have any concluding remarks?
Successful S&OP process is a journey of continuous improvement which allows an organization to plan strategically to execute tactically. A true S&OP process which is implemented and executed enterprise wide will reap benefits consistently till it matures to best in class of its own.
To recap in brief, a 3 pronged approach to achieving S&OP excellence is
- Make is easy to implement
- Make is easy to execute and
- Make it easy to sustain