I interviewed Carlos Panitz who discussed Demand Management and Collaborative S&OP Software.
Can you talk about why S&OP and collaborative S&OP are still a challenge today in these times?
Good morning, Dustin, and thank you for the interview. Thank you for the question.
The challenge of S&OP in the current days is tied up, at least in South America — I will give more samples from my region here — is that many companies have a [inaudible 00:00:53] S&OP process as a whole. Many, many companies try to approach S&OP more as a review of sales plan and demand site and not integrate this analysis with the supply side of the process. Sometimes there is a lack of maturity in the stakeholder levels to understand the current contribution they can provide for such important process for a company. In many ways, what you see is a process called S&OP in the companies supported, many times, by spreadsheets, try to reveal numbers against budgets or making simple forecasts and not understanding that it's very important for a supply S&OP process to address three basic topics.
First, it's about matched demand and supply and not talking only about demand. Secondly, it's important to create what-if scenarios in which we can address constraints and opportunities that might show up to improve the revenue. The third one — and it's very important — is get a consensus. Sales, marketing, finance, operations, and supply chain need to end this process looking for the same number to start their responsibility [inaudible 00:02:43].
Can you talk about what are the value proposition of collaborative S&OP?
Since, I think, 10 or 15 years from now, the word “collaboration” started to show up more strongly as improvement in the framework of the S&OP process. The basic value proposition of collaborative S&OP is try to get more insights in the scenario analysis and in demand analysis. Once we have markets with more volatility, with shorter cycle times of the products, with strong competition and distribution channels, only to run a statistical forecast or try to reproduce patterns that was discussed [inaudible 00:03:55] process is not a reliable way to capture what is going on in the market at that moment.
The main challenge to create a [inaudible 00:04:08] environment for collaborative S&OP is to make this workflow run smoothly from the planning side until all the actors that may collaborate. Some companies have dozens of people in the sales organization that need to be asked for what are their view, what are their traits, promotions that they're seeing necessary, what the competition is doing, and capture this information and bring very fast back to the workflow in order that you can cycle the entire S&OP process in a shorter period of time.And this is a challenge because you cannot do this just using traditional, standard transactions of the ERP systems.
Why do you separate the discussion between demand management and S&OP as different topics?
Basically, because demand management is [inaudible 00:05:34]... Demand management, it's a little broader umbrella. It encompasses not only the S&OP [inaudible 00:05:44] but once we talk about demand management, we need to talk about inventory policy, replenishment process in the distribution channel. So to improve the fuel rates, the perfect order fulfillment, it's important also that the logistics operations, the replenishment process in place address the complexity of the network and the size of the portfolio that we need to deliver for the customers.
Also, under the demand management scope, there is a topic that sometimes is forgotten or not well addressed by companies. That is portfolio management in which the company needs to define what's the best moment for launching products and phase out products, not create too much complexity. Many companies in the past learned that too much complexity, too many options, just create cost and don't add value for the value chain. It's not part of the S&OP process, but if it's managed poorly, damage and hurt very strongly the S&OP process.
To summarize, on demand management, it's not only S&OP that we have as a framework but also the replenishment strategy adopted by the company and the portfolio management approach that they have to try to optimize this portfolio for each distribution channel and to define the right moment to introduce a product to go to market with the product and the phase out of the product without the risk of disruption or obsolete parts along the supply chain. This is why I separate demand management and S&OP as different scopes. S&OP is part of the demand management process. It's a proven best practice that can improve strongly the demand management process but is not the only framework that needs to be used to improve the delivery and [inaudible 00:08:16] demand of the customer.
Can you provide a brief background of yourself?
Yeah, sure. My background, I have two degrees. One in engineering and another in business administration, both here in Brazil. Then I took my master degree in industrial engineering, more specifically on supply chain operations research. After that, I worked for 15 years as a supply chain manager, most of the time in the automotive industry. Since 2012, I run a software and consulting company on supply chain and S&OP software.
Thanks, Carlos, for sharing today.
About Carlos Panitz
VE3 - Supply Chain Consulting and Solutions