We'd like to again thank Lora Cecere of Altimeter for serving as the Supply Chain Expert Community's first S&OP Expert of the Week. We all know that Lora is incredibly passionate about sales and operations planning, and she brings tremendous intelligence and experience to the topic. Lora graciously agreed to answer your questions on S&OP, and we selected a few of the best of the submissions from the community. Here are those questions and Lora's responses:
1. Where do you see the next breakthrough in S&OP?
· What if analysis and simulation to deal with uncertainty
· The tie of supply chain planning to execution: manufacturing cycles, transportation planning, and better inventory management
· Demand orchestration: the tie of go-to-market strategies to commodity strategies
We will see more and more solutions move to software as a service deployment that will make it easier to maximize the advantages.
2. It is generally know that with a proper S&OP process, enormous improvement can be reached. Potentials in a double-digit percent range are common. Implementing S&OP brought to our company excellent and sustained results, including reducing obsolescence by 50% and reducing stock by nearly 20%. What I am really keen on is to find further potentials. How do I seek opportunities like due diligence within the finance area? Are there any "templates" or audit materials available that I could use?
The biggest value in supply chain maturity in S&OP is the time to sense, shape and respond to demand. The most mature S&OP processes can do this 5X faster.
I know of no audit materials. But, if I were you, the points that I would check are:
· Feasibility of plans: Were they used in the past month? How well did they predict a viable playbook?
· Adherence to schedule: How well does the team meet schedule objectives to develop the plan?
· Forecast bias and error: How well are people held accountable for forecast error distortion?
· Inventory Obsolescence: How well does the process recognize and manage slow and obsolete inventory?
· Meeting attendance: How well is the S&OP meeting attended cross-functionally? What is the quality of the plans?
· Key metric improvement: Are you making improvements against the key metrics of customer service, inventory, forecast accuracy, margin (costs) and revenue?
3. I have been out of the supply chain area for the last six years. Can you tell me what a multi-location, fast-moving computer manufacturer should look for in the latest “best in class” software?
Data model: How well does the data model represent your supply chain?
Ease of use: How easy is the system to use for translation of sales volume to mix (horizontal translation of demand) and financial analysis to a location (SKU) (vertical translation of forecasting from bottoms up and tops down)?
Collaborative workflow: Ability to plan globally and execute locally with local inputs.
Bias and error recording and adjustment: Ability to hold people in the process accountable for forecast overrides and managerial inputs.
What if analysis: The ease and accuracy of modeling “what if something happens” to evaluate and determine the BEST scenario.
4. S&OP requires inter-departmental collaboration among multiple front- and back-office stakeholders. What’s the best way to ensure that all of the relevant parties are invested and working toward a common goal?
The first obstacle is staffing. Many people confuse the important with the urgent. If the team is focused on day to day—urgent matters—they will never have the time to align on the important: planning.
They must all be aligned and incented against the same five metrics:
Revenue or market share
Reporting structures. To ensure balance in S&OP processes the teams need to report to a profit center leader that can make the right trade-offs based on the operating strategy.