Collaborate 2 Win

collaboration

Collaboration is a buzzword used across organizations but very few have mastered the art of institutionalizing collaborative behavior. Collaboration, in simple words, is creating something as a group that would not be possible working individually.

One of the premise of the integrated supply chain management concept was to foster collaboration within the business as well as with the external partners. The extent to which this objective has been achieved, varies from company to company. Merely creating an integrated supply chain function does not guarantee collaborative approach. That is why, in many cases, SCM function has itself become a silo within the organization. Not just that, it continues to nurture silos within itself in the form of logistics, demand planning, FG inventory management, supply management and so on.

In one such example, a supply planner, who was involved in planning huge quantities of promotion product, did not communicate the plan to the downstream supply chain.  Thus, the warehouses were taken by surprise and did not have enough resources and space to handle the product.  The end outcome was a delay in the launch of promotion and dilution of its effectiveness.

Sales and Operations Planning Process is another initiative intended to encourage collaborative behavior but that too has met with limited success.  The root cause of the problem lies beyond the realms of organization structure, processes, IT tools etc.

How does a leader get to know that collaboration is not working at the workplace? Here are few indicators:

  • People would ask for more resources & buffers e.g. inventory, people, budgets etc.
  • People would come back with problems or the reasons why certain goals could not be met
  • The amount of effort being put in by people is not commensurate with the outcomes
  • In the group meetings, people would not voice concerns or speak in muted voice
  • There is either too much tension or too much bonhomie between people

Key Ingredients of Collaborative Culture

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Shared Vision

People need a purpose for collaboration. It has been found that people, in general, tend to collaborate more in the situations of crisis e.g. war, natural calamities or crisis within a company. The crisis creates a strong and common purpose for people to give up their individual gains for a collective cause.

One of the ways to create a strong purpose is to develop shared vision and goals for the organization. This shared vision should override all other goals and objectives either at individual or functional level. To know if your team members have a shared vision, you can do a small exercise. In one of the group meetings, ask each team member to write down the shared vision and you would be surprised to see variety of responses.  Every individual in the organization should have clear line of sight to these few shared and Wildly Important Goals. The shared ownership reduces the functional or territorial attitude.

Build Trust

One of the reasons why people do not share knowledge, expertise or experience is lack of trust on each other. The fear of misuse of the shared information or credit taken for personal benefit destroys the trust. In one case, the production manager of a company informed supply planner about machine breakdown resulting in production shortfall. Instead of collaborating with the production to re-prioritize and reschedule production, he used the information to blame the production manager. One such instance is good enough to destroy the trust and create barriers for collaboration.

Trust requires building relationships and networks. Getting to know people, beyond their roles and positions, goes a long way in building trust. When the relationship becomes informal and personal, the chances of collaboration enhance. Company focused on collaboration enable these relationships by providing common and informal places for relaxation, breakouts, coffee corners etc. People get to know what other people do, understand each other’s pain points, develop empathy – something that you wouldn’t get to know through official job descriptions. The informal relationships create trusts which in turn makes collaboration smoother.

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Shift focus from Boxes to Linkages

Traditionally, the powers were vested in the boxes that represent positions in an organization structure. As the companies become more complex and networked, the power shifts from the boxes to linkages or interplay between the boxes. What it means that no single position in the structure can deliver the desired results. The performance is a function of the effectiveness of interplay.

For example,collaboration-linkages the product obsolescence is an outcome of the interplay between Sales, Demand Planner, Supply Planner and Production decisions. Therefore, all of them should share the accountability and KPI of obsolescence.

Decision making may require moving along the linkages iteratively. The focus should not be on who makes what decisions but on how decisions are made i.e. whether all the links impacting the decisions have been evaluated. The moment focus shifts to the links, people have no option but to collaborate.

Empower People

People who are not empowered do not tend to collaborate as they do not have the authority to share information and take actions. Leaders must delegate authority and provide enough space to their team members to go beyond their assigned duties and collaborate to solve common problems. They must be allowed and encouraged to choose their battles, be part of cross-functional teams, seek help or provide help to others and take initiatives. While allocating responsibilities, 20% to 30% of time should be provided for working on cross-functional initiatives. It would not only strengthen the bonding but also contribute towards people development.

Community of Practice

In early 2000, P&G was facing tough challenges in terms of productivity and innovation success rate.   The new CEO of the company AG Lafley used collaboration – internal as well as external, as a lever to fight both the challenges. He established 20 cross-functional “communities of practice” within P&G. These collaboration initiatives paid off handsomely. By 2008, P&G had improved its R&D productivity by nearly 60 percent, more than doubled its innovation success rate, and lowered its cost of innovation.

Community of Practice is an informal group that meet at a certain periodicity to share knowledge, experience and help each other solve pressing problems. To know more about how various companies are benefitting from COPs, read here.

Remove the Buffers / Comfort zones

Excessive buffers, resources and comfort zones lead to poor collaborative behavior and vice versa. The moment buffers and comforts are taken away, people have no options but to share resources, information and expertise.  For example, if the supply chain and sales function do not collaborate, it would lead to higher inventory, obsolescence and lower customer service levels. The buffers and excessive flab must be challenged every time to make people reach out to their counterparts for the support. Creating an environment of sharing resources and information to achieve personal or functional objectives helps in fostering reciprocity and collaboration.

Rhythm of formal reviews

Establishing a rhythm of structured cross-functional reviews to plan and execute, fosters collaboration in the organization. For example, an Indian Cement company follows “war room” process to review the sales orders, production, stocks and make certain key decisions on daily basis. These reviews are attended by Sales, Logistics, Plant managers across the organization. A beverages company has a formal Sales and Operations Execution (S&Oe) meeting on a weekly basis that is attended by top management of the company during peak season.

S&OP (or Integrated Business Planning) is another avenue to facilitate collaboration between all the functions of an organization. However, in many companies it has failed to engage the stakeholders and been diluted to merely a supply chain driven process. The problem lies in the way the process has been positioned, implemented and sold to the stakeholders. In order to get past the dead end in S&OP, read here 

In these reviews, people arrive at the common action plan, hold each other accountable for the actions assigned and follow through the plan.

 Constructive Challenging and Consensus

It may sound an oxymoron to use Challenge and Consensus together but are essentially two sides of the same coin. Constructive challenging is important for capturing diverse views and deliberation. However, at the end, the group needs to arrive at a consensus after weighing pros and cons of each choice.

The Sales and Operation Planning process requires both constructive challenging and consensus. However, at times people tend to focus too much on arriving at the consensus because either they lack ammunition to challenge or they are not completely engaged. This could send a false signal that people are collaborating. For example, demand planning review meeting requires challenging the assumptions used for putting together the demand plan. The product manager and demand planner, who are part of the forum, must evaluate and challenge the assumptions before arriving at the consensus plan. It could also mean encouraging uncomfortable discussions to thrash out every possible aspect of decision making.

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Collaborative behavior is a habit that needs to cultivated over a period through both formal and informal means. The leaders need to demonstrate the behavior and be role models. However, it has been found that the biggest gap in the collaborative behavior prevails at the senior level in the companies. They, unknowingly, could send conflicting messages to their team members e.g.

“why are you messing up with someone else’s work?”

“focus on your job, you are not paid for social service”

“don’t get into it else you would be held equally accountable”

In the current world of complexity and uncertainty, Collaboration is not an option but a necessity to win in the market place. If you are keen to know, how we could help you to bring about this change in your organization, please click her or write to contact@advanchainge.com.

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Supply Chain Systems Thinking – A Case based Webinar

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What you may expect in this Webinar?

  • Case of a fruit juices company (The Fresh Connection) facing huge challenges –  Unhappy customers, financial losses, high obsolescence etc.
  • Analysis of end to end supply chain, financial statement, reports and key performance indicators
  • Collectively make strategic and tactical Supply Chain decisions for the company
  • Analyze the impact of the decisions on the performance of the company
  • Learn about importance of systems thinking in Supply Chain decision making

Watch this video for the preliminary view of the Case Problem 

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Systems Thinking is a holistic approach to decision making that looks at problems not as isolated challenges but rather as part of the larger system in which a particular function or process operates. 

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See the video below on the importance of Systems Thinking in Supply Chain

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About Fresh Connection Simulation

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Preparing for GST – Are you missing something?

One nation, one tax and one market, GST is staring in our faces. The supply chain folks are busy solving the puzzle of IGST/CGST/SGST and doing maths on the various costs in the upstream & downstream value chain. Most companies have already prepared a blueprint of the supply and distribution network that would require fewer but larger distribution center facilities. It would translate into expansion of the existing warehouses, closing some of the existing ones and opening warehouses in new locations. Some of the questions that are on top of everyone’s mind are:

  1. How to manage services levels from fewer facilities that would result in increased distances and response times to customers? Would 3PLs and transport companies pitch in to create an efficient network with hub and spoke model to fill in the gap?
  2. Given the fact that warehousing facilities will become larger, there would be a business case for automation of facilities. Can companies move from dedicated contract warehouses to shared facilities to create economy of scale?  Would 3PLs invest in the automation without passing on the cost impact?
  3. How to handle increase in rentals and other costs at the locations that appear in almost every company’s blueprint?

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However, amidst these priorities, something very important is being missed out that may hit companies at a later stage. And, this missing piece is developing competency of people engaged in managing and handling logistics operations. Currently, most logistics professionals handle small manual facilities and deal with small time local operators. A typical scene in a warehouse would be labor all over the warehouse, trucks parked in haphazard manner and supervisors shouting at the top of their voices to control everyone.

Now imagine the new scenario, for example, managing a 200,000 square feet facility with multiple zones, with reach-trucks or order-pickers or other sophisticated equipment, dispatching thousands of orders every day. These facilities would require robust process discipline that is independent of the memory and experience of the individuals running the show. Any small error or mistake can quickly snowball into a bigger problem. One can compare the operations in these facilities like that of factories. The logistics professionals will need to develop the competencies of managing people, equipment, throughput, safety and cost efficiency, similar to that of factory managers & supervisors.

The logistics service users would now have to deal with larger and professional service providers. The ability to develop & nurture long term relationships, getting appropriate commercial agreements and managing performance would be the key deliverable. Apart from these skills, the logistics practitioners would need to develop competencies on network optimization, warehouse layout design, transport route optimization, fleet mix optimization and technology interventions to continuously improve the efficiency and reliability of the supply chain.

The period of transition from the existing to new footprint could be very painful and severely impact the business unless the logistics team are well prepared to handle this situation. The skills that would be required to ride over this turbulent phase would be effective planning, program and change management.

The competencies that would be required in the post GST scenario, can be classified as below:

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Do you have a plan to assess and address these gaps in your logistics teams? If not, you may add this to the list of priorities that may need to be addressed sooner than later. Competency building takes time and requires sustained efforts. If you need external help in this initiative, you may reach out to us at contact@advanchainge.com 

We follow a proven approach of sustained engagement and develop interventions that have all the components of 70/20/10 model of competency development. We break down the entire initiative into small bursts or modules. Each module starts with classroom training followed by assignment of on the job projects with measurable deliverable and coaching & mentoring of learners to deliver results. Only when the desired objectives of a module are achieved, the next module is taken up.  This approach ensures that the competencies developed are sustainable and both individuals and organizations benefit from the initiative.

Supply Chain Execution Edge

Strategy is sexy, execution is sweat and blood. The great strategy and execution divide has been a topic of discussion and one of the greatest challenges for the CEOs. While great strategy is an outcome of great leadership and thinking, ability to execute is a part of DNA of an organization. It is a usual practice to formulate long term plans and strategies at the beginning of year. However, the accountability of implementation of the strategies is left to every department and very little thinking happens on what it would take to execute the strategies.

As per a survey conducted by The Economist Intelligence Unit in 2013, less than half (46%) of the respondents felt that their businesses were excellent or good at executing strategic initiatives. On an average 56% of the strategic initiatives were implemented across all the respondents over past 3 years. Only 33% of the respondents fed back the lessons from the failed strategy execution into new strategy formulation.

Execution is a strategy in our business”, says Paul Polman, CEO Unilever. Unilever realized that their customer service was at best average and therefore, declared it as a priority for the business. The appropriate organization structure was put in place along with reward and measurement. Then followed the rigorous following through and holding people accountable. Now, Everyday Great Execution (EDGE) is the mantra of Unilever organization’s culture and processes. Successful leaders understand that the team meetings, town-hall meetings or investments in technology do not guarantee the successful execution of a strategy. It largely depends on how well each employee identifies with the strategy and how well-oiled is the execution machinery of the organization.

Let us now examine the importance of execution capability in supply chain. In the current times, the businesses do not necessarily compete on products and technology. For example, Samsung would know about the new technologies and products Apple is working on and vice versa. The real competition is about who has the better supply chain execution capability to get the products on the shelf quicker while ensuring the product quality. Supply Chain is about 10% strategy and 90% execution capability. Supply chain people, in any company, are the busiest lot but are they really spending their energies on the right initiatives. Most of the time they are fighting day to day fires or trying to get alignment between conflicting interests of different departments. What is missing?

  1. Communication and Alignment

The companies have very well established processes for Annual Planning, Sales & Operations Planning and scheduling. In most cases, the people responsible for executing the plans e.g. delivery, procurement, production etc. get to see only the detailed level schedules and have little idea about the big picture. For them, every SKU or material is equally important and requires same level of attention. They cannot identify with the business critical Winning Goals & Winning Moves and how their decisions and actions would impact the success. For example, if meeting a deadline of an important customer order is the key winning move for the business then every part of supply chain should focus on meeting the most important objective. It requires supply chain leaders and managers to align their teams and communicate the key winning moves of the month, quarter or the year on a regular basis.

  1. Appropriate Lead Measures

We hear and read a lot about Balanced Scorecards and many organizations swear by their system of measurements. What most companies measure are the success measures e.g. revenue growth, profitability, working capital, customer service and so on. These measures are true reflection of the success of the company but are not helpful in understanding the gaps in performance. For example, customer service is a success measure for supply chain performance but the person responsible for order fulfillment needs to know much more than just one figure e.g. stock availability, inventory accuracy, order processing time etc., before being able to pinpoint where the gaps are and what needs to change. These lead measures are the levers available in the hands of people directly responsible for execution. Every part of supply chain should concentrate on the their set of aligned lead measures to steer the business towards winning goals.

  1. Use Performance Gaps for Structural Improvements

Generally, supply chain teams analyze their KPIs on a monthly basis and try to address the performance gaps. However, most of  it happens at a very superficial level without getting into the depth of the root cause and addressing a process or system instead of addressing just one specific problem. As a result the gaps and issues creep back after some time.

While there could be multiple issues needing attention, every supply chain team should be working on 3-4 important initiatives on strengthening their ability to execute winning goals in a very structured and sustained manner until the capability has been ingrained into the process, culture and behavior. The teams should be able to distinguish between day to day whirlwinds that take away their focus and the winds that sail their boats in the direction of the winning goals.

  1. Accountability and Commitment

When companies are small, team members contribute to the success of the company regardless of department divisions. But as companies grow, team members become singularly focused on getting their jobs done rather than focusing on how their jobs help to score the winning goals. Mistakes are blamed on other departments or people leading to silos. It happens when companies focus only at the success measures and no one is held accountable for the leading measures.

Every lead measure should be assigned to a team or individual who commits and held accountable for reporting, analyzing and improving the measure. It should be clearly communicated who takes what steps and corrective actions, should there be any gaps in the performance. The commitments made by the team or individuals should be reviewed on weekly / monthly basis to bring in sense of ownership.

  1. Discipline

Finally, discipline plays a very critical role in execution and is the first casualty whenever there are “whirlwinds” of unforeseen events. People tend to take short cuts and short term decisions not realizing the impact of their decisions on the other parts of supply chain and business.

The discipline is about following the rhythm of the planning and execution processes while ensuring the alignment with the rest of the supply chain and business. It is like an orchestra in which every musician is expected to follow the discipline of playing the assigned piece and stay in rhythm with the rest of the crew.

Supply Chain Execution Excellence requires putting together all the above pieces as a well-oiled machine that continuously moves the performance needle in line with the key business strategy.

We can help your supply chain organization to develop this capability using a well tested and structured Supply Chain Execution Excellence framework. Click here for more details or contact us.

Insights from Gartner’s Top 25 Supply Chain 2016

Gartner has come out with Top 25 Supply Chains for 2016. One of the significant change in this year’s rating is introduction of CSR as one of the scoring criteria.

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There are companies that have managed to hold their positions, few have joined the bandwagon for the first time and some have moved up & down the ranking noticeably. See here the list of Top 25 Supply Chains 2016.

The key highlights of the changes in the ranking are:

  • Both Apple and P&G continue to hold their position as the Masters, having attained top 5 position for 7 out of 10 years. Apple’s revenue has come under pressure lately, however, they continue to perform strongly on other parameters.
  • Unilever upsets Amazon to score the top position. A major contributor to this change is the zero CSR score for Amazon (??) and perfect score of 10 to Unilever. Amazon continues to be in top 5 due to its leadership in innovation in products and supply chain.
  •  H&M overtakes Inditex (Zara) on account of higher Return on Assets and Revenue Growth.
  • Walmart drops by 3 ranks due to a low score of 3 on CSR and reduced Revenue Growth.
  • Nestle has jumped up by 7 rankings. The world’s largest consumer food supply chain scored a perfect 10 out of 10 for CSR, including a 99 out of 100 in the environmental dimension of the Dow Jones Sustainability Index for its use of “zero-water” factories and conversion of biowaste into renewable energy.
  • France-based L’Oréal, the world’s largest cosmetics company, ranks at No. 19, up three slots from last year. Its supply chain has focused on improving demand forecasting and supply and demand matching capabilities. The results have been impressive, as it has been able to improve service levels by more than 2%, while holding inventory constant.
  • New entrants – Schneider, HP, BASF, BMW and GSK

What these companies are doing differently to earn their position in top 25? Gartner has highlighted 3 trends of the leading companies:

  1. Customer Driven Partner Integration
  2. Advanced Analytics
  3. CSR and Sustainability

Let’s see few examples of the initiatives taken up by the companies occupying top 15 positions, summarized from the Gartner’s report.

Customer Driven Partner Integration:

  • Apple continues to succeed by offering platforms that ecosystems of partners build upon to meet customers’ needs, whether that relates to core product features such as access through touch-based security, media content and applications or third-party accessories that convert its products into smart diagnostic devices or payment terminals.
  • McDonald’s corporate supply chain team excels at orchestrating the upstream supply network. It promotes and acts as the conduit between outsourced vendors, suppliers, corporate stores and franchise partners. It uses council meetings to collaborate with suppliers on new product innovation and technology, as well as on plant safety.
  • Intel’s supply chain group has proven to be a worthy partner for growth in the past. Over the course of 2014, the team enabled an entirely new ecosystem of China-based technology providers to support the ramp up of new tablet products.
  • Cisco has leveraged technology along with process improvement is in supplier collaboration. The team deployed a cloud-based partnering platform with suppliers that serves as a single source of truth for data, eliminating the bullwhip effect between Cisco, contract manufacturers and suppliers. There is full demand visibility, and suppliers can address shortages through alerts in a more automated way.
  • Nike’s supply chain has extended visibility to outsourced factory production and compliance, as well as to how stores are executing on merchandising, inventory and operations plans.

Advanced Analytics:

  • P&G’s supply chain team is using advanced techniques to drive elimination of truck residence time at mixing centers. The company has also embedded sensors in some of its products, such as toothbrushes and air fresheners. The data transmitted from these products aids the company in understanding consumer usage patterns to support replenishment of supplies for existing products and design features for future offerings.
  • Unilever has made significant investments in regional operational centers that support all facets of the customer order-to-cash process. This work is yielding cost savings through economies of scale and common processes, as well as the ability to better support customer needs by applying analytics to a common CRM system.
  • H&M operates its supply chains tailored by product type, with 80% of volume built to plan at standard, cost-efficient lead times and the remaining 20% that is agile and can respond to fashion trends by going from design to hanger in as little as 20 days, using digital technology.
  • Inditex has set up a planning and analytics team that sorts through real-time sales trends to inform future design and production. Another team converts voice of the customer feedback gathered from the store and district network into prescriptive advice for the design teams.
  • Cisco, as part digitizing the logistics function is connecting logistics to the broader supply chain with data, standards, automated event management and machine agents. Cisco is also bringing new technologies to bear in its warehouses, including augmented reality, telematics and video analytics.
  • Samsung’s supply chain team continues to focus on improving customer collaboration and gaining insight into consumer behaviors through connected devices.
  • Nestlé is investing in predictive analytics for demand planning and enabling growth in its e-commerce business, which includes packaging tailored more for delivery than display in a store.
  • Colgate-Palmolive team has partnered with its enterprise software provider to co-develop supply chain control tower capabilities, including better demand sensing, inventory optimization and supply network planning. The pilot implementation of this capability has enabled daily responsiveness and reduced inventory levels, while minimizing out of stock impacts.
  • PepsiCo’s supply chain is partnering with commercial teams to deploy a total portfolio optimization governance process and tool that allows for data-driven assessment of portfolio health, detailed analysis relative to evaluation criteria and targets, and a process for final portfolio decisions. Pilots of the new portfolio optimization platform are yielding double-digit percentage improvements in profit per volume measures.

CSR:

  • Apple has improved the degree of transparency into its extended supply chain in recent years. In the area of conflict minerals, its 2015 Supplier Responsibility Progress Report states that all of its 242 smelters and refiners of tin, tantalum, tungsten and gold are subject to third-party audits to ensure they are not funding violence in the Democratic Republic of Congo (DRC).
  • Unilever says that it is achieving zero waste through its “four R approach” — reducing, reusing, recovering or recycling — and treating waste as a resource with alternate uses, such as converting factory waste to building materials or composting food waste from staff cafeterias. Longer term, it aspires to be “carbon-positive” by 2030.
  • Intel is the largest U.S. purchaser of renewable energy certificates and when combined with in-house sources, gets 100% of the 3.1 billion kilowatt-hours of electricity its operations consumes annually from green sources.
  • H&M was part of a recent coalition of top clothing companies that called on governments to agree to a strong climate change deal based on concerns that long-term climate effects could harm production of one if its major inputs, cotton.
  • Inditex has set a goal to run 100% eco-efficient stores by 2020. The new Zara flagship store in Manhattan tracks sustainability measures across all of its processes and will consume 30% less energy and 50% less water compared to a conventional store.
  • Cisco is leveraging in-house Internet of Everything (IoE) technology to improve product quality, gain energy efficiency in operations and reach universal order visibility.
  • Samsung has recently received two awards for sustainability from the U.S. Environmental Protection Agency (EPA) for its use of sustainable materials in the Samsung Galaxy S6 and its long-term commitment to the proper disposal and recycling of e-waste in the United States.
  • Coca Cola has set out ambitious sustainability goals for 2020 that include improving water and emissions efficiency by more than 20%, empowering five million women across its value chain and several programs to improve nutritional content and reporting.

While the scoring criteria and weightage given are open to debate, but key takeaway is the breakthrough innovations the leading companies are focusing on to stay ahead of the curve.

Sales and Operations Planning – Getting Past the Dead End

If you were to ask a senior leader of a company about initiatives that are being taken to move the S&OP process in the company to next level, majority of them will tell you that they already do it very well. Some of them may give you an impression that they have, sort of, perfected the process.  The next question I would ask is, “If that is so, then both customers and shareholders must be delighted”. The most common response to the statement is a blank look.

S&OP concept is three-decade old that was originally designed to balance and getting cross-functional alignment to demand and supply plans. The companies adopted the process for varied reasons – some genuinely believed in its greatness and others because they did not want to be seen as not doing the right things. Whatever may have been the reasons, in most cases it was perceived and implemented as a process by supply chain and for supply chain. And, it made sense as the main objective was balance demand and supply.  Other functions i.e. Sales, Marketing, Finance, Manufacturing understood their roles in the process but their ownership has always remained a challenge. The key reasons of disengagement are:

  • Misalignment in the reward system e.g. sales being rewarded on achieving annual targets while supply chain on forecast accuracy, inventory & so on.
  • Silo mindset continues to exist. People meeting for the demand and supply reviews should not be construed as collaboration. Most meetings end up in fixing blames for the past problems and sandbagging the future plans.
  • No clear accountability for the metrics
  • Inadequate process governance. The discipline of the meetings, preparation, data quality etc. take a backseat making the whole process inefficient and burdensome.

It has been found that the business heads, the owners of S&OP process, also lose interest after few cycles. The primary reason for this behavior is too much focus on short term and operational level details. The business heads are interested in answers to three fundamental questions:

  1. How are we performing against the business goals and strategy?
  2. What are the key risks and gaps that can derail the journey towards the goals?
  3. What needs to be done to safeguard against these risks and overcome the gaps?

When the business heads do not see these questions being addressed through the S&OP process they tend to disengage.  They also hate to play the role of referees in the verbal fights between different functions in the executive S&OP meetings.

These symptoms indicate that the S&OP in these companies has reached a dead end. According to a study by Gartner most of the companies are stuck in stage 2 of S&OP maturity.

The only way to get past the dead end is to re-position and reorient the entire process as business focused, instead of demand & supply focused. Oliver Wight, the originators of S&OP process, have rechristened the process to Integrated Business Planning (IBP) – not just a change in the name but it is a change in the approach as well as mindset. Anything that helps in answering the three questions from the business heads, mentioned above, should be part of the IBP scope. All the business reviews and decision making meetings should be merged with and made part of IBP.  Oliver Wight talks about number of differentiators of IBP process, but there are three main drivers of change that can help you to take your S&OP journey past the dead end.

  1. Broaden the Scope

While the demand and supply balancing may continue to play heavy on the agenda but the scope should include key strategic initiatives and projects e.g. new customers acquisition, products phase in and phase out, operational efficiency improvement, new supplier development etc. Broadening of scope will automatically engage and excite all the functional stakeholders.

  1. Change the Language

Supply chain folks speak the language of SKUs and volumes, whereas business heads understand the language of value or dollars. Therefore, a strong financial integration and capability to translate plans into revenue, profit and cash flow is the key to the transformation. Similarly, the sales heads need to be spoken in the language of customers, channels and territories. Marketing heads like to hear the language of products, categories and markets.

  1. Recognize uncertainty

Traditional S&OP has always tried to project one number. We all know, that in the current business environment reality can change significantly between two planning cycles. Therefore, it makes sense to also look at the potential downside or the upside to the plans. By doing so, you may not end up one number but can still have one version of the plan, which is also known as the range forecast. It immediately enhances your capability to recognize risks and opportunities in the business and entrenches the adequate response in decision making. It would also help in reducing gaps between the plans and execution.

In a nutshell, S&OP is a journey to continuously improve the capability of a business to achieve its goals. There is no maturity level that qualifies for the title of “perfect or ideal S&OP”. While supply chain may continue to play a pivotal role in the process but it is a process owned by the business leaders for the business.