From the diary of a Supply Chain Consultant
by I. Pilkington & B. Perez
Is your organisation ready for S&OP? Many organisations launch into an S&OP journey when they are simply not ready, and this lack of readiness leads to little or no deliverables, a demotivated group of stakeholders and an overall unpleasant experience.
Organisations who have tried and failed find it incredibly difficult to make a successful implementation at their next attempt.
In this blog I talk about the key building blocks that need to be in place before you launch into your first S&OP cycle. With these in place, your organisation will have a greater chance of success.
Be prepared for change
Having a mindset in the leadership team & stakeholders that believe in thorough preparation and change is a key enabler to a successful S&OP implementation. S&OP process drives change, it will drive your business to operate in a different way to what you have been doing previously. As you embark in to being a demand driven company you need to take time to prepare and engage stakeholders in believing this process is the right way. Organisations who don’t take time to prepare and manage change and jump into implementation too quickly, generally pay the costs for many years to come. Delivering the message, communicating the change, engaging stakeholders and managing the expectations are key steps to take before the launch of any new process.
S&OP deployment takes time and it has to mature over time, so it's very important to be aware that this is not a process that will ever go in right in the first cycle you run. As we have mentioned in a previous blog S&OP maturity is likened to water finding its own level.
Be clear on the problem you are trying to solve
Going into a change programme without knowing specifically why, is a futile exercise. How many times have we seen this in our working lives? In our experience, if the problem is not defined or it is not specific enough to work with, the process will not succeed and the lack of clarity will cause countless issues down the line. S&OP is a means to an end. It is one of the most important business process any organisation can implement, however it must be implemented for a reason.
The beauty of S&OP is that when it matures it impacts a suite of deliverables. Organisational growth of 10~30%; Service improves significantly to your customers (10%~50%) and from your suppliers. Productivity improvements (30~45%); Working capital (25~30%); Inventory Turns (25~30%). In addition, your information flow from day-to-day to longer term is clear and transparent. By doing these things, your data becomes cleaner and reports are more accurate. How many times have you asked yourselves does the data make sense? In my experience when data is not trusted, businesses add more KPIs, however this becomes a burden on staff, and the new KPIs will be as dubious as the others.
Be clear on why you are implementing S&OP and you will be pleasantly surprised at what else it delivers.
Know your Data
How good is your data?
As we know not all data is good data. Having granularity of demand, both historic and forecasted, and by part number / SKU is advantageous. A forecast that is out longer than 18 months is a great start. The second area relates to capacity. Being able to understand demonstrated / actual capacity in terms of labour and machines is vital. The preparation phase starts with what information you have today, and then works on improving this by the start of the 1st S&OP cycle. For example, if the demand forecast out to 18 months isn’t known, then let’s work together to get it. If we don’t know actual capacity, then let’s find a way to understand it in the next 3 months.
Another item to consider is the source of your data. Are you relying on spreadsheets or is all of your information coming from your ERP system? In our experience regardless of the ERP used in businesses, systems are usually not used effectively. As you delve in to your process and understand your data requirements you will strive in making your ERP your number one trusted source of information. As we know being a demand driven organisation is key for S&OP, and many other business improvement activities such as lean. On average literature suggests 3 months from starting the journey to day 1 of the 1st S&OP cycle. In other words, a 3 month preparation phase. In reality some of my clients have achieved a successful preparation time in 6~8 weeks, and that is contributed by having good information.
Build the right structure to support the process
S&OP deployment requires a lead facilitator and nominating the right person to drive this process is needed as close to the start as possible. When first engaging senior leaders we stress the need for them to appoint an S&OP Leader. This role can be full time or part time, however the level of commitment must be understood, so that the process leader is empowered to do the work.
Defining roles and responsibilities at the beginning of the process is key to implementation. Having the structure to support each of the process phases, will give focus to the S&OP journey and the stability necessary to make it succeed.
There are two aspects to the leader on day 1. They must operate at the right level. In a smaller company it could be a functional leader, in a larger organisation it could be a direct reporting line into the Executive Team, however it cannot be any lower down in the organisation than this. The leader needs to carry weight, and be able to influence senior leaders. Remember this is the most important process that the business will implement.
Secondly, who / which role should lead S&OP varies by organisation, and it can be influenced by the focus of S&OP at the outset. As long as the leader has the right capability to learn and operates at the right level then this will be satisfactory. Many organisations change the leader as the process matures. For example, commercial could own it initially and then it may transfer to finance. If a supply chain structure is in place, then the Supply Chain Leader is perfectly placed to lead S&OP initially and into the future.
The S&OP Leader is the key for focused support from ourselves. As consultants our support is always heavier at the start and drifts off over time as the team build capability, the leader becomes more confident, and the process starts to deliver significant business impact.
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