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The Path Forward for Agility

Sales and operations planning. So important, yet success is so elusive. While many companies approach S&OP as a technology implementation, success requires a focus on 60 percent culture, 30 percent process and 10 percent technology. Companies cannot get to success without technology, but it cannot be the primary focus. A successful implementation can improve agility by 25 percent to 35 percent. -Lora Cecere, Founder, Supply Chain Insights

The Path Forward for Agility

Agility—the ability to do more with less—improves with a successful sales and operations planning (S&OP) program. In our research, we define agility as the ability to have the same cost, quality and levels of customer service with changes in demand and supply volatility. In the face of rising volatility, this is desirable. The fix is S&OP, but achieving success for leadership teams often is elusive because of the need to build the right cultural elements. Here we share insights on some for focus:

  • Focus on the Supply Chain Metrics That Matter Cross-functionally. Identify reasonable targets and manage a set of cross-functional metrics that represent growth, cost, inventory and return on invested capital.
  • Clearly Define the Supply Chain Strategy and Operating Charter for the Supply Chain Center of Excellence. Spend time understanding the organizational goals and define how to deliver the business strategy through supply chain excellence. In the building of your charter, avoid buzzword bingo. Define all terms and focus on delivery. Measure the impact and market the successes.
  • Define a Multi-Tier Inventory Management and Buffer Strategy. The management of the forms and function of inventory, and the design of the network, is paramount to buffer risk. Inventory is the most important buffer, and companies with strong risk management programs define an inventory planning position and are active and knowledgeable about the use of multi-tier inventory management technologies.
  • Give Planners Time to Plan. One of the distinguishing characteristics of an effective S&OP plan is the time for planners to plan. This is not trivial. Focus on the important not the urgent. Many companies struggle with how to evaluate planning effectiveness and productivity. It is complicated because no two companies are the same.
  • Get the Right People to the Data. One of the obstacles in S&OP is getting to data. Make it a priority to train employees on data storage and retrieval.
  • Educate the Financial Team. One of the barriers in driving supply chain excellence is the role of the financial budget. While many companies believe that the role of the supply chain team is to deliver on budget processes, as companies mature they realize the supply chain plans should be an input into the budget process, but that the budget process should never constrain the company’s ability to seize opportunities. The goal is to keep the supply chain organization and relevant processes aligned to the market.
  • Recognize That Risk Management Is About Much, Much More Than Technology. While technology vendors espouse risk management as a technology, it is much more than the deployment of a technology. Build risk management into S&OP processes.
  • Test Current Paradigms. Companies need to start with the end in mind, and not be confined by traditional thinking. Could cognitive learning redefine master data? Could Hadoop on non-relational databases be used to drive new insights and discovery for distributor data? Could sentiment data, along with rating-and-review data, help to better understand consumer insights on new products? These are all possibilities that are feasible today. However, it requires the rethinking of existing paradigms.
  • Sales and Operations Planning improves agility. However, achieving the goal requires aggressive change management.

The Outlook

With the increase in volatility, companies want to be more agile. The answer lies in S&OP, but success can only happen when companies build the right cultural elements to improve alignment and success in planning.

Agility—the ability to do more with less—improves with a successful sales and operations planning (S&OP) program. In our research, we define agility as the ability to have the same cost, quality and levels of customer service with changes in demand and supply volatility. In the face of rising volatility, this is desirable. The fix is S&OP, but achieving success for leadership teams often is elusive because of the need to build the right cultural elements. Here we share insights on some for focus:

  • Focus on the Supply Chain Metrics That Matter Cross-functionally. Identify reasonable targets and manage a set of cross-functional metrics that represent growth, cost, inventory and return on invested capital.
  • Clearly Define the Supply Chain Strategy and Operating Charter for the Supply Chain Center of Excellence. Spend time understanding the organizational goals and define how to deliver the business strategy through supply chain excellence. In the building of your charter, avoid buzzword bingo. Define all terms and focus on delivery. Measure the impact and market the successes.
  • Define a Multi-Tier Inventory Management and Buffer Strategy. The management of the forms and function of inventory, and the design of the network, is paramount to buffer risk. Inventory is the most important buffer, and companies with strong risk management programs define an inventory planning position and are active and knowledgeable about the use of multi-tier inventory management technologies.
  • Give Planners Time to Plan. One of the distinguishing characteristics of an effective S&OP plan is the time for planners to plan. This is not trivial. Focus on the important not the urgent. Many companies struggle with how to evaluate planning effectiveness and productivity. It is complicated because no two companies are the same.
  • Get the Right People to the Data. One of the obstacles in S&OP is getting to data. Make it a priority to train employees on data storage and retrieval.
  • Educate the Financial Team. One of the barriers in driving supply chain excellence is the role of the financial budget. While many companies believe that the role of the supply chain team is to deliver on budget processes, as companies mature they realize the supply chain plans should be an input into the budget process, but that the budget process should never constrain the company’s ability to seize opportunities. The goal is to keep the supply chain organization and relevant processes aligned to the market.
  • Recognize That Risk Management Is About Much, Much More Than Technology. While technology vendors espouse risk management as a technology, it is much more than the deployment of a technology. Build risk management into S&OP processes.
  • Test Current Paradigms. Companies need to start with the end in mind, and not be confined by traditional thinking. Could cognitive learning redefine master data? Could Hadoop on non-relational databases be used to drive new insights and discovery for distributor data? Could sentiment data, along with rating-and-review data, help to better understand consumer insights on new products? These are all possibilities that are feasible today. However, it requires the rethinking of existing paradigms.
  • Sales and Operations Planning improves agility. However, achieving the goal requires aggressive change management.

The Outlook

With the increase in volatility, companies want to be more agile. The answer lies in S&OP, but success can only happen when companies build the right cultural elements to improve alignment and success in planning.

The Path Forward for Agility