Today's global business landscape is like a kaleidoscope changing on every turn. Once we think we've nailed things down, they change. One day we're outsourcing to China and the next, it's Vietnam and India. A mass customization mindset brings on product design changes at a breakneck pace. Lead times are lengthening on both sides of the demand-supply chain equation--the times are much greater than we could have ever imagined a decade or two ago. Now both suppliers and customers are often half-a-world away.
These things bring on a new level of complexity, risk, and uncertainty we cannot ignore. We must be prepared to change in new and different ways at virtually the drop of a hat. Additionally, keeping the emerging tools, techniques, and methods aligned with strategic imperatives has become more important than ever.
Executive S&OP: An increasing number of companies find that the executive portion of sales and operations planning (S&OP), called executive S&OP, is the keystone to doing just that. Even the Harvard Business Review has gotten on board: "... S&OP is indispensable to creating a world-class global supply chain, which in turn would become a major competitive advantage for the company."
Some of the reasons for this are that executive S&OP provides two very important things.
1. A new approach to seeing the future (forecasting) based on the notion "less is more."
2. A defined and disciplined process that aligns leadership's energy through a consensus-building practice.
While these issues might seem to be purely technical, the fact is that the key to either one has more to do with behavior change than technology adoption. For example, the traditional mindset leads us to think that when the future is complex and uncertain, more detailed granular data and information are necessary. Exactly the opposite is true--you must get out of the woods to see the forest and not just the trees.
Rick Hall, vice president of Homac Industries, led a transformational implementation of executive S&OP in his company. Part of the work changed the forecasting approach from a highly granular stockkeeping unit approach to forecasting only in families beyond the short term. This practice, coupled with a disciplined process, led company leaders to the following results:
More clarity on the current business condition
Less crunching of massive amounts of ultimately useless data
More understanding of where they want the business to be
Less confusion about where the company is and where it is going
More agreement on how they will get the business to where they want it to be
Less confusion surrounding business initiatives
More accountability for the results
Less waste of human and financial resources
The company's leaders are in the process of expanding executive S&OP to other business units in the parent company.
KVH Industries in Middletown, Rhode Island, is another example. The company manufactures mobile satellite antenna systems with thousands of parts and a near infinite variety of end items. To be cost effective and responsive to customers, with a supply chain that extends around the world, KVH had to combine both traditional and lean tools to be competitive. Combining these tools into a postponement strategy is paying off in big dividends.
KVH's executive S&OP process became the forum to discuss and align managers' understanding and energy on how to combine traditional tools with emerging tools for effective deployment. "S&OP is a key element to our success. It is a vital part of our lean six sigma effort," said Jeff Greer, KVH vice president.
Although not apparent to a casual onlooker, making the executive S&OP process work has more to do with the way people think than it has to do with technology. The key element is people--not computers and systems.
It is not an extension of past experience. In other words, it is not doing what you do better, but rather doing things differently to be better. This is what makes executive S&OP difficult to implement. Making high-level behavior change is difficult to accomplish. However, for those companies that do, the payoff is astonishing in this highly global and ever-changing landscape.
Bob Stahl, president, R.A. Stahl Company, can be reached at (508) 226-0477 or via e-mail at RStahlSr@aol.com. Tom Wallace, president, T.F. Wallace Company, can be reached at (513) 281-0550 or via e-mail at firstname.lastname@example.org.
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