The Magic of S&OP

Maria Simos CEO e-forecasting.com

Teamwork, collaboration, transparency and increased profitability. Sounds like some Disney Magic, right?

Well based on the experiences shared from the panel at the Institute of Business Forecasting & Planning’s kickoff event on Sunday dubbed the ‘Advanced S&OP Practices Forum’ it’s in fact real and achievable.  The panel, which was an opening to IBF’s Supply Chain Planning & Forecasting: Best Practices Conference, spoke to an eager room of over 100 demand planners ready to listen and learn about how to take their own company’s S&OP to the next level.

Tom Wallace who was the MC for the afternoon session, gave us all a history lesson, sharing with us how the real founder of S&OP was not only ahead of his time and changed the way businesses operate, but was also sitting right in the room with us.  Dick Lang created Sales & Operations Planning, also known as S&OP, in the 70’s and sat just three rows ahead of me during the forum.  How lucky of a group was this to have the opportunity to attend this conference with Dick Ling who also would be leading a workshop the next morning called ‘How to Align Sales & Operations Planning with Strategic Intent.’  This elevated the excitement in the room and put the rest of the discussions into a greater context.

Before having the panelists take over, Tom shared some slides as a warm up.  He went over the four fundamentals of demand planning which are demand, supply, volume and mix.  He stressed the importance of looking at demand as being the driver. He went on to explain that if we do so  that demand and supply will become balanced, either by our own actions or external factors whether we like it or not.

There are a few key themes that resonating in all the panelists:

  • S&OP will increase collaboration, communication and teamwork
  • Top management needs to be involved so needs to be implemented top-down
  • S&OP runs your business and needs to be part of your culture

Highlights from the panelist discussion, who Tom dubbed as ‘true innovators:’

Chase Winsam of Whirlpool Corporation – Chase took the mic but said that rather than speak about S&OP, he wanted to sing some karaoke. Instead of breaking into song however, he shared with us how Whirlpool was able to reduce forecast bias from 16% to 2% by implementing stronger S&OP practices, while also decreasing inventory dollars. This was all accomplished while maintaining 90% service levels.  An easy idiom he used during his presentation while showing us some outputs was “Get it graphical then think practical.” It is important to rationally think about the numbers and what they are telling you.

Grant Hoffman from Motorola – Grant got our attention quickly when he started his talk with the fact that Motorola had been losing $400 million a quarter during the recession.  The company’s focus turned to their relationships with their suppliers hoping to reduce shortages. This became a process they now call supplier S&OP.  His words of advice were that you need to start at the top, keep confidentiality when working externally, find the proper decision makers, do not be afraid to commit and to have immediate communication on late breaking news.  It may take up to six months to build a relationship with a supplier, but there is a lot of value in these relationships and they are well worth the effort.

Jay Nearnberg from Pfizer – Jay started his presentation by saying that innovation is so important in a stagnant economy like today (and like in the future as I know we are forecasting very low growth domestically and globally overall).  For Pfizer’s business, there is a strong push towards real-time.  Their dashboard as well as their forecast is updated every day.  Most of these overrides come from key customers, the knowledge of a promotional shift or new product information.  The ways that S&OP add value are manifold: cross functional engagement, the engagement of all  management levels, transparency of assumptions, shifts caused by situations, all departments get on the same page, and scenarios and trade offs are discussed along with pre and post-tracing.

Alan Milliekn from BASF – To round out the panel, Alan’s lively presentation shared how BASF uses S&OP to maximize gross profits globally.  Some benefits they have seen include a shift from local volume orientation (‘just keep running my plant’) to global value orientation (‘let’s make money, let’s make money!’).  Also, there is built in transparency and improved communication as well as improved teamwork and of course, increased profitability.

Wrapping up the presentation, the Q&A session brought about some key points:

  • Technology is pushing companies to find competitive edge
  • Processes do not necessarily change too much, but people do, most basic thing you can do is continually educate people (like attending IBF events like this)
  • First you need to get the basics of S&OP then the enhancements will come, first need to balance demand and supply
  • Takes just an average of one and a half hours of executives time each month to be involved

The afternoon forum was a real eye opener and sure got my attention. Especially in the difficult economic times that we are still in, it almost sounds like achieving successful S&OP can be a bit of Disney Magic when it comes to your bottom line.  The lineup of upcoming presentations over the next two days will help showcase case studies and insights on how to demystify some of this and take it back to our companies.

2 Responses to The Magic of S&OP

  1. Hi Juan,

    Presentations are available. Give our office a call to find out more how to get a copy. 516.504.7576

    Best
    Constance

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