Last week, we had a great first meeting of the Bangalore chapter of IBF, with learning sessions on S&OP process implementation and supply chain optimization. S&OP Process Implementation was led by Karthikeyan S who is S&OP Process Lead at Honeywell and played key role in the S&OP success at Honeywell.
Kathik’s discussion was extremely captivating, as well as interactive. He re-enforced many key principles of a successful S&OP process implementation with a live case study. At Honeywell, the term has been improvised to be called SI&OP or SIOP, with “I” standing for Inventory, which is given a very high level of importance in the whole process. In fact, the successful implementation resulted in a reduction in inventory carrying cost so huge that the savings was actually utilized in introducing new products, leading to a jump in revenue.
The real crux of Karthik’s discussion was the journey of process implementation, which wasn’t a path of roses, but the resilience of the team and management made it successful. The situation that existed before the implementation was quite common and many of us can relate to it. It was a factory, which was forecasting sales and not the sales team doing any forecasting. A lot of obsolete inventory routinely piled up. Planning was adhoc and mostly chaotic. Just 2 warehouses were catering to the entire country leading to unoptimized supply chain.
Post implementation, which took around 2 years, the scenario has been quite different. Now the sales team owns the forecast and it is based on customer demand (versus the supply focus earlier). They have a more optimized supply chain with more and strategically placed warehouses. The product build is based on the replenishment model and meetings happen on a weekly basis.
Some of the interesting facts that were shared were the classification of the products into 4 categories with interesting names like Runners, Repeaters, Crawlers and Strangers. This helped in designing forecasting strategy for each category and achieving better accuracy. The other very important point stressed throughout the discussion was the support of the top management in implementation of the process. Leadership supported the implementation team and the statistical forecast in initial days to drive the point to the reluctant sales team. As we know so well, without this kind of management support, the process would fail before it began.
Behavioural challenges were galore too. There was less than 50% attendance in first few meetings and the SI&OP team was perceived to be the police by factory folks. Sales team’s resistance and excuses were something that made all heads in the room nod in agreement with familiarity of the situation. This gave birth to another interesting categorization of stages in the process with respect to the people involved. The stages with respect to people behaviour were named as Speculator, Spectator, Participant and Owner. The names themselves are self explanatory of the each stage and I think anyone who has gone through the rigor of this process implementation would readily relate to this beautiful description.
The participants of our first meet were definitely enriched by the discussion of the live case study and are eagerly looking forward to many more such sessions. Do you have any great S&OP lessons learned to share? Please comment.