At the recent “Best of the Best S&OP” conference jointly sponsored by IBF and APICS, one of the Marquis topics, and one which generated much positive feedback, was presented by Douglas Kent, former SVP at Avnet and adjunct professor at the International University of Monaco. The title of his presentation was “Supply Chain as Innovation Driver: Aligning New Product planning with S&OP.” There could not have been a more appropriate topic. One only needs to remember Apple taking everyone to school on how to innovate to drive your business. No doubt, there are many companies that have their Product Innovation Pipeline geared up to get ahead of their competition as everyone emerges from the recent ‘Great Recession’.
The central theme of the presentation quickly established that S&OP and New Product Planning activities are inextricably linked. So much so, that you cannot have one without the other.
To ensure that all in attendance were on the same page, defining S&OP was at the top of the Agenda. This was extremely important because while S&OP does have clearly defined steps, it is very often different across many organizations.
The basic definition started with a simple sentence, “S&OP is a process by which a business makes its decisions”. Though simply stated, the definition runs true in that in any well-oiled S&OP process, simplicity can be refreshing. Without any complications, the definition was extended to describe it as a Process that results in a single achievable plan, a collaborative process to align decisions, activities and resources against a defined business strategy. And finally, S&OP must be a data and fact-driven process.
In S&OP, Reality must Rule. Here is an example of how a New Product Introduction (NPI) process can self-derail despite seemingly going thru the correct process and procedures. Can one imagine the bewildered faces on the NPI team members when what was supposed to be a home run product launch, actually proceeded surprisingly to nose-dive into complete failure? Post-launch root cause analysis exposed two key failure points – that the product had not been test-marketed to consumers, and the retailer surprisingly, and despite objections, positioned the product (HDTV Wall mounting bracket) in the Hardware section-not with its offering of HDTV’s. Though there had been a lot of collaborating prior to product intro between Sales, Marketing and Operations, two key pieces of data were inadequate at the very least. The real lesson is that following the steps of S&OP with mechanical regularity, and resorting to using data without a business team analysis (Demand Manager, Marketing Manager and Sales Manager) is an eventual roadmap to failure.
This was one of the supportive themes in the presentation. The NPI process can not merely be rammed into the S&OP with a data dump. The entire data set of any proposed launch must be set against business trends, data supported interpretations of consumer behavior trends, lead-times, verified in-store dates, production capacity review, the predicted effects of possible promotions, and the effects of previous product phase-out. There are other factors to study, but the key point to consider is that collaboration and an informed discussion about the numbers is critically important.
Another key point emphasized was that Market Volatility in today’s consumer products environment can be a moving target with one rarely earning the moniker ‘sharpshooter’. And it is likely to remain this way into the future due to the effects of the quickening pace of innovation, clearly defining the sometimes elusive aspects of consumer behavior, and other factors such as the real and sometimes significant effects that On-line retailers are having on the big boxes. What this really works out to be is that New Product planning and S&OP absolutely need to be integrated into a seamless interface. As compared to the normal gathering of demand data and the following inclusion into the overall Demand Plan/Business Plan, New Product planning, as emphasized by this session’s presenter, raises the bar with respect to collaborative Sales, Marketing and Operations team discussions, consensus-decision making, and robust data analysis. Some additional takeaways, highlighted by the presenter, were the necessity of a Product Review/Life Cycle process and that our best intentions can still miss the target. But that is no surprise, S&OP is both an evolutionary, and a learning process.
A final point… Conference events such as this one, which was sponsored by the IBF, are great learning events as well as a great opportunity to rub elbows with the “Best of the Best”. Check it out in the future.
Richard P. Kerivan
Rpkerivan @ gmail