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Why Sales and Operations Planning - and why now? And how?
"Sales and operations planning is all about communication !

11 November 2009. Times of economic turmoil... We often use this phrase to refer to the current situation, and by right. What is hurting us now, is - more even then the lower economic activity level - the lack of predictability on what happens. A few smart people knew that the something would happen, but nobody could tell when. Running your supply chain under these circumstances is indeed a challenge. What is interesting, is that the uncertainty is not over. Suddenly, the economy will pick up again, in a certain sector, in a certain area, and the race will begin again. You'd better make sure you are ready by that time.

A must read on that matter is " Managing for High Performance in an Uncertain Economy" by Brian McCarthy and Jane C. Linder. They explain what companies do to be successful during and after previous recessions:

• they manage their finances carefully, both in good and in bad times, focused on generating cash flow;
• they have a clear strategy ready and stick to it, also when the downturn hits;
• and they are able to decide rapidly and decisively, because they know exactly how to make money.

So how does that relate to sales and operations planning? Well, more than having the perfect supply plan or the perfect demand forecast, a good sales and operating planning process enables you to react quickly and correctly to the unexpected ("the volatility in demand and supply"): what it actually does, is make sure that everybody in your organization executes on the same plan, and adjusts the plan in the same way. It ensures that the sales efforts done by your demand organization are aligned with the production abilities of your supply organization. It ensures that your product development process delivers new products on time and by the needs of the market, while your sales organization makes sure these new products reach the market according to plan. Finance is to make sure that budgets required for these initiatives are available, while operations and sales need to make sure their financial constraints are respected.

It is no surprise then that S&OP is mainly a communication process: it is about making sure that your demand and supply organization (and your product development organization) communicates and cooperates correctly.

So what do you need to do? There are a few good books available on S&OP, but in a nutshell, this is what you should do:

• You need to communicate all plans (demand and supply plans) over the organization, and highlight the mismatches. A mismatch between plans indicates that you have options to choose from. You should foresee the possibility to discuss these various options.
• You need to organize an arbitration process to resolve the mismatches, and come to one conclusion. If the impact of certain decisions is not trivial, you will need some decision support systems.
• In this process, you don't just include the sales/marketing organization and production/supply. You also need to make sure product development and finance are fully included, as valued partners.
• When the plan is made, all organizations need to stick to the plan. During the S&OP process, they make a commitment to deliver their part, and should have all the intentions to make it happen.
• When they see they can't live up to their commitment, they should communicate that as quickly as possible.
• For areas where you know it is hard to predict, you foresee buffers: product inventory, or time buffers, or whatever is needed, but you foresee the unforeseeable.
• And finally, you need to keep track of the decisions you jointly took. You also need to track why you took them. The hypotheses you based your plan on, is crucial information to monitor to know when you have to change your plan.

How you do it, may vary from the circumstances. If you are a small organization, you don't need software, you just need to talk. Once information flow becomes a bottleneck, though, you need software tools to bring your plans together. You want to discuss the plans from various organizations, so ease of use and visibility of all the plans is primordial. But the focus remains on the process.

I don't have the pretention to explain S&OP in one page. To get started, go and find some excellent books on the market. But remember: it is all about communication!

In 2009 - organize training, training, training and training !

12 July 2009. May I hope the above title brings the message clearly enough? In supply chain, the importance of training cannot easily be overrated. I beg your pardon for standing on my soapbox: From experience, I know this is the biggest issue in all organizations. I have seen a lot of supply chain solutions, and I have never seen a single organization with an overdose on training. Stronger even, it are exactly the most successful companies who stress this matter most. I am not talking here about (just) caring for employees, making them a feel good. This is about companies saving money, making money, surviving in times of economic turmoil. I may be flogging a dead horse here , but looking at reality, so many companies are reducing budgets for training in 2009, and I sincerely believe that the right training is the best investment you can make in an economic crisis, like today.

In this post, I would like to focus on one aspect of training: the format of training, and how it leads to real organizational improvement. Next month (next blog post), I will apply this to the subject of supply chain.

Training for performance

Let me be clear here: I am advocating effective training here: training that leads to results: results for yourself, your own career, results for the organization or the company you work for, or results for the company you own. Without looking down on people studying for the mere pleasure of studying, or of achieving a higher degree of wisdom, the objective is to reach actual results. Secondly, cost-effectiveness is an important side-aspect: in today's times, if the costs of training are exaggerated, it will be stopped. If on top of that, training can be efficient, all the better.

Also, when I refer to training, you will understand that I am not just talking about classroom training: I include all techniques imaginable to enhance your knowledge and skills. Therefore, I define a four step process for training:

1. Reading and preparing: Everything you can prepare on beforehand, by reading, or preparing in different ways (podcasts, chatting, googling, ..) will make your mind prepared on what you will learn. Except for the happy few, any classroom training will be too condense to capture everything you will hear. The better prepared you are, the more knowledge will stick to you after training classes.

2. Knowledge transfer. The most typical approach is classroom training. This can either be in the form of a lecture, or in the format of exercises, a workshop, a study paper, a formal training course… In all honesty, few people have the discipline to get started on self-training without any formal program. What I notice, is two major benefits of this step: first of all, you get a structured overview of what you want to study, and secondly, you get a deadline. Deadlines are marvelous for getting results.

3. Coaching. How often have you gone to an excellent training class, only to establish later on how little you remember of it, and how much less you adhere to the practices taught? This will be familiar for you all, every single one of you. The solution for that is as simple as it is hard: get involved in a coaching program. Find yourself a coach, ask for a coach, coach yourself (although…), or when you're in charge, coach your own people. I am not going to expand here on coaching - there is plenty of material available, like for instance manager-tools - but make sure you have a chance to regularly reflect on your progress, and additional steps you need to make to improve. The regularity here is critical: every week or every month, or whatever time interval you find suitable. If you only have enough discipline just for this, go for this. The rest will become easier.

4. Performance evaluation. I am a strong advocate of performance evaluation, also for everything you learned. Exams are not as bad as they seem to be: they are a necessary investment of time to assess where you are. Similarly, organizations benefit from audits, assessments, performance evaluation, annual reviews. If they are good, they confirm your success, for yourself, your career, and your company. If they are less good, they indicate where you need to improve, and are excellent input for the coaching process.

Of course, the entire process only makes sense if you know what you want to achieve. But that is the subject of another blog.

The Art of Problem Solving

6 June 2009. A good supply chain manager is a good problem solver. If you don't believe, check the job offerings on supply chain: problem solving is always high on the list. And no surprise, because in your position as a SCM, you need to do more than come up with the greatest theories or the finest concepts: you need to get the job done, and show results at the end of the quarter.

Good problem solving takes a number of steps. In principle, the game is easy. The hardship lies in the perseverance. We would define five steps in problem solving:

1. Define the problem. You need to define the problem first before you start to solve it. Especially when it is not just your problem, but that of a group of people, and certainly when someone outside your organization is involved. I can only urge you to write down a description of your problem, and spend time on it to make it clear and unambiguous. The time you spend here will be gained back multifold afterwards. Also, get agreement of all people involved. The worst thing you can encounter, is aiming a moving target. When you write down the required / desired situation, include as well the reasons behind it - tangible or non-tangible. Include as well soft factors, such as lack of knowledge of a certain process, bad feeling, or inexperience with a certain region or partner. A powerful approach is to write down what happens if you cannot solve the problem.

2. Find the root cause of the problem. With a problem well-defined, it is now time to analyze the situation and find the root cause, or root causes of the problem. A typical approach, especially for complex problems, is to pose one or more hypotheses, and then to prove whether they are right or wrong. Remember that a problem often has multiple causes, and that two root causes may have a common underlying causal factor, often related to more generic problems, like the attitude of an organization, company culture, lack of unified vision, etc. That can imply that you may want to consider multiple root causes in your approach towards a resolution as well.

3. Establish an action plan. Consider possible solutions towards the problem, possibly relating to various factors of the root cause analysis. Of primary importance is to make a decision as to which approach you are going to go for, get agreement on it with all stakeholders, and stick to the plan. It is worth while to write it down, and get an executive sponsor to maintain the drive on the initiative.

4. Coach people to resolve the problem. Ultimately, all problems are still solved by people and it takes time and energy to bring a project to completion. Use your coaching skills to the best of your abilities. The only way to achieve sustainable results is by winning the heart and mind of the people you cooperate with.

5. Follow up with the team, and/or the internal (or external) customers to which degree results are obtained? And sustained? You want to include multiple measuring points, as you want to achieve lasting results. Make sure you document and publish the results, on a regular basis. This is a good landmark for your own career, as well as for the people in your team.

Supply Chain Management

24 March 2009. We are in a time of crisis and recession, and the recession is hitting us hard. Like any reasonable human being, the kneejerk reaction for all of us - the first thing to do in time of crisis - is to stop spending. Agreed, it is better than just continuing to bleed cash until the lights go out. However, please do consider that managing your supply chain is about managing your company - and everything around it. Improving your supply chain (what we sometimes like to call our "value chain") is about getting more revenue, reducing your costs, improving your services and streamlining your business. All of this while considering the financial impact of what you are doing. In my line of thinking, not investing in improving your supply chain, is not an option, definitely not in a time of recession.

Holonic Manufacturing

23 May 2007. Holonic Manufacturing is a highly distributed approach to manufacturing that provides sufficient structure to tackle the complexity of industrial-size manufacturing systems. Because of the autonomy and intelligence of the individual components, holonic manufacturing systems are robust against disturbances. Their ability to form hierarchical structures ensures a high performance during normal operations.

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last update: 11/11/2009

© Feb 2009 Luc Bongaerts