In the last 30 years S&OP improved performance in many businesses. However, S&OP has not yet substantially delivered on its ultimate promise of enterprise wide resource management, rolling financial forecasting and strategy deployment. Whatever maturity model or consultancy support companies use, S&OP seems to get stuck. Worse, overall S&OP development and progress seems to have stalled. It sometimes seems like S&OP is stuck in a time warp, where the same old things as 30 years ago are being discussed. On top of this we can see examples of marketing driven service providers that very doubtfully brand their product S&OP, or make up new names for existing S&OP processes. The S&OP Pulse Check 2015 suggests S&OP practitioners are left behind in confusion:
- 62% of respondents think there is not enough innovation in S&OP systems
- 64% think there is not enough coordinated innovation in S&OP processes
- 68% think behaviours are not addressed enough in S&OP implementations
- 71% think we need more industry standards around S&OP
Where to go from here for S&OP?
To get some answers for S&OP practitioners, Niels van Hove founder of Supply Chain Trend, interviewed a group of S&OP leaders. These leaders all have 20+ years S&OP experience and published books, whitepapers and articles in renowned magazines. A group, eligible to comment on the current state of S&OP. A group, that has shown passion to improve S&OP and a willingness to provide ideas for the future. Supply Chain Trend will publish a weekly Q&A with these S&OP leaders.
In this week’s interview: Sean Culey
Sean is a renowned business transformation expert whose work on disruptive technologies and the impact they will have has led to him being sought after keynote speaker at conferences, corporate events and universities. He is also a widely published author, with numerous articles in leading publications such as The European Business Review, World Financial Review and Chief Executive Officer.
Sean started working with IT and supply chains back in the late 80’s, and was one of the first people to work on business re-engineering projects using ERP systems (predominately SAP) in the early 1990’s. Since then Sean has been involved in a large number of complicated, innovative but exciting projects in Australia, America, Africa and Europe for industry sectors such as FMCG, Food and Beverage, Software, Healthcare, Pharma, Defence and Heavy Manufacturing – helping to improve some very diverse Value Chains! Sean is a SCOR Master Instructor (SCOR-P), a Fellow of the Chartered Institute of Logistics and Transport (FCILT) and a member of the APICS Supply Chain Council European Leadership Team.
Sean is currently working on his forthcoming book; ‘Transition Point: Revolution, Evolution or Endgame?’ which details the history and future of technology and its relationship and impact on our social and economic progression.
S&OP, a vision for the future interview
Niels: Can you describe your first involvement in S&OP?
Sean: My first involvement with S&OP was around the year 2000 when the company I was working with embarked on a global business reengineering project, designed to support what was then the world’s largest global SAP implementation. I was involved in the S&OP education and process design sessions with Oliver Wight and my specific area of responsibility was making sure we didn’t just have a good plan – we actually executed on this plan. This was an area where there was virtually no documentation or assistance avallable other than some flow maps on MRP and MPS – which were already well understood.
I therefore had to design and implement a brand new series of SAP enabled business processes I named ‘Demand Control’ which took the output of S&OP – a constrained demand plan – and monitored and controlled its execution all the way through supply and demand scheduling into order management, logistics and demand fulfilment. It was clever stuff if I may say so myself – pushing SAP and APO to its limits but without any real ‘bastardisation’ of its design or logic. The outcome was leading edge, integrated, ‘sense and respond’ capability that linked SKU / customer demand plan consumption with supply planning and demand fulfilment, a full 5 years before anyone else started talking about the need for this. It allowed the business to maintain services levels in the high 90’s (usually 99%+) while also understanding where every case of product was and why.
Niels: How would you describe your personal passion for S&OP?
Sean: I wouldn’t actually say I have a passion for S&OP. What I have a passion for is helping companies to become great. S&OP – and IBP – are merely processes that help the more executive layers of the organisation set the way forward by agreeing on a unified and consistent view of the future plans. I like S&OP – don’t get me wrong – but like all processes it is heavily dependent on the understanding and commitment of the multiple process heads across the value chain. Helping them see for themselves why S&OP should be implemented is key – and this is where I find most satisfaction.
Niels: According to most maturity models, S&OP stalls or even fails. Why do you think this is?
Sean: In my experience, it comes down to a number of factors. By far the most prevalent is lack of clear ownership. The process is implemented because its deemed the right thing to do, but there is limited belief and buy-in by the executives. The process is understood, but not the purpose.
Sometimes the ownership is there, but at too low a level. I have been into major organisations where this process has stalled because the person responsible for its implementation quite simply doesn’t have the authority to command the respect of the participants, and therefore participating in the process is seen as an inconvenience, and as a result, done half-heartedly.
In other cases, getting hold of the data to run the process is simply too onerous, because the business either lacks the analytical and reporting capabilities, or the data itself is so poor that no one trusts it and relies instead on time consuming, and demoralising, Excel sheet filling.
However, my number one reason is because S&OP is not seen as a strategic enabler, either because the alignment to the strategy is unclear, or more likely, the strategy itself is unknown. Often, what the business calls a strategy is in fact an outcome – for example doubling shareholder value, becoming number one in the market, profit growth – and this means it is difficult to associate S&OP with these outcomes, other than as a way to control costs.
Niels: What do you believe can be done about that?
Sean: Well, a strategy that actually has the customer, rather than the firm, at its core would be a start! S&OP as a process is a way of ensuring that the strategy the company developed to achieve its goals is executed, and enables the executive team to create consistency in understanding, communication and control of where they are against that plan and what actions need to be taken in order to address any gaps between target, plan and actuals. It is great at helping to break down the silos – but it would be more successful if this alignment had a clear, customer centric focus.
Niels: What else significant is missing in the current state of S&OP?
Sean: I speak frequently at supply chain and manufacturing events around the world, and I am constantly amazed at how many sessions are still on S&OP – and how popular they are! S&OP is a thirty-year-old process that still seems revolutionary to many.
I think that it is still not seen as one of a series of interconnected processes that align strategy with execution. Often the plan itself is seen as the outcome, and the company may make some initial quick wins when they spot a few low hanging fruits they can pick, it struggles to achieve continuous improvements because the management of this plan all the way to the customer is missing. The business effectively has an integrated business planning process with a silo execution of that plan – or chaos management as it’s often called.
So what I think is missing is both its positioning as a strategic alignment activity, one that needs to continue right down to the point that the customer successfully receives their order, and the alignment of metrics and behaviours to support the plan’s execution. To that end, what it misses is the inclusion of value chain segmentation at its heart. I’ll talk more about this later.
Niels: What do think are some of the fallacies about S&OP?
Sean: I defer back to my previous points, and state that the process is often implemented in isolation with an expectation that it is a silver bullet solution, and it will be all rainbows and unicorns once it is in place. S&OP requires hard thinking, data integrity and disciplined execution by the senior team members. Often, companies engage with consultancies to implement S&OP because they believe they should, and while the process steps are explained, and the data requirements identified, it is still the consultancy’s solution – not theirs. This lack of emotional understanding of what this process represent means that it is always going to be a difficult slog, one that is questioned frequently. The lack of understanding and ownership will also be self-fulfilling, resulting in less than stellar results which increases both the doubt about the process and the frustration with the time it takes.
Niels: How would you describe your future vision for S&OP?
Sean: I would like to see S&OP become accepted as more customer focused and strategic – which I guess is what the move to IBP is doing, and also recognised as one of four key meetings needed to align value chain strategy with value chain execution. The advancement in tools has done much to alleviate the data capture and analysis overhead, but it does not address the core issue of answering ‘why’ we are doing this, and that why should be linked to the goals of the organisation. “Because Oliver Wight says so” just doesn’t cut it.
The other thing I would like to see is a recognition of the cultural transformation potential of S&OP. ‘Culture eats strategy for breakfast’, as Peter Drucker once declared, and leadership sets the culture. By emotionally engaging in a process that has alignment, integration, openness, collaboration and communication at its core, the S&OP team should be setting the standard and leading the way. They should also endeavour to ensure that their respective teams also behave in a similar manner.
Niels: What needs to be done to reach that vision?
Sean: In order to make this happen, the following four key meetings should be set up with the same value chains becoming the focus of each:
Integrated Business Strategy (IBS) – a once a quarter meeting of the top table to understand where the company is going to play moving forward and how it will win. This should be based around a segmentation of the business into a series of clearly defined value propositions and a correspondingly clearly defined customer segment. The outcome of this process should be a series of key strategic measures for each value chain.
Integrated Business Planning (IBP) – this periodic process then creates and manages the plan to ensure that the strategy is executed. If results differ to what was expected, then a gap closing process takes place that may result in a feedback loop to the IBS process if they believe the strategy is unachievable, or to the IBM process if a closer focus on ensuring plans are executed successfully.
Integrated Business Management (IBM) This weekly process effectively needs to ensure that supply and demand is in balanced for the forthcoming weeks, and analyses any issues that occurred in the previous week so that the root cause is known and action taken to resolve it. As per S&OP / IBP, this needs to be cross-process, and adopts the same mindset only from a scheduling rather than planning perspective.
Integrated Business Execution (IBE) – Finally, a daily stand-up meeting should be undertaken to ensure that everything is in place and that any nasty surprises that occurred over the last 24 hours are understood, and an agreement as to what actions are taken are made (such as which customers get the stock if a production line fails etc.).
The key to these meetings is that they are aligned in terms of strategy, focus and approach. The same value chains are analysed, by different teams, at different levels of granularity and over different time horizons – but for the same strategic reason; to delight the customer by providing excellent service at the optimal profit level.
Niels: Can you give me an example of when S&OP was easily and successfully adopted? What was special in that instance?
Sean: S&OP in isolation is helpful, but not truly transformative. It’s just formalised common sense. However, S&OP as part of a passionate desire to align and integrate the business around the goal of profitable customer delight can be truly transformative, because then it makes perfect sense. A couple of years ago I successfully implemented S&OP across a business in the UK in just 10 working days – and by successful I mean that the business openly declared that the need for me was redundant. They got it and owned it – both emotionally and logically. It was common sense. This was because I had taken them through a business transformation journey where we stripped the business back to its core objective, defined the strategies for each value chain, clearly defined roles and responsibilities, mapped the current and to-be processes, identified the needed solutions and new ways of working and throughout all of it defined the key metrics that were needed to ensure that the strategy was planned, managed and executed in an aligned and integrated way. This meant that once the process was understood and the data needed identified and prepared, the process wasn’t questioned. Its purpose was self-evident, attendance was compulsory by choice and outcomes were already understood.
Niels: What is your message for S&OP practitioners, who are struggling to make progress, or who are looking for guidance?
Sean: Stop. Step back. Engage with all the stakeholders to clearly understand why you are doing this. Once the ‘why’ is clear, the ‘how’ and ‘what’ will be also. Once the ‘why’ is clear, resistance to this process will fade away, and passion and engagement will increase. Then work out how to ensure that the output of this process is managed all the way to the customer’s door. Make sure the processes, metrics, behaviours and aligned, and the system capability and data is available.
Finally, remember that it’s a journey not a destination.
Niels: Thanks a lot for your contribution Sean.