Supply Chain Brain - October 2009

Dynamite Those Corporate
Silos With S&OP
The Secrets of Successful
Change Management

Sales and operations planning (S&OP) has been a working management concept for at least 25 years. But companies have yet to derive full value from the exercise. It’s time to move to the “next generation” of S&OP systems and processes, according to Yehiav.

The problem up to now, he says, is that many companies have run S&OP systems within discrete functions. Communications between departments have been minimal, so that sales and marketing, finance and supply chain aren’t sharing data and acting in the manner of a single organization.

Integrated business planning is essential, says Yehiav. Often various corporate “silos” will operate as separate profit centers, with performance incentives at cross-purposes. Sales will be driven by the revenues that they generate. Finance will be concerned with the resources it needs to commit to orders within a given reporting period. Supply chain will be focused solely on how to get goods to market. An integrated process synchronizes those disparate activities and ensures the free flow of data and demand forecasts. What’s needed, says Yehiav, is a core system that can translate and share information so that “everybody is actually driving to the same goal.”

Good internal communications are especially critical at times like now, when the economic downturn could be abating and renewed consumer demand about to kick in. If supply chain isn’t talking to sales, it might not be prepared for the surge. Similarly, when launching promotions, sales might be forced to expedite product if the supply chain side of the house isn’t ready to match the effort with goods in the pipeline. Such disconnects can serve to erode already-thin profit margins.

The main issue is one of proper business process, but technology can help. The right system, serving all corporate functions, can boost operational efficiency and minimize excess inventory.

Sales and operations planning systems, coupled

with good business processes, can help companies

to achieve a common internal “language” when

tackling issues of supply, demand and customer

service, says Guy Yehiav, vice president of sales

and strategy with Oracle Corp.

To view this video interview in its entirety, visit www.SupplyChainBrain.com.

A sales and operations planning approach

can yield big benefits to the organization, says

Karen LaBombarda, TMG Associates princi-

pal. But first, companies must overcome peo-

ple’s natural resistance to change.

Companies looking to implement a demand planning or sales and operations planning (S&OP) process are in for a tremendous challenge. But the rewards make it well worth the trouble, says LaBombarda.

The key, she says, is not to view the effort as a linear process that goes through a number of pre-defined steps to a successful conclusion. Real change management is “a very iterative process.” Managers need to be constantly monitoring their progress and adjusting tactics in line with experience. At the same time, they must never take their eyes off the ultimate goal: visibility of information, and the sharing of forecasts, throughout the company.

Resistance can be alleviated by involving everyone in the effort from beginning to end. “If you get to the finish line first but alone, you lose,” says LaBombarda. “It’s critical to bring the organization with you.” From the start, companies should identify process “champions” who can guide the whole company through an effort that might not be entirely straightforward. All major projects should be taken in discrete phases, with each depending on the results of the one before it. “Start simple,” she says, “and move toward the complex.”

Some companies undertaking a demand-planning or S&OP project will do so with modest goals in mind, such as achieving better forecasting or sharing basic data. But the true implications are greater than that, says LaBombarda. The objective ought to be destruction of the corporate silos that prevent the various functions of a supply chain from working toward a common goal. S&OP can help marketing to understand the supply side, sales the process of fulfillment, and supply chain the upstream processes that cause so much “gyration” in the numbers. With S&OP, she says, “people understand what it takes to be profitable. They get energized.”