Reduce the Friction: Lean How to Get the Supply Chain and Finance on the Same Page

CR Supply Chain Managing Director, Mark Gavoor, will be presenting a webinar on Wednesday June 5th at 1 pm CDT. The organization hosting it is Proformative: The Largest Community of Corporate Finance Professionals. It is a free organization. In our short dealings with them, we are impressed with professionalism. The Title: Reduce the Friction: Learn How to Get Supply Chain and Finance on the Same Page

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The Right Data in the Right Place at the Right Time

On September 19, 2012, Mark Gavoor presented a webinar “The Right Data in the Right Place at the Right Time.” This webinar was sponsored by Northwest Analytical an industry leading provider of manufacturing intelligence and statistical process control software. Mark was invited to present by Jeff Cawley, VP of Industry Leadership. Mark and Jeff have known each other for years being introduced by their mutual friend Dr. John Surak. John invited both Jeff and Mark to co-author a paper with him and co-authored a paper together in the January 2008 issue of Food Quality.

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S&OP: Closing the Gap between People and Processes - Part 2

Part 1 of this series of blogs may be found here. Part 2 continues herein.

The origins of S&OP are not well documented. It seems to have emerged gradually with the introduction and evolution Materials Resource Planning (MRP). The Oliver Wight Company was the first on the scene in the 1980s to offer training and consulting focused around MRP at first, then evolving into the precursor of S&OP. The time phased planning of MRP is at the heart of S&OP.

Since then two factors have made for the very real promise of S&OP:

1. The evolution and prevalence of ERP systems with 
   
   
   1. Right information in the all the right places at the same time 
   
   
   2. Sophisticated demand, production, and transportation planning functionality 
   
   


2. The formal S&OP process based on a monthly operating cycle 

Many organizations have these things in place. Yet, their S&OP process does not live up to their expectations. There are countless articles, books, and seminars on S&OP focused on implementing it and then make it work. Our contention at Cadent Resources is that it is not the S&OP process or the systems available to coordinate and manage the data. These are necessary but not sufficient conditions for S&OP. The real challenge is to get the people part of the process right. The real challenge is viewing S&OP as a Socio-Technical Process and then working diligently to improve the Process. In a sense this is the Mother of All Continuous Improvement Projects. Overall, implementing S&OP, on the macro level, is a two step process:

1. Get it up and running. This actually is the easy part. 
   
   
   1. You can hire a consultant to help. You should assign a key mid-level manager or director to run it. 
   
   
   2. The management team should approve the process.
   
   
   3. The key however is to get started. Get it soundly organized and initiated. 
   
   
   4. This part of the process is 3 - 9 months depending on the current level of planning in the organization. That is 3 - 9 months from management’s decision to implement until the day it goes live. 
   
   


2. Continuously improve every aspect of it. 
   
   
   1. This is the harder part of the process.
   
   
   2. This is where the commitment and dedication of the management team to make it happen is critical. There are no short cuts in this area. 
   
   
   3. This part of the process is never ending and is best measured in years. 
   
   

Years? Yes, years.

This comes from companies that are deemed best-in-class at S&OP. The people in these companies that run S&OP believe it is all about Continuous Improvement, constantly getting better in every aspect bit by bit, sub-process by sub-process, month by month.

Consider why this is the case:

1. S&OP touches every part of, well, sales and operations. This includes the entire Supply Chain from Purchasing to Manufacturing to Logistics. This includes Sales and Marketing or is often referred to as the Demand Chain. It includes finance who need to evaluate the collaborative plans in S&OP against the budget. 


2. It is about getting these organizations that are not often for cooperation and collaborative planning to indeed cooperate and collaboratively plan. This is no small task. 


3. Ultimately, it includes the management team. They are the only ones through their “ownership” of the process and by their review of S&OP each and every month can encourage, cajole, and demand (when necessary) that all the functions mentioned in the first bullet actually cooperate and collaboratively plan to the drumbeat schedule of the monthly S&OP cycle.

Based on the above, there are a lot of moving parts in the S&OP process.  Beyond that there are inter-department and functional, let us call them, “intricacies” that are embedded in the culture.  These intricacies do not automatically disappear with the launch of S&OP.  It takes both a firm resolution to make S&OP work and a dedication to the Continuous Improvement thereof to make it work.

More to come in part 3.

S&OP: Closing the Gap between People and Processes - Part 1

On September 14, 2011 we presented a webinar, Sales and Operations Planning: Closing the Gap between People and Processes. The webinar can be viewed on our On Demand Webinar Videos collection. As a follow-up to the well received webinar, we are going to blog about many of the items we covered in the webinar. This is the first in that series.

Sales and Operations Planning is, of course, a business process and methodology. But, even more so it is a journey of continuous improvement. What is the objective of S&OP? The objectives are to impact and improve the large core of the day to day operation of the business. Through better planning and collaboration between the functions of the business, the goals of S&OP can be summarized as follows:

• To proactively balance Supply and Demand to get everyone to agree on:    
  
  
  
  • One Demand Plan
  
  
  • One Supply Plan
  
  
  • Fulfilling the Plan 
  
  
  
  


• Having the right products:
  
  
  
  • In the right places
  
  
  • In the right quantities 
  
  
  • At the right time 
  
  
  
  


• This is done in order to optimize these fundamental business measures:    
  
  
  
  • Maximize revenues 
  
  
  • Maximize service 
  
  
  • Minimize inventories 
  
  
  • Efficient and effective management of capacity  
  
  
  
  

This is not much to ask for. These are the primary goals of any business. It is what we all do. It is what we all strive for. People have been trying to do this in some form since the earliest days of commerce and trade. In today’s fast paced, complex, and global environment, the need is greater than ever. Markets and economic drivers change at the speed of information. Businesses must be agile and skilled in their planning and execution. Those who are not do not perform well and risk going out of business.

Why then do we struggle with something so fundamental and critical to business?

Engineering and operations management curricula have been teaching Inventory and Production Planning or Management at the undergraduate and graduate levels for years. People have spent their entire careers working in and then leading operations. We struggle with the same problems all the time: basically the same objective that underlie most S&OP implementations. 

• Maximize revenues 


• Maximize service 


• Minimize inventories 


• Efficient and effective management of capacity 

We should add that we endeavor to do all of the above at or below budget.

Managing operations pre-computers was the balancing flow of information and the flow of goods. The movement of information was excruciatingly slow and inefficient. This mismatch was best exemplified by “The Beer Game” which was a manufacturing and distribution simulation developed at MIT in the 1960s. Since then, there has been a steady improvement in the flow of information.

That flow of information improved with the capability of specialty systems and eventually in the fully integrated Enterprise Resource Planning systems such as SAP and Oracle that we use for end to end business management. ERP systems essentially flip-flops The Beer Game scenario. The information flow used to be the limiting factor for sound Supply Chain Management. That is no longer the case. it is possible to have any and all information available to anyone in the supply chain who wants or needs it.

If the goal is to have the right products in the right places at the right time in the right quantities, it is essential to have the right information in the right places at the right time. This is now possible. This instantaneous access to information is the engine that makes an integrated planning process like S&OP possible. Possible becoming probable with a lot of hard work and continuous improvement. This is, essentially, the focus of this series of blogs.

S&OP and Supply Chain Physics Series Webinars Available On Line

We have posted our Supply Chain Physics webinar series as well as our most recently delivered S&OP: Closing the Gap Between People and Processes on our web-site.

All of these videos are available without registration and can be found here. We hope you enjoy them.