Welcome to the S&OP Experts Blog Series. This series features a weekly Q&A with an industry thought leader on sales and operations planning trends and strategies. Follow-up 'question and answer' sessions are hosted in the S&OP section of the Supply Chain Expert Community. Registered community members may submit their questions for the expert of the week. Andrew K. Reese is Editor of Supply & Demand Chain Executive. Reese joined the magazine in May 2000, and he is responsible for development and oversight of editorial content and production.
Kinaxis: What do you believe is behind the surge of activity around S&OP? What are the anticipated benefits?
Andrew: The recent economic turmoil obviously has created a huge amount of real volatility – as well as anxiety about volatility – in the marketplace, and that, not surprisingly, has reignited interest in S&OP as a tool to help navigate the corporate ship through these choppy waters. If by no other indicator, this has been evidenced by the 'standing-room-only' (SRO) attendance at the IE Group's S&OP conference in Las Vegas at the start of this year, and the reports of a capacity crowd at IE's follow-up event in Boston in September. Of course, many companies had already started their S&OP journey before the Great Recession began, and the economic turmoil merely added to the urgency of better aligning supply with demand. Another (increasingly common) factor influencing activity around S&OP is the movement of experienced executives who have led successful S&OP initiatives at Company X moving to (or being recruited by) Company Y to lead a similar initiative at the new organization, often from the ground up. That speaks to the growing recognition of S&OP's value in the corner office, as C-level leaders are willing to invest in executives with S&OP bona fides on their CV.
Kinaxis: How important is a maturity model for S&OP? Do companies have to be at the most advanced stage of S&OP to claim to be doing S&OP?
Andrew: Crawl-walk-run would seem to be a requirement when undertaking something as potentially fundamentally transformational as S&OP. It's like training for a marathon – you can't expect to walk out the door and run 26.2 miles; you need to build up miles over time, measure your results and progress, use the incremental gains for motivation, and recognize that trying to ramp up your training too fast will only lead to problems. Even a regular runner must adapt to the significant pounding that a marathon inflicts on the body, just as an organizational organism – even one that is good at functionally specific planning –must adapt to the changes necessary to be successful in an enterprise-encompassing process like S&OP. To extend the metaphor, the most important step in running a marathon is the first one you take out the door on your first day of training and on every subsequent training day as you put in your miles. Similarly, the most important steps in S&OP are the first ones down the road on your S&OP journey (making the initial commitment) and the first step you take every day thereafter (continuing to be committed over time). That latter point is crucial because S&OP really doesn't have a "finish line"; each planning cycle lays the foundation for the next, and each milestone in terms of improvement should become the baseline for the next stage of the journey.
Kinaxis: Organizational thinking is often inherently bound by the dimensions of the “box” it is currently in because people don’t question working assumptions strongly enough. Do you believe “process inertia” is a barrier to advancing S&OP processes?
Andrew: I have yet to speak with any practitioner engaged in deploying S&OP who has not said that organizational change is the hardest part of the process and also the most important success factor. Some say that change management is 50 percent of the work; others peg it much higher, in the 70+ percent range. Regardless, getting stakeholders to buy-in to the new way of doing things is undoubtedly a key barrier to S&OP. Perhaps this is why we have seen S&OP embraced in organizations that have gone through some sort of "shock to the system," whether that means a financial crisis that has prompted a cultural change, or new leadership coming board and, again, initiating a change in the organization's culture.
Kinaxis: Can the S&OP process be carried out without technology? Does this relate to the S&OP maturity model?
Andrew: The old joke that the most common supply chain technology is the Excel spreadsheet is probably just as applicable today as it was 10 years ago, so to the extent that spreadsheets drive S&OP process for many – if not a majority of – companies, and that spreadsheet software is a technology, then the answer to your first question is justifiably "no." But by your question you more likely mean, "Can S&OP be done without highly sophisticated, dedicated software solutions?" And that does relate to the second part of your question around maturity levels. To use another metaphor from the world of sports, you could ask whether a cyclist "needs" technology beyond just a bike to ride well enough, and the answer would be "no." But professional cyclists rely on technologies like wind tunnels (to improve time trialing position) and power meters (to measure and improve output performance) to make the kinds of incremental gains that get them over the line faster than the competition. Likewise, you don't need a dedicated technology solution to do S&OP "well enough," but "well enough" isn't going to get you across the finish line first. Go to the industry conferences, talk with your peers from competitor companies, find out what tools they're using and ask yourself whether the results that they're reporting are giving them a competitive advantage over your organization. If so, maybe it's time to start building the business case for investing in those same sorts of tools. That said, it's important to remember that technology alone doesn't win any race. Lance Armstrong said that he won the Tour de France because he went out training on Christmas Day – meaning that he had the dedication and drive to get up every single morning with one goal in mind, getting across the finish line in the yellow jersey in Paris come July. Winning the Tour de S&OP is going to take the same kind of organizational drive and dedication.
Kinaxis: There is indeed a great deal of cross-functional cooperation and collaboration that is required for managing S&OP – how are companies enabling this, and are they doing it successfully?
Andrew: The three keys to change management that seem to come up most often in conversation are executive sponsorship, senior executive sponsorship and C-level senior executive sponsorship. Someone has to set the tone, establish the credibility of the process, empower all the participants, and – let's face it – bang heads when necessary. Beyond that, people typically point to the importance of having one agreed set of numbers to work from as the basis for effective collaboration, both in the sense of agreeing on the credibility and validity of the inputs into the process, and the sharing of responsibility for the outputs from the process.