Bob Ferrari: Process inertia and organizational thinking can derail the progress of an S&OP initiative

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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.

Bob Ferrari is the Executive Editor of the Supply Chain Matters blog and Managing Director of The Ferrari Consulting and Research Group LLC, a consulting, facilitation, and custom research firm. Bob is a highly visible supply chain technology executive and noted industry analyst, with demonstrated experience in business planning, process, and information technology transformation. Kinaxis: What do you believe is behind the surge of activity around S&OP?  What are the anticipated benefits? Bob: I believe that the higher adoption of S&OP activities is motivated by three factors.  First, the benefits and effectiveness of an S&OP process have been proven by many companies in many different industry environments. This is especially pertinent when these companies attempt to navigate in the very uncertain and often volatile post-recessionary environment that exists today. Second, S&OP provides an organized means to build consensus for aligning product demand with various supply plans.  Finally, S&OP is the best means to engage senior management in the key decision making required in aligning  demand with supply across the global supply chain. The anticipated benefits for S&OP generally evolve in the areas of:

  • Improved demand and supply planning, better forecasting, and a more responsive supply chain
  • Improved customer service
  • Better, quicker, and more aligned decision-making 
Kinaxis:Many are advocating the evolution of S&OP to Integrated Business Planning?  Are you a proponent of IBP? Tying the financial plan/measures directly into the process is a key component of IBP, what else distinguishes IBP from S&OP?Bob:

I happen to be one who advocates that S&OP can be a stepping-stone towards Integrated Business Planning. That stated, not all companies are ready to move through this maturity. There are many other factors involved with IBP not the least of which are considerations for integrating information across the supply chain as well as organizational alignment and change management factors. My advice to companies has always been walk before running.  Building a solid foundation to an S&OP process should be the first consideration.  This includes expectations, roles and decision factors assigned to the participants which often include cross-functional discussions. Means of gathering and communication of information to support the process are also important, especially when participants include external supply chain partners.  Only when an organization feels it has a viable and well-understood S&OP process and an aligned organizational culture, should it consider moving towards IBP.  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? Bob: I do believe that process inertia and organizational thinking can derail the progress of an S&OP initiative and supply chain professionals should not be sidetracked with these common types of issues.  Most barriers lie in developing the overall process framework, process cycle time, and overall change management factors. Supply chain planning, process execution and customer fulfillment is inherently cross-functional in nature, often with conflicting goals. Sales and marketing teams are often goaled on unconstrained sales quotas. Procurement often seeks lowest-cost suppliers, sometimes located in remote regions with less mature business practices.  Product management seeks to meet time-to-market dates, and finance can be persistent in budget adherence.  When large doses of supply chain ‘reality’ are added, inertia can occur since there is a strong reluctance to not deliver ‘unwelcomed news’ to senior management. In my view, there is sometimes a tendency for S&OP participants to be more focused on building continuous consensus vs. a broader and more challenging perspective on the big-picture of supply chain business issues.  Broader empowerment, sponsorship, peer mentoring  and active participation by senior management helps to overcome this inertia.  A final thought relates to the overall cycle time of the process which must match the clock-speed of the business.  If for example it takes 4-6 weeks to accumulate and assess all demand and supply information, when the business can change significantly in 3-4 weeks, than the process becomes ineffective, and support wanes.  Technology tools play a key role in facilitating more timely analysis of the required information that can not only sustain, but enhance the cycle-time of the process. Kinaxis: Can the S&OP process be carried out without technology? Does this relate to the S&OP maturity model? Bob: This is a great question since in my discussions with supply chain executives and professionals, this very question is often raised, with pre-conceived opinion.  The qualifier I often add in these conversations is the notion of “advanced technology”. An S&OP process can be carried out without technology if the scope of your supply chain and supporting organization is small and manageable. Obstacles to the S&OP journey are more often organizational and process related. However, the most important consideration to an S&OP process is the overall time it takes to conduct the continuous planning cycles, the ability to quickly gather, analyze and report summarized information, along with the ability to perform what-if analysis or quickly analyze various alternative plans that the process wants to consider.  More often, this is where advanced technology plays a very important role.  Technology can facilitate the quick gathering of cross-functional planning and execution information, the placing of information in proper context, and the ability to quickly analyze that information.  Of late, firms had augmented S&OP with inventory optimization, business intelligence and CRM related software applications to foster a more robust process for sensing and mitigating unplanned changes in either demand or supply.  Advanced technology also overcomes scope and complexity, and with more and more supply chain activity involving global-based participants, such technology keeps the process working in a timely and effective manner. Kinaxis: If you had to name 3 priorities for a company looking to evolve their S&OP process, what would they be? Bob:

  1. If a firm has not initiated an S&OP process, begin with a pilot phase to work through the various needs for bringing participants, information, and decision-making processes together in a single recognized process.  Move from the pilot phase to more mature phases in a well defined and recognized timetable. The most important emphasis for the initial phases of S&OP are organizational alignment and process consistency.
  2. Senior management sponsorship and active participation is mandatory and an important priority, particularly in the decision-making aspects of S&OP.  Question or challenge when senior management attempts to delegate such responsibilities. With senior management sponsorship comes the dedicated resources to support the ongoing process.
  3. Insure that all data supporting the S&OP process is clean, accurate, and updated on a timely basis.  Nothing derails the process quicker than bad data.

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