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. Steve Puricelli is a Senior Manager in Accenture's Supply Chain Management Service Line and he is also the North America S&OP Offering Lead. He has an extensive background in sales and operations planning including forecasting and production planning, both as a practitioner and as a consultant. Prior to Accenture, he worked at Information Resources Inc (IRI), HP, and General Motors. He has more than 15 years of experience working across the high-tech, consumer packaged goods, aerospace, and automotive industries. He holds a BS degree in mechanical engineering and an MBA degree in operations from Vanderbilt University. Based in San Francisco, he can be reached at email@example.com. Kinaxis: What do you believe is behind the surge of activity around S&OP? What are the anticipated benefits? Steve: A number of market drivers are putting pressure on supply chains and the S&OP process – specifically the volatility and uncertainty we’ve seen over the past 18-24 months. In addition, supply chains have grown more complex over the past decade, which has created a very dynamic operating environment. As a result, organizations are starting to realize that the supply chain and S&OP are important mechanisms to managing the business effectively. Traditionally, supply chains and S&OP are volume or unit focused, but now I’m seeing more senior executive involvement at organizations in S&OP because of the revenue and margin aspects it can control. Once viewed as simply the process or meeting to balance supply and demand, S&OP is evolving into a powerful mechanism to manage and shape business performance. 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? Steve: An S&OP maturity model to me is comprised of a number of capabilities and is not a single entity – and understanding each capability and where your organization plots on the curve is certainly important. However, most organizations generally do not need to have, or be at the most advanced stage for each of those capabilities. In fact, I advocate that organizations selectively invest in those capabilities that drive value to their supply chains, and are on the leading edge of the maturity curve, while the other capabilities could reside lower on the curve. A term we use is Supply Chain Masters, and we’ve found through our research that leading organizations, or Masters, are not great at everything they do. We’ve found that these organizations selectively invest in capabilities that are critical to their business – and they are very comfortable and confident having capabilities lower on the maturity curve in those other non-critical areas. Kinaxis: Can the S&OP process be carried out without technology? Does this relate to the S&OP maturity model? Steve: The short answer is yes. I’ve seen a lot of organizations with “manual” S&OP processes that are also leaders when it comes to supply chain performance. Having said that, I’m a firm believer that technology plays an important role in a leading S&OP process, but it is not the driving capability. If you think about S&OP philosophically for a minute, it’s more than just a process or a monthly meeting; it’s actually a governance model for the supply chain comprised of organizational, process, and technology capabilities. I tend to see leading organizations, or Masters, focus more weight on the organizational and process aspects of S&OP over technology, but that’s not to say technology in these organizations is missing. In relation to an S&OP maturity model, there is certainly a correlation where technology plays a more important or less important role depending on the attributes or characteristics of the business. A supply chain with a small number of products, limited number of manufacturing and distribution locations, and only a few customers or channels – using a manual technology solution such as spreadsheets might be sufficient – or even appropriate. On the other hand, technology is often a key enabler for S&OP to scale – and providing the breadth and depth to S&OP is generally not achieved with manual approaches. 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? Steve: Building on the previous question and thinking about S&OP as a governance model comprised of three key areas: organizational, process, and technology capabilities – each area serves a distinct and important role to enabling cross-functional collaboration across the supply chain. The organizations that are collaborating successfully look at their S&OP capabilities holistically across each of those three areas. Addressing process without considering the organizational or technology capabilities may only yield marginal improvements. Each area plays a role in enabling cross-functional collaboration:
- Organizational capabilities are needed to help integrate more business functions into S&OP than are typically involved.
- Process capabilities should address and allow for integration into the upstream and downstream processes that S&OP touches.
- Technology capabilities should integrate and normalize the disparate data and system environments that generally exist with S&OP.
I’ve found that the leading organizations recognize there is no “silver bullet” when it comes to addressing S&OP effectively – just implementing a new tool or a new process isn’t going to enable S&OP. First and foremost, organizations that are doing this successfully have clearly defined ownership and accountability of S&OP and they also understand that all three components of S&OP should be addressed. But I’ve also found that the reality is that organizations need to manage and operate with limited budgets and resources and may not be able to address S&OP in this holistic manner. And leading organizations are not immune to these constraints either, but they approach the enablement thoughtfully, and with a well defined roadmap that address the three components of organizational, process, and technology capabilities in an integrated manner. Kinaxis: If you had to name 3 priorities for a company looking to evolve their S&OP process, what would they be? Steve: Use of the word “evolve” implies a good or an acceptable S&OP process is already in place and the organization is looking to improve or further develop their capabilities. Under that assumption, I would recommend the following:
- Incorporate financial information into S&OP. As I noted earlier, supply chains have been traditionally very volume or unit focused, and have lacked the information and capabilities to make decisions based on the financial impact to the business. We recently developed an offering called PS&OP or Profit, Sales, and Operations Planning that specifically addresses this issue of evolving an existing S&OP model into a more enhanced version that incorporates profitability into S&OP decisions.
- Enable what-if modeling and predictive insight capabilities into S&OP. The growing complexity of supply chains, and inherently S&OP, is creating an increasing number of trade-off decisions that organizations are faced with each and every week. These trade-off decisions, such as revenue vs. margin or cost vs. service level, are also complex. Effectively analyzing and testing each of the various scenarios that present themselves during the S&OP cycle through the use of predictive what-if modeling capabilities should allow for improved supply chain performance.
- Instill commitment and patience into the S&OP evolution. S&OP is one of the more complex business processes – primarily because it is so cross-functional and touches so many different parts of an organization. Whether an organization is evolving or transforming their S&OP process – commitment to making changes and improvements is needed from the organizational leadership and patience is needed from those involved with S&OP. Leading organizations, or Masters, understand that driving real change around complex business processes requires both of these characteristics, as well as the understanding that there is not a finish line, but rather it’s an ongoing journey to continually be nurtured.