Supply Chain Blog

Is S&OP Really Necessary? Integrated Supply Chain Planning

Posted by Michael Thompson on Tue, Nov 30, 2010

From Monty Python to S&OP and integrated supply chain planning in one blog.  The next instalment ....

 Dear Mike

I thought that you were joking when you said my email would Supply Chain Discussionmake a great series of articles about integrated supply chain planning.

Although I am still not sure what you intend, I would be happy to contribute to the series. And yes I still believe that S&OP is not necessary for some companies. I await further instruction.

Jacek

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Dear Mr Thompson

Thank you for your recent letter inviting me to join in the debate “Is S&OP Really Necessary - the role of Integrated Supply Chain Planning”. 

As I am open to new ideas, I am happy to join in.

Yours sincerely

Reginald

PS – It’s a good job that I like Monty Python. 

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Dear Mr Thompson

I disapprove of your last blog.  Not only is it insulting to Chief Executives, and potentially blasphemous (you know what I mean), it ignores some basic facts about supply chain planning.

I am not sure what your “Head of Supply Chain Development, Jacek” has in mind, but your CEO Reginald has the right instincts. 

Organisations do not need S&OP.

Well run companies with a sound supply chain supported by good processes, well integrated ERP systems and well trained competent people do not need S&OP. 

I look forward to your response.

Yours sincerely

Brian (anon)

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Dear Brian

Thank you for your letter.

I actually agree with you. The purpose of the blog was to start a discussion. 

Reginald & Jacek have agreed to discuss the issues in a debate.  Reginald has promised to come with an open mind.  Jacek has agreed not to get too technical.  I have offered to moderate the debate. 

Please do feel free to contribute.

Yours sincerely

Michael Thompson

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Does anyone else out there wish to contribute.  Please do share your thoughts & experiences regarding S&OP and integrated Supply Chain Planning.

More to come ....

In this series:

  1. What has S&OP ever done for us?
  2. The Role of Integrated Supply Chain Planning
  3. Is S&OP Really Necessary? Forecasting & Supply Chain Responsiveness
  4. What has S&OP ever done for us? A great deal actually...
  5. To S&OP or not to S&OP - That is the question
  6. What has S&OP ever done for us? The role of the CEO

      Image credit: lusi on stock.xchng

      Tags: Michael Thompson, S&OP, Forecasting & Demand Planning, Integrated Business Planning

      The Top 10 Smash Hits of FMCG Supply Chains (with a twist)

      Posted by Dave Jordan on Wed, Nov 24, 2010

      This week we take a tongue-in-cheek look at the Supply Chain charts.

      I Want My ERP – Sting is at number 10 with his classic need for a decent ERP system to support your business. Avoid off the shelf solutions as they rarely work in the long run. Yes, you usually get what you pay for so evaluate carefully.

      S.O.P  from Abba is at number 9 this week. You can almost hear the cry for your business to implement a fully functioning and inclusive Sales & Operational Planning process. Why don’t you hear what your staff are saying about S&OP because “when you’re gone, how can I even try to go on?”

      Suzi Quatro sits at number 8 with Can The Plan, i.e. exactly what you should not do. When you generate an agreed plan from the S&OP meeting and receive top management buy-in then stick with it! Multi- functional co-operation in planning to one set of numbers ensures you get the best chance of success.

      Top 10 smash hits of Supply ChainRightly ahead of Suzi at number 7 is Stand By Your Plan –Tammy Wynette.  For all the reasons above you should stick to your collective best estimate of what the business will achieve in the month. If any department starts to work to another plan you have simply lost control.

      Hope Of Delivering by Paul McCartney is at 6 this week – yes, Macca is still hovering around in the charts. Take the “hope” out of your  service proposition by choosing your 3PLP wisely or by investing in skilled in-house capability. At the end of the day your delivery company is the final contact with the client before a sale is secured and payment activated.

      Little Eva is at 5 with the classic – The Distri-bution. Everybody probably is “doin it” now but those that manage Distributors well will be topping the sales charts. Get close to your Distributors and integrate them into your business as far as possible. They are after all responsible for a major part of most FMCG businesses.

      It’s A Forecast – Bonny Tyler is at number 4. A forecast is just that, a forecast. While yours will never be 100% correct you should be constantly aiming to improve accuracy on a sku basis. Forget forecast by brand or category as this does not provide the detail required to allow the Supply Chain to make adjustments in the future. The forecast should be collaborative taking all aspects of supply, marketing, finance and demand into account.

      Into the top 3 and at three is Barry Manilow with Co-packabana (At The).  Promotional complexity can be both a USP and a millstone. You may believe you operate with a small number of sku’s but this number balloons when you take into account all the promotional co-packing and re-packing that takes place. Take a long hard look at your level of sku complexity and consider delisting those that do not add value.

      Dolly Parton sits at 2 with The Best Little Warehouse in Texas – Dolly has a couple of bits hits and this is one of them.  Organise your stock so you know where to find it and don’t’ forget to count it and count it regularly. You best laid plans can come unstuck if you cannot find your stock when trying to order pick.

      Saleing – Rod Stewart is this weeks’ number one! Old croaky throat is still at the top with a song that sums up what your whole organisation should be aligned to achieve. Following the messages in the top 10 can help you secure sales success even under difficult economic conditions.

      Next chart? Who knows…….

      CTA 3PLs in CEE 0.03 Small resized 600

       

      Tags: SKU, Logistics Service Provider, Dave Jordan, ERP/SAP, S&OP, Forecasting & Demand Planning, Distribution, Inventory Management & Stock Control

      What has S&OP ever done for us?

      Posted by Michael Thompson on Mon, Nov 22, 2010

       

      Inspired by Monty Python’s film “Life of Brian” ... What have the Romans ever done for us?  And one of our consultants .....

      "What has S&OP ever done for us?

      ...said Reginald the (very frustrated) CEO at the annual operational review meeting.

      Silence fell in the room; that uncomfortable silence with nervous body movement and avoidance of eye contact.

      “Well, it gave us structure to our supply chain operations” said a rather quite voice from the back of the room.

      “Well ... OK ... I’ll give you that”, responded our CEO. Benefits of Sales and Operational Planning                                                “The supply chain is more organised than it used to be”, he continued.  “But apart from more structure to our supply chain operations, what has S&OP ever done for this company?”.

      “What about KPIs & the new Balanced Scorecard”, said the lady on the second row.  “before S&OP we didn’t really have a way of measuring things” continued, Sally, the Head of Quality Assurance.  “you can’t improve, what you don’t measure ....”, as she warmed to a theme encouraged by nods from colleagues.

      “Fair enough”, Reginald responded. “KPIs have made a difference”, he continued, “ but apart from more structure to our supply chain operations and KPIs, what has S&OP ever done for this company?”.

      One set of numbers”, a rather confident sounding IT Director added.  “If it wasn’t for S&OP, we would still be all over the place with data ... remember when we had all of those spread sheets, three sales forecasts.  It was because of the S&OP programme ..”

      “Yes, yes”, interrupted the CEO.  “I suppose one set of numbers has helped .... kind of .... ”

      It has transformed operations”, Derrick, the IT Director interrupted.  Embarrassed by his apparent insolence, he paused. 

      And was saved from a new silence by Reginald.

      “OK, but apart from more structure to our supply chain operations, KPIs, and one set of numbers, what has S&OP ever done for us?”

      CONSENSUS.  For the first time we have a process to sort out the arguments. We can now have a grown-up debate every month to agree a sales forecast that represents reality, a production plan that has half a chance of producing the right stock to support the forecast and inventory that customers actually want”. 

      William, the Head of Supply Chain had found his voice.  And his right hand as he thumped the desk in support of his own argument.  It was he who had sponsored the S&OP programme.  Not everyone supported it.  Indeed, it was implemented in the face of indifference and obstruction.  Maybe, just maybe ...

      There was no more awkward silence.  It had been replaced by whispers.  Whispers of approval.  More nodding of heads.  The volume increased. 

      “Listen, I am not saying that S&OP is a bad thing.”  Reginald tried to regain authority. 

      Whispers became mutterings ....

      “What I am saying is that apart from more structure to our supply chain operations, KPIs, one set of numbers and consensus, what has S&OP ever really done for us?”

      Now there was a different silence.  The silence of defiance.  Until from the back of the room, and this time anonymously, came

      “If you turned up to the monthly S&OP meeting, you would realise just how much S&OP has done for this company”.

      However, Reginald had a supporter. For at the back of the room, sat Jacek, the new Head of Supply Chain Development.  Jacek had spotted an opportunity when he joined the company. He knew that the new S&OP processes would be a step in the right direction. But has also knew that far more was possible. 

      If only Reginald knew about Integrated Supply Chain Planning ....

      More from Reginald & Jacek later ....

      What is your S&OP experience?

      In this series:

      1. Is S&OP Really Necessary? Integrated Supply Chain Planning
      2. The Role of Integrated Supply Chain Planning
            1. Is S&OP Really Necessary? Forecasting & Supply Chain Responsiveness
            2. What has S&OP ever done for us? A great deal actually...
            3. To S&OP or not to S&OP - That is the question
            4. What has S&OP ever done for us? The role of the CEO
            Oscar Supply Chain Blog  

            Tags: Michael Thompson, KPI, S&OP, Forecasting & Demand Planning, Integrated Business Planning

            Enchange, Supply Chain, Route to Market, Distribution, S&OP, ...

            Posted by Michael Thompson on Fri, Nov 19, 2010

            Sorry, this blog has nothing to do with any of the above. It is everything to do with Friday afternoon & a bit of fun.  

            We had a meeting today about how to improve our blogging & some whit suggested that if we were really serious about increasing web traffic, only sex & jokes work.

            As an experiment therefore we thought about spicing up the Enchange blogs with a bit of ....

            Humor resized 600Humour of course.  This is an email that did the rounds some time ago about Employee Appraisals.  Apparently they were actual quotes from the employee performance evaluations of a US Corporation.  Here are 20 of my favourites.  I have chosen to believe them. 

            Unfortunately, we can’t acknowledge source as we don’t know where it came from.

             

            1. “Since my last report, this employee has reached rock bottom.....and  has started to dig.”
            2. “His men would follow him anywhere, ....... but only out of morbid curiosity.”
            3. “This employee is really not so much of a ‘has-been’, but more of a definite ‘won’t be.”
            4. “Works well when under constant supervision and cornered like a rat in a trap.”
            5. “When he opens his mouth, it seems that it is only to change feet.”
            6. “He would be out of his depth in a parking lot puddle.”
            7. “He sets low personal standards and then consistently fails to achieve them.”
            8. “This employee is depriving a village somewhere of an idiot.”
            9.  “Got a full 6-pack, but lacks the plastic thing to hold it all together.”
            10. “A gross ignoramus - 144 times worse than an ordinary ignoramus.”
            11.  “He would argue with a signpost.”
            12. “He has a knack for making strangers immediately.”
            13. “He brings a lot of joy whenever he leaves the room.”
            14. “When his IQ reaches 50, he should sell.”
            15.  “A prime candidate for natural deselection.”
            16.  “If he were any more stupid, he’d have to be watered twice a week.”
            17. “If you give him a penny for his thoughts, you’d get change.”
            18.  “One neuron short of a synapse.”
            19. “Some drink from the fountain of knowledge;..... he only gargled.”
            20.  “Got a full 6-pack, but lacks the plastic thing to hold it all together.”

            If you like this, we are happy to make it a regular feature.  Please let us know.  Or even better, please share some of you best business jokes.

            Tags: Humour, Michael Thompson

            7 Reasons why 100% Customer Service Does Not Help Your FMCG Business

            Posted by Dave Jordan on Fri, Nov 19, 2010

            Nobody doubts the difficult market conditions we find ourselves in. Every single company is trying its hardest to take their share of a diminishing consumer purse to meet their targets. In reality, not everyone can achieve their annual numbers but many will make difficult choices they may regret.

            Customer Satisfaction resized 600Any company keen to succeed needs a decent level of Customer Service and increasingly this is becoming a key area of competitive advantage. Yes, CS has been around for years and everyone knows how important it is but today a basic level of service is simply not good enough nor tolerated by customers.

            What concerns me is hearing FMCG producers proudly boast of attaining and maintaining 100% customer service. Ok, many claims do not stand up to close examination as some FMCG organisations are still adjusting orders to reflect what they have in stock! That is another problem altogether as this Sales led feel-good tactic is simply misleading.

            There is no doubt your employees should be focussed on squeezing out every last sale but surely not at the expense of causing mayhem and waste in the business? In the space of a month 3 very different companies have proudly explained they achieve 100% CS. Without too much investigation you can quickly see the effects this has on the business and importantly, staff motivation and the all important bottom line.

            So, what are some of the problems can 100% service levels cause?

            1. You will be holding huge amounts of finished goods and/or RM/PM components. Your working capital as a % of sales may be disguised but the absolute value will be excessive.
            2. Excess logistics capacity will be required to store these items and ensure ease of availability.
            3. Inefficient production planning leading to change-over time and material loses.
            4. Risk of RM/PM expiry due to excessive storage periods.
            5. High and unnecessary complexity
            6. Inability to introduce innovations quickly OR acceptance of hefty write off costs.
            7. Staff exhausted by the constant stress and frenzy of maintaining 100% CS.

            All in all, a very complex and cumbersome business which is far from leading edge and probably devoid of even a basic forecasting process.  If you allow customers to abuse you then you get what you deserve. However, some simple collaborative forecasting with your customers is likely to lead to a much more fruitful and profitable relationship for both parties.

            Tags: Customer service, FMCG, Dave Jordan, Forecasting & Demand Planning, Inventory Management & Stock Control

            Why does S&M cause so much pain in FMCG businesses?

            Posted by Dave Jordan on Mon, Nov 15, 2010

            No, honestly this is a blog about Supply Chain! Those seeking advice on leather and chains should return to Google now.

            Sales Forecast by MarketingWithin an FMCG business are there any people lacking more in structure, discipline and planning as Sales and Marketing colleagues?  A resounding and harmonious “no” is the answer from across the global Supply Chain community. When the chips are down and challenges exist it is the same S&M brigade aiming the first kick and usually in the direction of Supply Chain colleagues. These people must be covered in Teflon because you never, ever see an S&M colleague admit to an error or a delay or a poor forecast.

            Have they ever considered how their business could perform at a vastly superior level if they just turned up as team players for once? Their “me, myself, I” attitude and wholly inappropriate superiority complex cause untold damage to the smooth running of growth seeking operations. Total disregard for policies and procedures is the norm along with a seemingly deliberate desire to de-motivate others through their actions.

            Innovation? Innovation is a pseudonym for “let’s cause maximum internal disruption”. Barely detectable tweaks or the incorporation of a low level of insignificant perfume or flavour is considered to be the highlight of the year. Extra security will be needed in supermarkets as consumers break down the doors to get to the latest version of Bloggo. Is it me or is innovation always late? Yes, no matter how late the innovation process may be the rest of the company is expected to maintain the originally networked launch date.

            If only they could drag themselves away from that agency business lunch to attend an S&OP meeting. S&OP? Oh, that Supply Chain thingy. No, no, no! The rest of the world seems to get the fact that S&OP is a business process and is not an evil being thrust on them by the dark arts of Supply Chain.

            They claim to have their fingers on the pulse of customers and consumers yet their forecasts of demand are usually so far off mark you wonder if they benefit from a pulse of their own. A blindfolded man paying darts is likely to be equally accurate.

            And why are Sales so secretive and evasive about their customers? They seem to deliberately avoid any contact between the customer and other members of the company who just might understand their supply needs a little better. Perhaps customers talk a strange dialect that only Sales people can understand?

            Ok that is enough, I think; time for a glass of something and a lie down.

            Tags: FMCG, Dave Jordan, S&OP, Forecasting & Demand Planning, Sales

            7 Steps to destock FMCG Distributors in CEE

            Posted by Dave Jordan on Tue, Nov 09, 2010
            Yes, it is difficult. You have already "sold" the stock and paid out and received sales bonuses based on sales targets. The fact is that although the stock may have left your books it has not really been sold. The ownership of the goods has changed but nobody has consumed your product. You have not sold as much as you have reported to HQ!

            If you are overstocked then you have to bite the bullet and do this! Destocking the Distributor network frees up space and cash and saves money on storage fees. It also improves your customer service and overall Supply Chain flexibility.

            1. Senior Team Alignment. There will be plenty of bitching and moaning about destocking particularly from the people who put it there in the first place. Ensure you have buy-in of all the senior team or you will fail. Listen for signs of dissent and stamp it out quickly.
            2. Team. This is not a task for a special project team. Your best Demand and Supply Planning Managers must run the destocking process. The task requires precise attention to detail as not all sku's will be overstocked to the same level nor will all Distributor locations.
            3. Setting Cover Levels. At the start of the process you need to calculate exactly how much cover you really need to hold at distributors. This is not an arbitrary number and has to be calculated based on a variety of lead times and demand factors. The Supply Chain leads this process and recommends a prudent level of stock that meets the requirements of your oganisation. This is NOT a job for a salesman!
            4. Managing HQ. Destocking causes a loss in sales as the overstock is managed out of Distributors. Get your destocking planned well in advance so it can be taken into the Annual Budget submission. The win-win position is often to agree to continued sales growth but be excused from the profit loss.
            5. Duration. Do not try to destock too quickly. Depending on your sku complexity and the level of overstock don't be surprised if it takes 6 months or more to reach a healthy state.
            6. Manage Factories. Ensure your supplying factories are aware of the destocking process well in advance and your demand signals are fully understood. It is important they know when you will reduce orders and when you anticipate a return to a stable state.
            7. Monitoring. The Planning team needs to produce a spreadsheet that allows the stock levels of each sku to be tracked. This is best done outside of any ERP as the calculations are far too complex and decision making extremely dynamic. The Senior Team should see the current overstocking status weekly with a detailed discussion of current issues monthly. Stock levels should become an important KPI for you.

            Yes, it's painful but it is necessary for the health and integrity of your business. Implementing a rigorous S&OP process will help keep your stock levels under control.

            Get stock level rightWant to get your stock level right? Learn more here:

            Tags: FMCG, Dave Jordan, CEE, S&OP, Forecasting & Demand Planning, Distribution, Inventory Management & Stock Control

            The Top 10 Smash Hits of Warehousing & Logistics

            Posted by Dave Jordan on Tue, Nov 09, 2010

            The Top 10 Smash Hits of Warehousing Hello pop pickers, this weeks’ top 10 smash hits in this important but often forgotten part of the Supply Chain.

            At number 10 is All Systems Go by Donna Summer – Do not cut costs on your WMS and avoid any untried local “specials”. Make sure all stakeholders are involved in the design specification at an early stage to avoid costly bolt-ons later.

            Staying at number 9 is Prodigy with Out Of Space - Ensure your chosen 3PLP has sufficient space or can expand to meet your growth expectation. If your 3PLP offers you a site which cannot expand then walk away!

            Old favourites Smokie with For A Few Dollars More lie at 8th – Avoid the temptation to accept your lowest 3PLP quote. Cost is not everything and if you bit on the low quote you will probably pay for it in the long run. Evaluate 3PLP offers thoroughly including which staff they intend to deploy on your business. Also, is it really cheaper and more efficient to outsource?

            Up And Away from the Banned of St Trinians pops up at number 7 this week – your fast moving, profit generating brands should be on the floor or bottom racks to facilitate picking. Those slow moving or seasonal items (in that case why do you have ANY stock?) should be on the top row and out of the way.

            Alliyah bringing us Age Ain’t Nothing But A Number stays at number 6 – your WMS must be capable of carrying out stock ageing analysis to prevent losses from expired products. If age analysis is not carried out you will lose sales when you realise your “stock” is not actually suitable for sale.

            Holding steady at number 5 is Counting Every Minute from Sonia – if you want to avoid a severe financial shock at the end of the financial year then you must take responsibility for ensuring stock is accurately counted. In addition to statutory fiscal counting you should activate routine cycle counting to ensure your data retains its accuracy. Secondly, if you see a stock mismatch early enough you may be able to rectify it before memories fade and time moves on.

            Keep On Truckin’ by Eddie Kendricks sits at 4 this week – whether you chose narrow aisle or standard FLT’s do a simple check and ensure battery type are interchangeable across the fleet AND sufficient extra batteries are available to ensure 24/7 coverage. Surprisingly this is not an uncommon occurrence!

            Sittin’ On The Dock Of The Bay by Otis Redding begins the top 3 countdown – how many loading bays does your 3PLP have or propose for a new build? You have to get stock in at the same time as you move stock out. The almost inevitable month end bonus push from Sales will expose a simple lack of doors and bays.

            Living In A Box by the delightfully titled Living in a Box is at number 2 – forgive my indulgence. I think this is a great Supply Chain themed song so it gets in!

            It Takes Two Baby by ageing rockers Rod Stewart and Tina Turner leads the warehousing chart this week – do not assume your 3PLP knows enough about your business to leave him alone on a day to day basis. You need daily discussions to resolve issues plus monthly performance reviews at an appropriate senior level. Get yourself an office in the 3PLP premises and work hard at the relationship on a daily basis.

            What next? Wait and see a slightly different version of the charts next time.

            Contact Enchange

            Tags: FMCG, Interim Management, Dave Jordan, Pharma, Logistics Management, Inventory Management & Stock Control