Supply Chain Blog

Why S&OP and IBP are invaluable all year round but especially at Christmas

Posted by Dave Jordan on Wed, Dec 09, 2015

All rather too quickly Noddy Holder is already gargling on the festive gravel. Roy Wood and Wizard are wishing we could grossly over eat and drink on 365 or 366 days of the year and although they never met, Bowie and Bing are dueting about peace on earth – a likely story in today’s world.

Together with the usual sincere festive releases from talentless “celebrities” from reality TV we also hear some old favourites.

“Dashing through the snow
In a one horse open sleigh…"

How many of you actually started to sing then? Yes, the festive period is fast approaching and the biggest and best Supply Chain in the world is almost ready to activate. There is no way Santa Claus could achieve his annual success without sticking rigidly to an S&OP or IBP process, i.e. Santa & Opening Presents or Incoming Boxes of Presents.

The process starts every year on the 26th December just when all the children start to play with the empty Christmas wrapping and packaging instead of their much sought after gifts. Their engorged parents lounge sleepily in front of the television watching The Great Escape or Jason and the Argonauts – again! The loyal Elves are given their end of season bonus – taxed of course - and packed off back to Eleveden Forest in Suffolk. Didn’t you know that is where they live for most of the year?

Before too long, those lovely people who design toys and games quickly introduce new and more exiting models which will become must-haves for countless girls and boys across the globe. Toy shops are visited and catalogues scanned as millions of children quietly note those presents they would like Santa to bring them the following Christmas. Demand slowly builds until it is time to bring the Elves back from Suffolk, UK on the eleventh day of the eleventh month – no surprise there! The first job for the Elves is to get the global and regional toy factories ready to run once again.

SOP_Planning_Cycle.jpg

 

In parallel, millions of children around the world unzip their pencil cases with a purpose. Using their best handwriting they tell Santa they have all been well behaved this year and then they list all the presents they would like to receive. This accumulated demand allows the Elf factories to start making production plans to meet a deadline that is set in stone and stuffing and snow.

Money does not grow on trees so “Santa” has to quickly check what can be afforded from the budget. Remember, wish lists are always too long and you do not want 100% Customer Service  – keep ‘em hungry I say – or too much inventory. The Pre-S&OP takes place with all stake holders involved to ensure everything is ready to go. You want to avoid stock-outs just as much as you need to avoid expensive write-offs.

After necessary adjustments are made to the planned volumes by SKU, the final S&OP meeting takes place. Santa is fully dressed in his best red uniform and takes his seat at the head of the table. If Pre-S&OP actions have not been carried out then there is unlikely to be much “yo ho ho-ing”. Fortunately, everyone has completed their tasks and there is agreement before the final set of receiving child and gift numbers is rubber-stamped. Everyone involved in the Christmas S&OP/IBP must operate on the same set of numbers or somebody will be bitterly disappointed.

The big day comes and Rudolph leads the reindeers in pulling the sleigh across the world. Santa makes sure all the presents are delivered on time before little heads lift from pillows to wake parents at 4am! (Well, I woke mine at that time.)

And before you know it there we are again on 26th December and the same robust and reliable S&OP/IBP cycle starts all over again amongst the discarded wrapping. See you next year Santa.

“Dashing through the snow
In a one horse open sleigh
O'er the fields we go
Laughing all the way
Bells on bob tails ring
Making spirits bright
What fun it is to laugh and sing
A sleighing song tonight” 

 

Tags: SKU, FMCG, Dave Jordan, Supply Chain, S&OP

1 Inventory Optimisation Success Story

Posted by Michael Thompson on Wed, Dec 02, 2015

Inventory optimisation with supply chain analyticsIn my last two blogs I offered three reasons why multinationals are still struggling with inventory optimisation. I also suggested two issues that needed to be addressed before this process can commence. This is the story of how one organisation managed to turn around decades of frustration trying to optimise their inventory. The organisation concerned is an FMCG multinational. Some time ago, they embarked upon a supply chain transformation programme including an overhaul of SAP & APO in over 150 markets.

Their Problem

Despite the success of the programme in many areas of the business, they were still suffering from volatile and highly variable short-term supply chain plans and an excess of finished goods inventory. This was despite many of their markets being stable and predictable. Data was ‘scattered’ across many ERP & MI systems.  The ways of working within the supply chain were traditional, with operating practices unchanged for many years.  So we have at least two of the ingredients I mentioned in my recent blog (3 reasons why multinationals are still struggling with inventory) - i.e. Complex IT Projects and Complexity. It subsequently transpired that they also suffered from the third reason - Poor Diagnosis.

Their Solution

Despite well-established global, regional and market level S&OP processes, and good KPIs across the business, there was still something of a blame culture as far as supply chain decision making was concerned. In essence they did not have the tools to clearly & unambiguously establish the facts - there was a devil but not the detail in which to find it. So working with this client, we developed an analytical toolset and suite of SKU-level dashboards, focussing on demand, planning, materials, production and execution. Company data was extracted into the toolset. Monthly reporting revealed the root causes of excess inventory - and it was not the forecast that was at fault. For the first time we were able to establish the facts. Facts that cut through emotional arguments and halted the blame game. New supply chain policies were developed and the required changes were really quite basic in nature. Crucially, Operations Management had the confidence to drive the required changes. 

The Results

Senior management had the tools to set informed policy. Regional planners had the tools, for the first time, to perform root cause analysis of supply chain issues and to model 'What If' scenarios.

Inventory was reduced by 40% in 12 of the markets that were piloted.

In this success story we had created the environment for change by cutting out the blame and establishing the facts. We had also developed a powerful supply chain analytics tool. It is a tool that Enchange continues to use.

Please do share your organisation’s inventory story.

Tags: Michael Thompson, Inventory Management & Stock Control, Supply Chain Analytics