Rishi Trivedi

Last week, we had a great first meeting of the Bangalore chapter of IBF, with learning sessions on S&OP process implementation and supply chain optimization. S&OP Process Implementation was led by Karthikeyan S who is S&OP Process Lead at Honeywell and played key role in the S&OP success at Honeywell.

Kathik’s discussion was extremely captivating, as well as interactive. He re-enforced many key principles of a successful S&OP process implementation with a live case study. At Honeywell, the term has been improvised to be called SI&OP or SIOP, with “I” standing for Inventory, which is given a very high level of importance in the whole process. In fact, the successful implementation resulted in a reduction in inventory carrying cost so huge that the savings was actually utilized in introducing new products, leading to a jump in revenue.

The real crux of Karthik’s discussion was the journey of process implementation, which wasn’t a path of roses, but the resilience of the team and management made it successful. The situation that existed before the implementation was quite common and many of us can relate to it. It was a factory, which was forecasting sales and not the sales team doing any forecasting. A lot of obsolete inventory routinely piled up. Planning was adhoc and mostly chaotic. Just 2 warehouses were catering to the entire country leading to unoptimized supply chain.

Post implementation, which took around 2 years, the scenario has been quite different. Now the sales team owns the forecast and it is based on customer demand (versus the supply focus earlier). They have a more optimized supply chain with more and strategically placed warehouses.  The product build is based on the replenishment model and meetings happen on a weekly basis.

Some of the interesting facts that were shared were the classification of the products into 4 categories with interesting names like Runners, Repeaters, Crawlers and Strangers. This helped in designing forecasting strategy for each category and achieving better accuracy. The other very important point stressed throughout the discussion was the support of the top management in implementation of the process. Leadership supported the implementation team and the statistical forecast in initial days to drive the point to the reluctant sales team. As we know so well, without this kind of management support, the process would fail before it began.

Behavioural challenges were galore too. There was less than 50% attendance in first few meetings and the SI&OP team was perceived to be the police by factory folks. Sales team’s resistance and excuses were something that made all heads in the room nod in agreement with familiarity of the situation. This gave birth to another interesting categorization of stages in the process with respect to the people involved. The stages with respect to people behaviour were named as Speculator, Spectator, Participant and Owner. The names themselves are self explanatory of the each stage and I think anyone who has gone through the rigor of this process implementation would readily relate to this beautiful description.

The participants of our first meet were definitely enriched by the discussion of the live case study and are eagerly looking forward to many more such sessions. Do you have any great S&OP lessons learned to share?  Please comment.

Chintan Shah of BIC Inc.’s supply chain operations recently led an IBF webinar  for Asia on December 24, 2012 in which he outlined new models for driving sustainability programs at the company. Chintan has successfully implemented a S&OP process at BIC Canada with the purpose of eliminating human error and improving the supply chain process, which he refers to as Soft-S&OP. Earlier at BIC the forecast numbers lacked consensus as every function had its own approximation of demand vs. what the customer really wanted and what it would take to meet demand.  The S&OP process was created to foster consensus and corrected this problem. BIC created a more structured, three tier process: Collaborative S&OP, Supplier S&OP and Soft S&OP.

BIC implemented its new S&OP process in about 1 year.  The key aspect of implementation was collaborating with the customers to get needed data and win their buy-in. To maneuver through this successfully, Chintan engaged with key customers to start such as Walmart and Staples and interacted with the management and IT teams. The customers were required to share the sell-through data of BIC products to enable the company to see the real pulse of consumer demand. Once this data was gained, the next step was a pilot testing of the S&OP process with the customer to show them the benefits, as not only to BIC, but to them. The efforts paid off tremendously  and customers soon experienced great benefits of the process and in Chintan’s words they ‘just love it today’. In fact, as testimony to their success, Walmart and Staples have both recognized BIC’s process as value to them. To keep customers engaged, they are now involved in the decision making process through quarterly meetings.

The internal challenges like selling the idea to the sales team and getting them on board was also won with a similar strategy. Each internal group was shown the benefits by piloting the project and getting them to realize implementing the process will actually save time that can then be used on, for example, their core job such as sales.  Chintan expressed that S&OP meetings were quite painful to start with and required a lot of deliberations and patience, but now most functions are very accustomed to using it and it has indeed become an integral part of the planning process. As a result, BIC has reduced the reaction time to consumer demand to just few hours from many days earlier. The entire process is free from human intervention except for the judgment over the results.

Beyond the examples, as part of the discussion, Chintan brought a very interesting definition of S&OP to webinar participants: “[the] objective of S&OP is to arrive at a business ‘Game Plan’ to help manage and allocate critical resources to meet the needs of the customer at the least cost”. At BIC he used this philosophy along with fundamental concepts like ‘forecast accuracy being better at higher levels of product hierarchy’ and ‘one forecast number is better than many’.

Chintan also had words of advice for the professionals in India. He reminded them that Walmart  was the company which redefined the supply chain processes and changed the game in North America and IKEA  had one of the most stringent supply chain processes in the world. Now with names like these entering the Indian market, it will definitely change the way things are used to working in this market, so far. This opens up great learning as well as professional opportunities for those in demand planning, forecasting, S&OP, and supply chain.

To learn more about other IBF professional development program, please  visit: www.ibf.org

Rishi Trivedi
Regional Country Manager – India
Institute of Business Forecasting & Planning, IBF