Does your supply chain know how the commercial team intends to succeed in the marketplace? If not, how can it adequately support the commercial strategy?

In my experience as a commercial leader working in S&OP, I have observed that many supply chain/planning practitioners are highly motivated to grasp the commercial strategy. And that’s great because they have at their disposal several tools to support it. However, they tend to have difficulty in understanding what the commercial strategy is, often because they don’t know how to start the discussion with their colleagues in Sales and Marketing, or they’re unsure how to frame the questions which will give them the insight they need.

As somebody involved in S&OP but coming more from a commercial, not a supply chain background, I intend for this article to help professionals in supply chain, planning and S&OP better understand commercial strategy and priorities, so the S&OP process is not only balancing supply and demand, but also delivering on key company-wide objectives.

In order to meet this challenge, I suggest anybody involved in the S&OP process invest time in exploring the following three questions:

1) Where do we need to win?

I have found that this is often a better question than “What are the commercial priorities?” because the commercial reality is never one-dimensional, and it is rarely as simple as saying one business area is more important than another. Different revenue streams are often complementary. For example, it might be equally important to maximize profit on mature products in the portfolio as it is to drive new product launches, because the return from the former enables the latter.

A cohesive commercial strategy will have specific and differentiated commercial strategies for each business area. The original Boston Matrix is a simple and effective tool to help categorize and understand the dynamics involved.

In addition to this interplay of different business opportunities, the commercial strategy is also likely to have various short, medium and long-term dimensions. Understanding how these play out is also a critical enabler for the supply chain to develop proactive, commercially-aligned proposals.

This fundamental understanding of the commercial strategy is a crucial enabler for a Supply Chain team wishing to work closely with the Commercial function as it enables a much more focused and proactive partnership to drive business value. Leveraging this understanding, however, requires two further questions to be discussed, as outlined below.

2) How do we win?

The textbooks call this ‘key drivers of competitive advantage’. This is what it will take for the organization to win in its target market. Again, there are various tools which are used by marketing teams to develop their strategies in this area. One of the best known is Porter’s Generic Strategies which describes 3 generic strategies to achieve competitive advantage. In short, these are based on:

Cost Leadership: Minimizing costs relative to your competitors’.

Differentiation: Encompassing product/service characteristics, branding, distribution and promotion.

Focus: Concentrating the business in one or few market segments only.

Understanding how the Commercial team’s plan to win in each of its markets is essential as this strongly shapes the supply chain requirements of the business. For example, a premium product applying a Differentiation strategy will more often focus on product quality enhancements and service levels and would not unduly risk these in order to reduce costs. However, a more mature product in a commoditized market drives a greater requirement for continuously reducing costs.

3) How can we work together to ensure we win?

Having understood these key elements of the commercial strategy, the Supply Chain function is then able to drive targeted and relevant discussions with the Commercial team to create business value. The Supply Chain has many opportunities to influence the costs, working capital and product/service characteristics which ultimately shape the offerings made to customers.

However, many commercial stakeholders have limited experience and understanding of the supply chain. This means that when Supply Chain provides the Commercial team with initiatives to support overall business objectives, there is little understanding about how it could work. Supply chain/planning professionals should relate supply chain/planning initiatives to the commercial strategy. This allows both parties to anchor the discussion in the fundamental commercial requirements and this helps create the energy and engagement to support cross-functional partnership.

Examples of such initiatives and their associated commercial impact include:

• Supply chain segmentation
  • Adapts the supply chain configuration to align with the key business drivers (how do we win) for each key business area and hence optimize costs, service and working capital for each commercial strategy element.
• COGS reduction
  • This may be delivered by various routes including procurement, portfolio rationalization or process reconfiguration. When carried out in collaboration with the commercial team and focused on the relevant marketing strategy, these are supported and championed by the commercial team.

Using the three questions above as the basis to build better understanding of the commercial strategy and its requirements is a very practical approach to building improved collaboration between the Commercial & Supply Chain teams. Reviewing some basic standard tools (such as the Boston Matrix or Porter’s Competitive Strategy model) as outlined above can help prepare the Supply Chain team for a productive engagement with the Commercial function which drives useful insights into the commercial outlook and strategy.

These discussions are a critical enabler for driving mature S&OP discussions and decision-making which extends beyond demand and supply balancing and directly enhances a business’s competitive advantage.

I have never seen two demand planners working in the same way. Sometimes I am really surprised how different the same role can be in different organizations – or even within the same organization. There’s one universal truth, however: that interaction with sales teams is challenging, and getting the most out of them requires a well-thought out plan.

The worst-case scenario I can imagine for a Demand Planner is where they are limited to the role of “stock provider” who merely takes figures from Sales and maintains the system. The best-case scenario is when a real partnership is built with Sales teams where they provide not only quality inputs for forecasts, but collaborate with Demand Planners about how to best quantify their input.

Sales Are Not The Enemy

A stereotype outside of Supply Chain is that Demand Planners have the wrong priorities, like focusing on forecast accuracy metrics instead of fulfilling customer orders. I think that all Demand Planners agree that they’ll be in much bigger trouble when there’s insufficient stock to fulfill customer orders than failing to meet accuracy targets. But it is up to us as Demand Planners to communicate how things like forecast accuracy metrics help ensure there’s sufficient stock to fulfill customer orders. A lack of understanding and transparency about what we do erodes confidence in the forecasting process, and can lead to a situation where agreement on final numbers is driven by silo-based interests instead of fact-based analysis. The work of Sales teams and Demand Planners should be complementary, not competitive – and that means being transparent about what is it you’re doing and how it serves the aims of Sales.

Here I share two scenarios of cooperation with Commercial teams, one ineffective and one effective.

How To Ineffectively Work With Sales Teams

Coming to the meeting with pre-defined numbers from both sides is not the best idea. Why is that? Firstly, because two teams are doing the same work, and it is a waste of time for two functions to do the same thing when it can be dome by one.

Secondly, a competitive approach to the numbers is pointless – it does not help the company gain an accurate view of future demand. What’s more, the Sales team is likely to win this pointless game every time for one simple reason: asymmetry of information. Both Demand Planning and Sales have the same historical data but Sales has the advantage of knowing upcoming events that will impact sales orders. By events I mean activities that will not only boost sales like promotions but also other factors that can negatively impact demand (lack of repeatable promotion, loss of distribution, price increases etc.).

At this point we need to ask an important question: Should Sales teams actually be involved in forecasting at all? Let’s move to the second scenario where I will provide the answer to this question.

How To Effectively Work With Sales Teams

Sales should focus on selling, not forecasting. But they do need to be part of the S&OP process. There are 3 major areas where they need to add value to the S&OP process: providing unbiased, quality information; consulting on final figures for the forecast; and providing input to post-validation of forecast accuracy.

I will expand on each of these points:

Providing unbiased quality information: An example here would be promotions by a customer (type of promo and when). The action for the Demand Planner would be to find in historical data what kind of uplift was generated by similar promotions by this customer in the past, and combining it with statistical forecasts for the remaining customers to arrive at a total figure for whole market. The above discussion between teams can happen at the first demand review meeting whose aim is to gather assumptions to prepare the forecast. Methods for including the promo uplift data into the statistical forecast is a topic for very long debate, and I will not go into details in this article.

Consulting on final figures: Once the Demand Planner prepares the forecast based on a combination of statistics and the estimated promo uplift, Sales should tell us if these figures makes sense. If not, what assumptions should be changed or estimated differently? Is the statistical trend wrong? Should promo volumes be projected differently? This discussion ideally takes place at the second demand review meeting before reaching consensus and presenting the forecast to upper management. The level of discussion is not SKU level, but rather product group or another aggregation level that makes sense depending on the business.

Input to post-validation of accuracy results: Updating the plan/forecast is only one side of the coin, similar attention should be paid to post-validation of forecast accuracy and finding the root causes of errors. Here Sales plays a major role as they have access to all market knowledge that helps to interpret actual sales data. An example here is ad-hoc promotion initiated by customers which explains a sales peak that was not accounted for in the forecast. The role of demand planner is to keep track of circumstances that can explain data anomalies.

There are 3 benefits to be gained from proper documentation of forecast error root causes. Firstly, it gives us information to be used in future (like overly-optimistic assumptions for promo sales or new products). Secondly, this information helps us to clean sales history or decide about adjustments to forecasts for corresponding months next year. Thirdly, it means we have documented knowledge that we can pass on to the new Demand Planner when the current one leaves the company or changes his/her role.

The above points can be summarized by below graphic:Summary

Sales’ engagement is critical for a successful forecasting process and, subsequently, a successful S&OP/IBP process. One question that remains is what their actual role should be in the process. Should it be preparing their own high-level estimations or focusing on providing reliable information? I am signing up for the latter. Obviously, information provided by Sales will always carry some degree of uncertainty as customers can change their mind at the last moment.

Sales teams should not hesitate to give their opinions, and be prepared to consult on, and sign off on, the official figures. However, they should not spend time on preparing their own estimations as this is the Demand Planner’s responsibility and area of expertise. Although it takes time to break silos and build trust between functions, the above efforts can deliver better forecast accuracy and better control of planning.

Sales and Operation Planning (S&OP) is probably the least understood aspect in Supply Chain Management. It provides the key communication links for top management to coordinate the various planning activities in a business. The main objective is to develop an overall business plan, which integrates various functional planning efforts, and if S&OP is not integrated and working to a cross-functional plan, the business can fail. Here are the 5 main ways S&OP can revolutionize your company.

S&OP Eliminates The Battle Over Ownership Of Finished Goods Inventory

S&OP is top management’s handle on the business. It provides important visibility into the critical interactions between Sales, Marketing, Production and Finance. Under S&OP, manufacturing’s job is to hit the schedule, eliminating the battle over “ownership” of finished goods inventory. If actual inventory levels do not agree with planned inventory levels, it’s not a manufacturing problem (as long as they hit the schedule). It’s either a Sales and Marketing problem (the products didn’t sell according to plan) or a problem of product mix management in the demand management activity (the wrong individual items were made).

S&OP Means Better Integration Between Different Functions

Better integration between functional areas in a business is one of the major payoffs of S&OP. Once collaboration between the top levels of the functional areas is developed, it can be translated into detailed plans that are in line with top level agreements. This results in a set of common goals, improved communication and transparent systems.

S&OP Means No More Panicked Rushing

Without a Sales and Operation plan, the expectation is that somehow the job will get done, and in fact, it does get done, but at a price. That price is organizational slack:  excess inventory, poor customer service, excess capacity, long lead times, panicked operations, and poor response to new opportunities. Detailed decisions will be made by clerical level personnel with no guiding policy except “get it out as best we can”. The annual budget cycle won’t be tied in with the detailed plans and will be inconsistent and out of date before it’s one month old. An effective S&OP process removes all of these problems.

With S&OP The Whole Company Works To One Set of Numbers

One of the benefits of S&OP is being able to run the business to one set of numbers, whereby Sales and Marketing, Production and Finance all agree on anticipated sales and the company’s ability meet those sales. This inevitability requires collaboration. Top management should lead the cultural change to make that happen as this can only come from the top. An unfortunate but frequent approach is to invest significant time in setting up S&OP but then stepping back, allowing the company to be run by separated performance measurement systems or budgets.

S&OP Allows You To Shape Demand

If demand planners are aware of likely sales, production capacity and inventory, they can figure out to increase profit margins for particular products. If they know, for example, that a particular SKU cannot be produced in sufficient quantity to meet customer demand for the next month, they can then present this information to Sales and Marketing who can promote other products. This is just one example of the powerful ability to shape demand, which can only come after demand planners collaborate with Production and Sales and Marketing.

To Achieve These 5 Benefits, Management Must Do The Following

Commit to The S&OP Process

Top Managements’ first obligation is to commit to the S&OP Process. This means a major change in the organization. The change involves establishing the framework for S&OP, getting the right team together, participating in the process and so on. The change may also imply modifications of performance measurements and reward structures to align them with the plan. As part of the commitment to the planning process, top management must force the resolution of trade-offs between functions prior to approving plans. S&OP provides a transparent basis for resolving these conflicts.

Incorporate S&OP Into Your Strategic Planning

Senior management must be directly involved in the S&OP process, which should be directly related to strategic planning. They must ensure insight gained from the S&OP process is used to drive longer-term planning, and ensure operational plans contribute to strategic goals.

Understand S&OP Is Planning, Not Scheduling

View the S&OP process as a planning process instead of scheduling process. This will seem obvious to many, but in companies without an S&OP process, you can be forgiven for viewing S&OP as simply a means to produce a certain volume by certain dates, when it is so much more. This way, the company goes beyond simply producing a defined amount, and starts thinking strategically to maximize profit. Remember that the operation plan is not a forecast, but a managerial statement of desired production output.

All Functions Must Agree On The Numbers

The operations plan should be a part of S&OP and it should be in complete agreement with the other functional plans (Sales, budget and so on) that make up the business plan. Senior management must foster this integration and collaboration. [Editor’s note: See this guide on developing the Executive S&OP Meeting to reach one number forecast]

Continuously Review The Plan

Reviews of performance against sales and operations plans are needed to prompt re-planning when necessary. Overall, the company must consider continuous improvement to be an important ingredient in further improving the S&OP process. A successful supply chain focused company views S&OP as a journey, not a destination!

Jack Harwell

A lot of attention is paid to the value of demand planning and forecast accuracy as it relates to benefits to the enterprise. These benefits include better production, inventory, distribution and buying plans. Customer deliveries are improved, while excess inventory is reduced and operations on the production floor can perform like clockwork. The “right stuff” is purchased, built, and distributed to the right location on time and in full. However, the effect of demand planning extends upstream to the supply network as well. And, with some effort, the payback can be multiplied to not only help the supplier, but also to further contribute to the success of your enterprise. It’s like a smile, the more you give to others, the more you will receive.

Suppliers rely on the forecast of their customers to make their production and procurement plans. In my experience, supplier support for their customer is proportionate to the quality of forecasts they are provided. When a supplier has multiple customers with varying degrees of demand planning capabilities, the customers that share the most accurate predictions of their demand will receive the most support for their future needs.

For example, when the bottom dropped out of the telecom infrastructure market in 2001, I was director of raw material procurement at a fiber optic equipment manufacturer. We had implemented SAP prior to 2000 (Y2K), and had made some great strides in demand planning and forecast sharing with our suppliers. As a result of our efforts, our suppliers were receiving weekly forecasts for all of the items we purchased from them. Because we had an effective S&OP process and shared our materials forecasts, these suppliers enjoyed a fairly accurate picture of our needs. As the decline in telecom equipment demand unfolded, our suppliers were receiving messages every week that told them to back off on their production and procurement plans.

Demand for telecom equipment dropped so far and so fast, no one escaped the challenges of keeping their inventory levels in check. However, I believe we were in better shape than our competitors. In fact, one of our key semiconductor suppliers confided in me that we received favorable treatment in our rescheduling requests because we had become so reliable in planning our demand.

There are other ways to gain from supplier support as a result of sharing good forecasts. For example, an effective just-in-time program requires a level of supplier commitment that goes beyond a transaction-based relationship. A reasonably accurate forecast is a necessary foundation for a mutually beneficial JIT program. In most JIT arrangements, the supplier takes on the majority of the risk. Without the visibility into true demand provided by forecast sharing, this risk can become quite large.

What are some of your experiences with JIT programs? How did your forecasting process contribute to their success? Are there other upstream benefits of forecasting that you can share?

Jack Harwell
Former Vice President / Corporate Officer
Radio Shack

Joy White

Panel discussions are most interesting when the panelists represent similar disciplines across a variety of industries. At the recent IBF Conference in Scottsdale, each of the 4 panelists were asked about various aspects of the planning process within their respective organizations. The range of topics included the single forecast plan (the one number plan), execution of the plan, use of metrics, frequency of the S&OP review and, of course, talent within the organization. There appeared to be a great deal of commonality and agreement on the various business approaches between the respective organizations. As we might expect, the degree of integration and frequency varied. Importantly, they all shared a very similar view regarding the “perfect candidate profile” and the increasing need for these individuals to develop and exhibit strong leadership skills.

In today’s highly competitive workplace, questions regarding the “perfect candidate profile” are always intriguing. The varying demographics of the workforce, coupled with the increasing use and sophistication of technology and the required “speed to market” make the “perfect candidate profile” an interesting discussion.  Of course in our field of business forecasting and demand planning, we know that sound analysis and mathematical skills are a prerequisite for success. However, the panelists resoundingly agreed that the number one skill required for success is the ability to lead and to confidently influence across the organization, and this ability requires “soft skills”.   It was also acknowledged that these so-called “soft skills” were not necessarily an innate attribute and required training and development. Randy Wilp, Leader of Global Commercial Forecasting at Merck & Co. Inc shared his experience utilizing an outside organizational behavior coach in his effort to build and foster the communication and “soft skills” of his team.

In my own prior experience with managing large inventory planning teams, it has been critical to the success of my organization to be able to not only build a solid forecast and replenishment strategy, but also to be able to communicate this plan to the appropriate business partners. The successful communication and “buy-in” lead to the best execution. This required the planners to be able to communicate their forecasts and plans in easy to understand terms, while clearly articulating the business benefits.  It is usually best to save the “geek speak” for like-minded peers.

As forecasting and planning organizations begin to take on a more front and center role within organizations, should we begin to consider the aspects of more robust leadership training? There is a recent post regarding new trends in Supply Chain Management Review which discusses preparing students for the work world in a pragmatic way. Perhaps it is also time to give greater consideration to the “soft skill” and leadership development as well. What are your thoughts?

Joy White
Supply Chain Leader
IBF Ambassador

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.

Joy White

At the IBF conference last month in Scottsdale Arizona, there were many interesting presentations and discussions regarding new product forecasting.  While the organizations were discrete, ranging from children’s clothing to pharmaceuticals, the challenges remain quite similar.  If accurate forecasting of new products is essential to a company’s growth and profitability, why is it so difficult?

Product forecasting is difficult, new product forecasting is even more difficult. Forecasting is tedious, time consuming, and error prone. However, new product forecasting can be very rewarding, because a large portion of sales comes from new products. The forecast is never 100% right, but it is possible to build a solid forecast and that is accomplished through integration and collaboration.

Steve Tribou, VP of Sales Forecasting and Planning at Carter’s/Oshkosh discussed how the development of “Account Plan Quantification” helped bring an analytical perspective and ultimately facilitate a more collaborative process. Steve’s narrative of events that took place prior to a more collaborative process appears to be very common amongst organizations.

Planning is hard, everything is constantly changing, and it is not as easy as developing the plan and executing to it. In the planning process we must deal with all of the interim change and therein lies some of the chaos we encounter. In an effort to achieve improved business results, we must focus on continuous alignment, realignment and synchronization.

For simplicity, although this is not a simple or linear process, let’s break this down into 3 stages. In his presentation, Steve acknowledged the presence of similar activities in the pre and post collaboration stages as well.

Pre-collaboration Processes

The pre-collaboration stage could be described as a bit chaotic. There was disconnect in the communication – in fact there were various methods of communications. Has anyone ever experienced this when attempting a seasonal planning session? Along with various methods of communication comes varying opinions. There is generally not a lack of people or opinions; it is generally a lack of the right actions. The move from pre-collaboration stage to collaboration is a journey and is often marked with some very tough discussions, distrust and challenging obligations.

The Transition Phase

We all know the difficulty of change should never be underestimated. For any process change to be effective there needs to be adoption across the organization. Generally, we see some early adopters, the meetings start to get interesting, the curiosity factor heightens, and there is movement. There is oftentimes a lot of “push -pull” in the organization.   It is during this time where the journey begins to take shape.

Post-Collaboration Processes

This stage is where the process begins to grow and mature. Trust, which is an essential component, begins to build in and across various business units.  A cadence starts to kick in and while this can be very subtle, it is increasingly felt within the organization and is ultimately manifested in an improved forecast. It must be noted a collaborative process requires continuous improvement and is therefore a continuous journey.

Implementing any collaborative process can be likened to Tuckman’s 4 stages of group development, Forming, Storming, Norming and Performing. The challenges are similar regardless of the industry or the size of the organization. The complexities however, do scale with size and with the degree of integration within the organization.   In my own prior experience, I was part of a large national retail corporation that went from a fully decentralized inventory management process to a centralized process. This was a huge undertaking that took nearly 6 years to complete. Much like the presenter commented at the IBF Conference, the initial period presented major challenges and very difficult conversations. This is all a part of progress.

Joy White
Supply Chain Leader
IBF Ambassador

Maria Simos CEO e-forecasting.com

Teamwork, collaboration, transparency and increased profitability. Sounds like some Disney Magic, right?

Well based on the experiences shared from the panel at the Institute of Business Forecasting & Planning’s kickoff event on Sunday dubbed the ‘Advanced S&OP Practices Forum’ it’s in fact real and achievable.  The panel, which was an opening to IBF’s Supply Chain Planning & Forecasting: Best Practices Conference, spoke to an eager room of over 100 demand planners ready to listen and learn about how to take their own company’s S&OP to the next level.

Tom Wallace who was the MC for the afternoon session, gave us all a history lesson, sharing with us how the real founder of S&OP was not only ahead of his time and changed the way businesses operate, but was also sitting right in the room with us.  Dick Lang created Sales & Operations Planning, also known as S&OP, in the 70’s and sat just three rows ahead of me during the forum.  How lucky of a group was this to have the opportunity to attend this conference with Dick Ling who also would be leading a workshop the next morning called ‘How to Align Sales & Operations Planning with Strategic Intent.’  This elevated the excitement in the room and put the rest of the discussions into a greater context.

Before having the panelists take over, Tom shared some slides as a warm up.  He went over the four fundamentals of demand planning which are demand, supply, volume and mix.  He stressed the importance of looking at demand as being the driver. He went on to explain that if we do so  that demand and supply will become balanced, either by our own actions or external factors whether we like it or not.

There are a few key themes that resonating in all the panelists:

• S&OP will increase collaboration, communication and teamwork
• Top management needs to be involved so needs to be implemented top-down
• S&OP runs your business and needs to be part of your culture

Highlights from the panelist discussion, who Tom dubbed as ‘true innovators:’

Chase Winsam of Whirlpool Corporation – Chase took the mic but said that rather than speak about S&OP, he wanted to sing some karaoke. Instead of breaking into song however, he shared with us how Whirlpool was able to reduce forecast bias from 16% to 2% by implementing stronger S&OP practices, while also decreasing inventory dollars. This was all accomplished while maintaining 90% service levels.  An easy idiom he used during his presentation while showing us some outputs was “Get it graphical then think practical.” It is important to rationally think about the numbers and what they are telling you.

Grant Hoffman from Motorola – Grant got our attention quickly when he started his talk with the fact that Motorola had been losing $400 million a quarter during the recession.  The company’s focus turned to their relationships with their suppliers hoping to reduce shortages. This became a process they now call supplier S&OP.  His words of advice were that you need to start at the top, keep confidentiality when working externally, find the proper decision makers, do not be afraid to commit and to have immediate communication on late breaking news.  It may take up to six months to build a relationship with a supplier, but there is a lot of value in these relationships and they are well worth the effort.

Jay Nearnberg from Pfizer – Jay started his presentation by saying that innovation is so important in a stagnant economy like today (and like in the future as I know we are forecasting very low growth domestically and globally overall).  For Pfizer’s business, there is a strong push towards real-time.  Their dashboard as well as their forecast is updated every day.  Most of these overrides come from key customers, the knowledge of a promotional shift or new product information.  The ways that S&OP add value are manifold: cross functional engagement, the engagement of all  management levels, transparency of assumptions, shifts caused by situations, all departments get on the same page, and scenarios and trade offs are discussed along with pre and post-tracing.

Alan Milliekn from BASF – To round out the panel, Alan’s lively presentation shared how BASF uses S&OP to maximize gross profits globally.  Some benefits they have seen include a shift from local volume orientation (‘just keep running my plant’) to global value orientation (‘let’s make money, let’s make money!’).  Also, there is built in transparency and improved communication as well as improved teamwork and of course, increased profitability.

Wrapping up the presentation, the Q&A session brought about some key points:

• Technology is pushing companies to find competitive edge
• Processes do not necessarily change too much, but people do, most basic thing you can do is continually educate people (like attending IBF events like this)
• First you need to get the basics of S&OP then the enhancements will come, first need to balance demand and supply
• Takes just an average of one and a half hours of executives time each month to be involved

The afternoon forum was a real eye opener and sure got my attention. Especially in the difficult economic times that we are still in, it almost sounds like achieving successful S&OP can be a bit of Disney Magic when it comes to your bottom line.  The lineup of upcoming presentations over the next two days will help showcase case studies and insights on how to demystify some of this and take it back to our companies.