By: Daniel Druwe Araujo

Daniel Druwe Araujo — Thu, 08 Sep 2016 15:55:27 +0000

Great subject brought up, Valentina.
It acknowledges the difficulty of organizations to understand the roles and relationships of Strategic Management, S&OP and functional processes.
From some perspectives, S&OP is the most key process for business management, as it links and coordinates strategic management and operational management, and across all relevant functions/areas of a business. All of this is done in true S&OP with the knowledge and authority of top executives of the business. I.e., the S&OP decisions are final (until the next cycle or until a really dramatic change in conditions require revising).
The importance of coordinating NPI and the other processes of the business has been recognized by Oliver Wight, the recognized defining entity for leading edge S&OP (or now IBP). Important enough for Oliver Wight to define Step 1 as the Product Review. Not just a side consideration in the Demand Review, but a full review on itself, preceding all the other steps.
This definition of step 1 makes a lot more sense than the other one, which defines step 1 as data gathering. Data gathering is inherent to each of the steps of S&OP and not a step that can be done once for all the steps upfront.
Therefore, dedicating a portion of S&OP to NPI or, more appropriately, Product Management, is definitely necessary, and preached by Oliver Wight for many years already. I stress Product Management rather than NPI because it is not about “just” New Products. It is critical for Product Management to manage the portfolio of products (and services), including discontinuation, changes and balancing.
Nevertheless, there is another critical point to stress that is the relationship between operational processes and the S&OP/IBP.
S&OP/IBP is a cyclical (rather than continuous) process that analyzes, the recent past and current situation, reviews needed plans for the medium term (18-24 mo), makes decisions on performance management and on medium term plans and policies, and issues the decisions, plans and performance management actions to the operational processes. All of this in line with strategic directions and coordinationg all aspects of the business with a business rather than functional view.
Demand, Supply, Finance, Human Resources, Capital Resources and other aspects of the business need all be planned, executed, controlled – in summary, managed – by other processes. And Product Management is no different – it needs an operational process to manage products in conformance to S&OP but apart from S&OP.
One important thing about Product Management is that it tends to start even prior to the S&OP horizon. It may be even 5 or more years in the future. This requires the Product Management to relate not only to S&OP and Master Planning but also to Strategic Management.
Therefore, we should think of Product Management as a process running in parallel to both Strategic Management and S&OP. Neither Strategic Management nor S&OP should be thought of managing products – this should remain a responsibility of the Product Management process.
Product Management should interact with Strategic Management on defining the avenues to pursue and then follow the avenues decided by Strategic Management.
When the Product Management plans and actions start to show in the S&OP horizon, Product Management starts to interact with the S&OP.
The S&OP then assumes the responsibility to match the plans, decisions and actions of Product Management with the strategic directions, with the plans of other functions and with the management of business resources.
If Product Management requires some scarce resources in competition with (e.g.) production, it is up to the S&OP to decide on how to allocate the scarce resources.
If Product Management indicates that the launch of a certain product may be delayed, it is up to the S&OP to analyze that against the financial, marketing and other strategic and tactical objectives and decide on the best choice.
If some change on the Product plans will affect demand, supply or finance or, conversely, if some changes in demand, supply or finance may affect products, it is for the S&OP to analyze and decide.
All of these relationships have been chartered by Oliver Wight and been implemented in leading companies for some years.
Unfortunately, most companies in the market have been laggards with regard to S&OP. This have been favored by education and consulting organizations – including APICS – that have themselves been laggards in the message they transmit to the market.
Valentina’s post is a very good and timely alert on the subject, with very good arguments!

By: Neal Goffman

Neal Goffman — Tue, 06 Sep 2016 14:49:28 +0000

Great blog Valentina. Collaboration is key, I agree. Additionally incorporating various lines of business within the organization, all using the same data, is an integral component. http://www.vanguardsw.com

Comments on: Dedicating an Independent S&OP Process for New Product Planning

By: Daniel Druwe Araujo

By: Neal Goffman