Managing Automation - January 2009 - (Page 44) [TRANSFORMATION] Kent Wegener says Otis Spunkmeyer expects to save $3 million to $6 million on inventory spending once its integrated S&OP process is in place. “The old system was based on what was safety stock and other forecasting errors. done previously,” Wegener says. “Now there is At this point, Otis Spunkmeyer’s inventory a view of how demand for the different product savings target is only partly realized, Welines is changing going forward. That gives gener says. But there has been a palpable our planners a lot more confidence to reduce improvement. “We have a much tighter inthe amount of safety stock.” tegration of the manufacturing plan with the While Otis Spunkmeyer is already reaping sales forecast, which we never had before. the benefits of a front-end financial planning That is a big deal,” he says. tool that provides both a sales forecast and a THE NEW MODEL way to track P&L on the balance sheet, the planned addition of a back-end demand manIn today’s economy, businesses can’t afford agement portal will provide a rough view of not to have an efficient S&OP process. In a capacity constraints across the company’s recent survey of more than 800 companies, four manufacturing facilities. The pending Aberdeen reported that S&OP is one of the planning portal, from John Galt, will slice top two focus areas for manufacturing comand dice the information based on how much product was sold in the “We have a much tighter integration of past, show seasonal spikes, and the manufacturing plan with the sales provide a view of actual inventory forecast.” — Otis Spunkmeyer’s Wegener and production capacity conditions. Together, these two systems close the panies — behind supply chain visibility (see S&OP loop by balancing supply and demand. chart, p. 45). High interest in S&OP can be Typically, S&OP processes are supported pinned to rising supply chain costs, including by a mixture of software applications rather transportation and inventory carrying costs; than a single, stand-alone system, experts say. increased customer ser vice expectations; Indeed, S&OP is not a and a volatile market resulting in high detechnology per se, but mand uncertainty. a process that comBut the report, “The Supply Chain Execubines budgets, finantive’s Strategic Agenda 2008,” notes that very cial forecasts, manufew companies use S&OP effectively. To be facturing, inventor y, successful, companies need a way to collect the supply chain, and, data, ensure that it is clean, and conduct perhaps most impor“what if” analyses. There also must be active tant, people. participation from the different parts of the or“The S&OP process ganization, the report says. is all about deciding “Companies have a fundamental gap in what is the most optiterms of how they do financial planning and mal way to run the how they do operational planning,” says business from an opNarayanan Viswanathan, supply chain and erational perspective,” logistics research director at Aberdeen. says Kai Trepte, vice “S&OP needs to evolve into a more intepresident of sales and grated business process, and it should be services for John Galt. bidirectional,” meaning financial goals drive “But the real value-add the S&OP process, and if the manufacturis that S&OP helps to break down the silos. ing facility doesn’t have enough capacity or Without it, you have people selling and they enough demand, that should be reflected in are always unhappy with the people [producthe financial targets. Right now, “there is ing] the product because there is no visibility not one solution that has all of the pieces into what the issues are. together. There is a gap in the marketplace,” “The real game changer is to compare all of Viswanathan says. the points of view and to understand the Privately held Elkay Manufacturing Co., a gaps,” Trepte says. “Then you move the maker of plumbing products, best known process from reacting to managing the gaps. for its stainless steel sinks and faucets, has You understand where you are on track or off more than 5,000 employees, 16 production track and can put the program and plans in plants, and 14 distribution centers. When place to close those gaps.” John Hrudicka joined the organization two In addition, the sales and operations planyears ago as vice president of finance, his ning process benefits from better sales forefirst priority was to organize the company casting, which will reduce the amount of around financial accountability. ma January 44 2009 Photo courtesy: Otis Spunkmeyer
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.