Managing Automation - March 2008 - (Page 35)

a demand planning meeting to consolidate all product forecasts; capacity and supply planning; a pre-S&OP meeting of managers from sales and operations; and the executive S&OP meeting with top management to reconcile any perceived conflicts or incompatibilities. For the most part, this model has sur vived as the de facto standard. The description may be succinct, but when people get involved, it rarely yields a color-bynumbers success. J. Paul Dittmann has seen this firsthand. As director of the Office of Corporate Partnership at the University of Tennessee and former head of global logistics at Whirlpool, Dittmann often conducts S&OP audits of manufacturing companies. The audits have turned up interesting variations on the classic process, including employees at one manufacturing company who told Dittmann they had an S&OP process in place, but it didn’t include representatives from sales. Another started out with sales involved, but found that meetings were veering into unrelated discussions. To get things back on track, the other participants simply stopped inviting the sales team. Unfortunately, that’s where many companies find themselves, Dittmann says. “There’s all these errors, and generally this is what happens the first time companies try this.” The most nettlesome aspect of the process, experts say, is the coordination required. S&OP hopefuls must corral constituents from sales, marketing, manufacturing operations, procurement, logistics, finance, and the executive suite and force them not only to interact with one another regularly, but also to take one another’s activities into consideration and make realistic efforts to align their goals. In most cases, experts say, the initial reaction is pushback. The thought of spending more time America’s Commercial unit, which reduced inventory and simultaneously saved $20 million and freed up $500 million in capital; Leggett & Platt’s Hoover plant, which saw a 50% improvement in finished goods record accuracy, a reduction in weekend overtime shifts, and a jump in equipment efficiency; and pump maker Weir Floway, which attributes 50% year-on-year growth and a tripling of its profit margin to its success at S&OP. THE LATEST WRINKLE The traditional enabler of S&OP has been Microsoft Excel, which helps companies organize the sales forecasts and histories that inform the process. Even today’s leaders in specialized S&OP software admit the ubiquity of Microsoft’s spreadsheet program. “Who doesn’t use Excel?” says Joe McConnell, CEO of software provider McConnell Chase Software. The application has its limitations, however, including a lack of master data management. If 15 product managers add forecast data to 15 different spreadsheets and pass them to another team member who manually rolls them up into one, tracing the origin of the data becomes onerous at best, and that information turns stale as soon as it leaves the originators’ hands. Another hindrance is Excel’s inability to run complex what-if scenarios. In Ventana Research’s most recent survey on S&OP, this ranked as the most desirable software feature for companies undertaking the process. Steve Hochman, supply chain research director at AMR Research, sketches a typical thought process: “What if I were to change price or volume? What if I were to invest in overflow capacity and what impact would that have on my ability to hit my six-month or my annual operating target?” That what-if capability underlies the latest wrinkle in the S&OP process — integration with the financial and business plans. Manufacturers with advanced S&OP strategies consider not only the projected market demand for their products and the company’s ability to fill that demand, but also the financial goals of the business plan, according to experts. The new objective of S&OP, in Ventana’s words, is “to enable decision-makers to reach consensus on a single operating plan that allocates critical resources to reach corporate performance targets.” Ventana refers to this as operational performance management. AMR cites many of the same objectives, but prefers the term “integrated planning.” Split the difference and the result is the same: a process that’s better integrated into a company’s business plan and financial performance. Here again, realism plays a role. If the busi- “If you don’t have [top-level] support, it’s virtually impossible to connect the dots by aligning the functions.” — J. Paul Dittmann in meetings for S&OP inspires many naysayers. But management must overcome the dissension. “It’ll save you hundreds of hours by investing five or 10 hours,” says John Dougherty, a principal at consultant firm Partners for Excellence and co-author of the book Sales and Operations Planning — Best Practices. Dougherty and others have seen the results of a successful S&OP process, and stress that the effort is well worth it. Oliver Wight cites benefits from its recent engagements, including Caterpillar North Photo courtesy: J. Paul Dittmann 35 March 2008

Table of Contents Feed for the Digital Edition of Managing Automation - March 2008

Managing Automation - March 2008 Contents Take 1 Mailbox Mitsubishi, IBM, and ILS Team Up to Make Integration Easy for Automakers Former Agile Exec Takes the Reins at Arena Solutions The Next Phase for 2006’s PM Award Winner Integration Firm Boomi Redesigns for On-Demand Ex-Wonderware Chief Takes Helm at Apprion Notes Cover Story: A Rare Breed Special Report: Where are Control Architectures Heading? Transformation: Back to Reality Integration: Getting Standards Under One Roof Industries: The Quest for the Perfect Order Product Scan Advertiser Index Next

Managing Automation - March 2008

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