After 20 years of implementing S&OP, our case studies and experience highlight there is no one S&OP solution design, nor indeed one level of granularity (detail) at which S&OP operates. Effort has to be focused on where the benefit will materialise and how the solution architecture fits with organisational capabilities. Management should be looking for the necessary insight to make robust decisions and reduce risk.

Some things however remain constant – a process typically with a monthly cycle, starting with demand management and forecasting, through supply and capacity planning: clear and consistent reporting, with KPIs that reflect the business structure and focus: a process that raises financial and business issues to the right management level for decision making. In all of this, S&OP emerges as a process, not a technology, and a means of generating ‘internal’ collaboration.

Business Model

As a result of different combinations of complexity, S&OP implementations must be tailored. Process architectures should be informed by the segmentation resulting from the demand to supply complexity and the internal process complexity. This influences how a business chooses to organise itself to serve the market, its business operating model.

Some companies have complex market structures and multiple plants i.e. many-to-many type relationships, which require a focus on consistency of demand management and supply reviews; this is  typical in Pharmaceuticals, Simpler market relationships, such as a national food manufacturer, can follow a more straightforward approach.

Process Complexity
Process complexity is heavily influenced by the barriers to process implementation. A recurring issue is the measurement of work centre capacity being defined in weight rather throughput and mix (time being the only true capacity!): resulting in compromised capacity judgements. This often combines with poor data integrity and investment in systems misaligned with investment in good process: creating barriers to improved ways of working.

Structural system fragmentation and the manufacturing and supply structures also drive process complexity.

Companies with robust ERP systems are able to focus on configuration within the system and generation of reports using existing reporting capability e.g. COGNOS or Business Objects. Organisations with fragmented systems need far more emphasis on interim tools, utilising an external database, to enable the aggregation and dis-aggregation of data, to facilitate comparison of supply and demand.

Companies often have a dominant function that which drives behaviours. For example, dominant marketing or product development may result in product proliferation and many new product launches, with less operational focus given to the impact on production and working capital. Careful definition of KPIs is important to engender a more balanced approach.

Process complexity combined with product proliferation leads to fragmented demand and a long tail of unforecastable products. The resulting production and inventory challenges require greater management focus and attention, with aggregated reporting, and management by exception, prevailing.

 Different Challenges and Complexity

Case 1: A division of this Healthcare company were experiencing strong market growth with their products at the premium end of the market. The challenge was planning to service that growth across multiple markets, all at different phases of development and product roll out. There was considerable focus on challenging the forecast and understanding how the new product programme would ‘fit in’ while avoiding service problems.. The key was deciding when to invest to ensure that capacity growth stayed ahead of the market.

Case 2: For this pharmaceutical company bulk production and packaging is geographically separated with long lead times experienced; the ability to interrogate the situation was very limited, given the systems lacked status reporting. Forecasting shifted from being a number generation exercise to one of interrogating the forecast with strong demand management communication. Supply management rules were formalised, enforcing frozen zones in capacity scheduling and strict compliance measures on production batches.

Both cases had different starting points and objectives, so the focus of LCP's activities were tailored and informed by a business review and a suite of diagnostics to ensure the resulting solution delivered value where it was needed.

Our Tailoring Process

LCP analyses the business prior to process design to ensure implementation is tailored and informed by established facts:

 1.     Supply Chain Diagnostics – our RapiSCAN® approach quickly untangles operating issues, addresses points such as forecast error and validates true performance at all points across the supply chain. It can also address product portfolio performance and the impact of product lifecycles.

2.     Process Simplification – mapping existing processes and capability gaps leads to a more robust  process requiring less manual input. Clearer system requirements make supporting tools and report design easier. Invariably processes are simplified.

3.     Interim Tools – system fragmentation or lack of capability often results in development of an interim tool to generate a suite of reports on the status of supply and demand. Getting value and volume conversion is essential to enable supply chain performance to inform all functions, not just operations.

4.     KPIs – redefinition of metrics is frequently required to facilitate cross functional working  and help resolve conflict.

5.     ‘RACI’ Definition – redefining roles and responsibilities is required to establish how responsibility and accountability may have changed; particularly important where the operation and market structure relationships are complex.

Our tailored process builds on a Business Value Analysis to define clear improvement targets (customer service, inventory and resource efficiency, capacity management, time compression), as well as support growth and business change, resulting in a focused improvement programme.

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