Sales and operations planning

The Shaman’s Journal Now Available

by Lora Cecere on October 17, 2013 · 0 comments

Today, I launched the The Supply Chain Shaman’s Journal. The Journal will be published quarterly, and will be a collection of posts from the Supply Chain Shaman blog. Each Journal is centered around a theme.

It published today in PDF format, and will be released later as an ePub on the Apple iBookstore, and as a .mobi for Kindles on Amazon.  In the meantime it can be downloaded  as a .pdf from the Supply Chain Insights Journal page. Using the link, you can also sign up for future issues as they become available.

In January, 2014 the Shaman’s blog will be four-years old. How time flies…

One of the problems with a blog is that as it becomes bigger, it becomes more and more difficult for the reader to access old posts. And, as many of you know, I like to pound a keyboard. I have posted 1-2 articles a week for over four years.

I wanted to make access to the content easier. So, the design of the Journal is meant to enable readers access what I have written here in an easily digestible format.

The inaugural issue focuses on Sales and Operations (S&OP) planning and features 23 select articles on the subject.

The Journal will publish quarterly.  Each will be a collection of blog posts on a new theme. The winter edition will feature articles on Supply Chain Organizational Design, and the spring edition will focus on the Metrics that Matter. Even though it is copyrighted, consistent with our mission, it is being released today with social sharing in mind, and under the principle of Open Content research. We just feel that content should not be locked behind a paywall. Read it, share it and enjoy!

We welcome your feedback!

Why It Matters

by Lora Cecere on October 1, 2013 · 2 comments

As I work with companies, I often contrast the strategies, approaches and outcomes within a peer group. Over the last five years, I have helped two companies, Sonoco Products and Owens Illinois (OI) with their selection of technologies to improve Sales and Operations (S&OP) planning. Both companies provide packaging materials to the food manufacturing industry. Owens Illinois provides glass products and Sonoco Products provides flexible packaging. Here I contrast their results.

Six years ago, Owens Illinois’ primary question was IT standardization versus the choice of best-of-breed vendor. The decision was a political tug of war. Warring factions undermined progress on business process. IT and the business teams were not aligned. They were unclear on their supply chain strategy and the role of supply chain planning. Complexity reigned in the business and they were unsure how to manage it.

Figure 1.

Sonoco Products, on the other hand, had a clear objective to maximize asset utilization while improving customer service for strategic customers. Their goal was to visualize excess capacity and make it available to enable their sales teams to offer upstream opportunities to their clients. It was their way of “shaping demand.”

As a supplier three to four levels back in the supply chain, life as a packaging provider is tough. Demand is volatile, price is competitive and complexity reigns. Food manufacturers, over the course of the last decade, have pushed costs and waste backwards in the supply chain. Products have proliferated by 37% over the last five years and packaging suppliers are being asked to provide more and more innovation to help the food manufacturers bring new products to the market.

Figure 2.

The companies are similar in size. Sonoco Products is a $4.5 billion company, located in the southern portion of the United States. Their journey to be more market driven with a strong focus on Sales and Operations Planning (S&OP) is now seven years old. Owens Illinois (OI), a $6.3 billion company, manufactures glass containers with headquarters in the Midwest. OI has been more focused on transactional efficiency, procurement and IT standardization.

As I write my new book, Metrics That Matter, I am studying the patterns of corporate performance based on choices in supply chain program execution. A company that is effectively working a supply chain strategy will have a nice, neat pattern at the intersection of operating margin and inventory turns. A company that is not balanced will tend to have a pattern that oscillates with no real trend towards improvement.

Figure 3.

 

Contrast the patterns of the two companies in figure 2. Owens Illinois oscillates with little predictability. While Sonoco Products is losing margin (in large part due to a tough market), they are making improvements in inventory turns. The pattern is much more reliable and they are executing a growth strategy.

So, what can we learn?

A Marathon, Not a Sprint. The story of supply chain excellence cannot be told in  one year snapshots. It cannot be accurately represented by studying two years, or even three. It requires a study of the patterns over a five to ten year period. Supply chain leaders deliver reliability and resiliency in the results.

Conscious Choice.  The journey is about conscious choice and leadership. It cannot be about singular metrics. Instead, it is about managing the trade-offs and improving supply chain potential. The supply chain needs to be managed as a complex system to drive continuous improvement against the supply chain strategy.

The Focus Needs to Be End-to-End. I am teaching a number of workshops this month with well-intended clients that have defined supply chain as a limited function of distribution, manufacturing and procurement. They will make limited progress unless they can redefine their initiatives to cross over and define their go-to-market strategies.

S&OP Matters. Sales and Operations planning done right (focus on the management of the supply chain to maximize opportunity and mitigate risk end-to-end) improves organizational alignment and agility, and improves operational resiliency.

Don’t Waste Your Time on the Wrong Battles. The discussion of which system is less important than moving forward with a system. The supply chain as a complex system cannot be effectively modeled on a spreadsheet. The political arguments of IT standardization often result in one function winning the battle while the company loses the war.

What do you think? Do you have a story to share on the implementation of supply chain strategy? I would love to hear it.