In part three of his series of practical insights blogs looking at the evolving importance of Sales & Operations Planning (S&OP), Alfred Baumbusch, EVP Operations at Maine Pointe, outlines four essential toolsets that drive S&OP excellence and considers why the ability to successfully optimize alignment, synchronization and responsiveness across the value chain may be the key to success.
As increased market pressure on the end-to-end demand/supply chain intensifies, effective and timely forecasting and synchronization across the S&OP process becomes paramount. Most organizations simply lack the advanced best practices to effectively manage complex enterprises and their end-to-end demand/supply chain.
A recent benchmark study by the Global Supply Chain Institute, “Advanced Demand/Supply Integration (DSI) Best Practices,” concludes that CEOs and functional executive leaders must create and manage a single, unified operating culture and plan. This includes rewarding the proper behaviors, executive/leadership measurements being consistent with a single-number system (i.e. in bonus structures) and eliminating bias in functional/discipline measures, and rewards used historically to manage short-term results.
Raising maturity across the supply chain
These findings are typical of what we discover when assessing the maturity of a client’s end-to-end demand/supply chain organization. In our experience, S&OP and DSI practices tend only to be found in organizations operating at a level four and above on the five-level TVO Maturity Pyramid, given those organizations have realized the power of cross-functional and customer-driven alignment. By leveraging the power of good S&OP supply practices with business intelligence from data analytics into a single plan, executives have the opportunity to raise the level of maturity across these functions. This supports the need to anticipate and meet demand through synchronization of the buy-make-move-fulfill demand/supply chain and deliver the greatest value to customers and investors at the lowest cost to business. At Maine Pointe, we call this Total Value Optimization (TVO)™.
The TVO Pyramid (above) shows how a company moves from subpar performance at the base of the pyramid (level one), to Total Value Optimization (level five). The Pyramid has five attributes that make up the supply chain, so the entire organization can be engaged to reach the apex. The three ‘legs’ (procurement, logistics, operations) represent core functional components of the supply chain. Each is built on a foundation of data analytics, and leadership and organization alignment.
TVO helps illustrate how companies that adapt quickly and optimize value, while becoming increasingly customer-demand driven with a synchronized, informed, and forward-looking end-to- end demand/supply chain, will not only survive but thrive. Conversely, companies which fail to adapt are likely to face a steady decline in market share, profitability and market presence.
Cross-functional alignment and synchronization are critical components needed to drive synergy savings and a differentiated, demand-driven end-to-end demand/supply chain and customer service.
Four toolsets will help drive supply-side S&OP excellence:
- Business process excellence
- Organizational structure
- Healthy integrated and collaboration culture
- Advanced analytics
Most efforts will focus on some blend of business process improvement and organizational restructuring. The most difficult one to influence, but the most likely to drive real S&OP results is organizational culture.
For that very reason, Leader & Organization Improvement (LOI) is the backbone of the TVO Pyramid. Both academic research and practical observation lead us to conclude leadership matters a great deal, particularly in the delivery of deep cultural change.
In pursuit of S&OP excellence, it is hyper-critical all four leadership pillars of a company—CEO, CFO, chief demand officer (may be sales or marketing or a combination of both) and the chief supply officer (may be a combination of manufacturing, procurement and logistics) behave in full support of the objective. Above all others, absence of full support from the chief demand officer will doom the initiative to failure. Leader & Organization Improvement must step to the forefront of a successful change effort to drive S&OP.
In part four of this five-part series, I will outline six critical S&OP success factors that have often proved to be elusive.
If you would like to talk about any of the topics raised in this article, please contact me at: email@example.com
Other articles in the Sales & Operations Planning series:
- Part one: The C-Suite Dilemma
- Part two: Why is S&OP so Important?
- Part four: Six Critical Success Factors for S&OP Implementation
- Part five: The Principles that Underwrite Success
Click here to read our Sales & Operations Planning perspectives paper
Calculate the value potential for your business. Complete our TVO Self Assessment Tool ™ and receive an automated Value Opportunity Report. This provides an indicative quantification of the value improvement potential (EBITDA & cash) across your buy-make-move-fulfill supply chain.
Maine Pointe is a global supply chain and operations consulting firm trusted by many chief executives and private equity firms to drive compelling economic returns for their companies. We achieve this by delivering accelerated, sustainable improvements in EBITDA, cash and growth across their procurement, logistics and operations. Our hands-on implementation experts work with executives and their teams to rapidly break through functional silos and transform the buy-make-move-fulfill supply chain to deliver the greatest value to customers and investors at the lowest cost to business. We call this Total Value Optimization (TVO)™.
Maine Pointe’s engagements are results-driven and deliver between 4:1-8:1 ROI. We are so confident in our work and our processes that we provide a unique 100% guarantee of engagement fees based on annualized savings. www.mainepointe.com