A couple of months ago I received a request from the Production Management Institute to give my input and prioritize from a list of 9 topics, the ones I considered more relevant to “hit the nerve” in competence building in the organizations, according to my experience.
I replied that S&OP/IBP (I consider both almost the same) would be the most important in my opinion, to create a better awareness and understanding of how to build organizational alignment, especially during these chaotic and complex times. However, I also mentioned that in order to reach that understanding, and have fruitful “demand vs supply” conversations it would be better, in my opinion, to start with more basic topics.
After some weeks, Andrea Walbert, Managing Partner from the PMI, shared with me the results of the survey and some of the data collected during the process. Several companies represented by different roles at all levels, from Demand Planners and Supply Chain Managers to Vice-presidents of Global Planning, within different types of industries, ranging from aerospace and automotive, to textiles or telecommunications; gave their input to contribute with their experience.
Not surprisingly to me, both S&OP and IBP occupied the first places in the list of the most important topics to be prioritized by companies to build their competences. From the results, almost 70% of the surveyed companies answered that both IBP and S&OP should be in the top 2 of the skills to be developed.
In my experience working with companies and mentoring individuals to establish the S&OP process from scratch, the most common challenge to overcome is the “buy-in” from Top and Senior Management.
Lacking the support from the company’s top and middle management is the main cause of failure. And in most cases, that lack of support is a result of a lack of understanding (knowledge).
Lora Cecere, founder and CEO of Supply Chain Insights, shared once to the Association of Supply Chain Management that “…those companies with a high degree of success with S&OP state 60% comes from behavior and cultural change”. She also mentioned that the other 40% is about the process structure and systems. Without having made a deep analysis myself, I have seen real-life implementations fail due to the missing commitment and accountability especially from the highest levels in the organization, even when having the best digital tools, and the right structure in place.
In my opinion, in order to drive that behavioral and cultural change, you really need to walk the talk, and that you cannot do without understanding the basics of this process and the impact it can have in achieving the strategic objectives of the organization. This is one important reason to improve this competence.
Even in companies that have already implemented an S&OP process, the main difficulties for improving its maturity are mainly related to misunderstandings of the process’s purpose, steps, and objectives. It is not uncommon to hear Senior Managers blame The Process for their inability to get the expected results, saying phrases like “…we need to reengineer the process…”, or “…we need to make a value stream map to redesign it…”. However, in practically all these cases, the root cause is on what Mrs. Cecere pointed out: Behavior.
From the process assessments I have been able to participate, the low level of maturity is mainly the result of different misunderstandings from the participants of what they know this process is and what it is not. Normally confusing the process, with the ability (or inability) to get relevant information, or with scheduling meetings not fitting Top Management’s busy agendas; just to mention a few.
In fact, according to Gartner “Nearly 70% of the companies are stuck in the Reacting and Anticipating S&OP Phases”; meaning between levels 1 and 2 (out of five) from the consultancy company’s maturity model. Being in one of these two first levels means the organization is focused mainly on firefighting, working in silos, and with limited collaboration. One more reason to invest in improving the competence.
Nevertheless, the S&OP process is very simple, and the benefits that result from a successful implementation are considerable, for both customers and the same organization; tangible, like better service levels, optimized inventories, reduced costs, better utilization of assets; but also intangible, like better collaboration among functions, better working environment, focused on planning for the future, rather than just firefighting and reacting to today’s volatility. This requires first of all understanding, that can only be acquired through learning and education, starting from the Top.
With the results of the survey conducted by the PMI, it seems to me that most companies acknowledge the importance of improving their literacy on S&OP/IBP. I would just recommend to do it as soon as possible, before the misunderstandings create wrong behaviors, which eventually create the wrong culture. Once there is awareness, it is up to us to do something about it.
