The following is a guest commentary that is published on the Supply Chain Expert Community website.

This author just returned from the Supply Chain World North America 2012 conference, sponsored by the Supply Chain Council, which was held this week in Miami. The theme for this year’s gathering was Taking Supply Chains to the Next Level, and as was the case last year, the speakers were extraordinary and the messages fairly consistent.

I had the distinct opportunity to moderate a panel consisting of various well noted supply chain thought leaders and influencers. The panelists included:

Steven A. Melnyk, Professor of Operations and Supply Chain Management, Michigan State University

Roddy Martin, Senior Vice President, Global Supply Chain Practice, Competitive Capabilities International (Former Vice President at AMR Research/Gartner)

Matthew Davis, Research Director, Supply Chain, Gartner Inc.

Bob Parker, Group Vice President, IDC Manufacturing Insights and IDC Retail Insights

One particular question that I posed to the panel was on the topic of S&OP and included the following:

Many companies are now embracing sales and operations planning (S&OP) processes as a key mechanism to align anticipated product demand with supply and operations requirements.

What do you believe are the logical next steps for organizations in their S&OP journey?

Do you believe that the benefits of S&OP are being overhyped?

In the spirit of education and continual learning, I wanted to highlight with this broader supply chain community some insightful responses from our panelists regarding this important topic. Too often, as a community, we tend to get wrapped up in project management thinking, viewing an existing process in the lens of sequential steps.  Sometimes it helps to take pause and instead reflect on the overall business and supply chain outcomes required from an important process such as S&OP.

All the panelists were in agreement that S&OP is not a short-lived, vendor-hyped process and is not going away anytime soon. They characterized S&OP as a journey toward multiple outcomes and benefits. What is most important is knowing what the current and required maturity level should be.

Matthew Davis observed that S&OP can be positioned as a means to determine where decisions and what decisions need to be made regarding the need to represent the one face of the firm to customers.  It brings together teams that directly touch and/or influence product demand and supply, along with those responsible for influencing resources or making decisions as to options. The activities incorporated are generally focused on demand shaping or the ability to influence and respond to changing customer needs.  In terms of future needs, with more and more manufacturing and service firms positioning product offerings as “solutions-centric”, the process will need to synchronize a combination of product, technology and coordinated services needs. As an example, in the high tech industry, a product could involve a combination of hardware, software and services coordination.  All of this implies that the planning process changes from that of materials and physical needs to further include a broader context of project management based synchronization.

Technology’s role in the process is to help overcome time latency and aide in the ability to integrate information with the capabilities needed to influence and respond to customers. A broader scope of product solutions adds a project management dimension to the process.

Bob Parker added the need to incorporate portfolio, situational and scenario based analysis to manage products, tradeoff decisions, as well as to mitigate risk, with an overall goal of continuous planning. He cited as an example, Procter and Gamble’s circles of cadence, involving strategic, tactical and operational decisions that need to be coordinated.  The S&OP process never ends, it is continuous.

Professor Melnyk added the need to focus the process on required business outcomes, not so much in the sense of hard metrics, but on the required outcomes needed to satisfy customer and business needs.

Roddy Martin added that the future of S&OP is framing the process differently, as a journey toward integrative decision-making. Too often, S&OP teams rush to include senior executives in the process without the process maturity, and the right level of information that can context business impact or business options. Having arguments as to the accuracy of information or the meaning and implications of information, chases senior executives away and can derail efforts. That is perhaps, the worst mistake. Executive S&OP is the summarization of all business planning and execution across various time horizons, along with the business decision implications related to resource plans.

What I took away from these combined insights is that we as a community may be framing the question of the future of S&OP in an improper context.  The future is a given, the opportunities are enormous, but our context and lens needs to broaden.

Bob Ferrari

This week, SAP is taking advantage of a supply chain focused conference sponsored by the SAP Insider publication to unveil the vendor’s new application, SAP Sales and Operations Planning (S&OP) Powered by HANA. Supply Chain Matters had the opportunity to be briefed on this new application in early February, and while the application has some long-term potential, the initial release may have been rushed to market.

This much anticipated application has been in the development pipeline for well over a year, and SAP has not helped its customers to overcome confusion as to SAP support for a company’s S&OP process.  Another composite application supporting S&OP was already made available to customers which does not have anything near the potential of the HANA powered application. Customers had to do their homework to figure out what the SAP long-term S&OP support plan may have been.

SAP HANA is marketed as the next wave of in-memory computing technology and represents an information appliance strategy where all key data is readily available on a HANA platform, avoiding the need to tap the SAP Business Suite applications for needed access to supply chain related information.  Supply chain IT teams should view HANA applications as an alternative to the classical Business Warehouse (BW) form of storing key planning and decision-support data. Supply Chain Matters has previously shared our belief on the market game changing potential for HANA based applications, but that from the mission critical supply chain and supplier relationship lens, HANA is yet to be tested.

This latest S&OP support application was designed to incorporate analysis of product demand forecasting, consensus demand planning, material and capacity restraints, revenue and profitability analysis, inventory target setting, and other analysis related to support of the S&OP process. The application however does not currently incorporate SAP’s inventory optimization extension application nor does it seem to incorporate inputs from the Response Management Powered by IKON application.  On the positive side, the application makes extensive use of dash boarding to visually represent data and also incorporates use of Streamworks for support the social aspect needs of the S&OP process, namely the constant sharing of data.

Supply Chain Matters was unable to secure a demo of the application actually in-use and thus we cannot currently comment on the overall ease-of-use of this application.

This latest S&OP support application had its pilot release in November of 2011 but was targeted to a select group of pilot customers. The go-to-market release occurs this quarter, but again with limited availability to a designated controlled group of customers. The release includes limited use of planned functionality, and no optimization routines, just heuristics.  There are also no feeds from SAP Supply Network Collaboration included in this release. Unilever has been identified as a current pilot customer.

Another consideration for evaluation teams is the fact that this application is current only offered as an on-demand SaaS based platform. We believe that this was a purposeful decision by SAP to insure the overall performance of HANA based applications. While many of SAP’s HANA based composite applications released to-date have been much hyped, very little have involved mission critical process support such as S&OP. It remains to be seen whether customers will embrace a public hosted platform or instead require SAP to provide a private cloud option. For its part, SAP is assuring customers that its HANA hosting process will not be multi-tenant and will involve secure lines. To date there is but one hosting center located in the U.S., with another planned later for Europe.

The pricing of this application is still a work-in-progress and will be predicated on subscription based model pegged to the size or scope of the S&OP process. Also unclear is how many different SAP licenses will be required to actually support the application.  Supply Chain Matters is of the view that this application could, in the end, be rather expensive.

For all of the observations noted above, we believe that SAP has rushed this application to market, probably to either satisfy internal product management or attract early adoption lighthouse customers to gain experience with the application.  Since much of the promising features are a work-in-progress it may behoove SAP supply chain customers to take a wait and see approach to this application or if under time constraints, explore best-of breed S&OP process support options.

Bob Ferrari

©2012 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog. All rights reserved.

The following also appears as a published guest commentary on the Supply Chain Expert Community web site.

The one year anniversary of the tragic earthquake and tsunami that impacted northern Japan was by many accounts a game changing event for global supply chains. In a recent Supply Chain Expert Community blog posting, blogger Jim Fulcher makes mention of recent research findings from the Business Continuity Institute indicating that one year after, 82 percent of companies that reported supply chain disruption have confirmed some changes to their supply chain strategy, with 12 percent indicating significant changes implement.

The notion that no company is immune to such risks, even one that has incredible influence and buying power was brought forward last week in conjunction  with the announcement from Apple of its latest generation iPad tablet computer. The Wall Street Journal featured an article that extracted from two individual teardown analysis of the new iPad performed by firms UBM TechInsights and IHS iSuppli. The UBM analysis “found components with the same functions made by at least three manufacturers in different tablets.” Specifically, Apple has multiple tablet production sources for device memory and high-resolution display. NAND flash memory came from Micron Technology, Hynix Semiconductor along with Toshiba Corporation, a previous high volume supplier of memory for Apple iPhones. The new highly touted iPad high resolution displays were determined to be sourced from Samsung Electronics, LG Display and another company not conclusively identified.

While the strategy may not be a surprise for those who may know of Apple’s internal supply chain practices, the fact that a diversified sourcing strategy is expanding is another indication of the new importance of active supply chain mitigation has become. UBM and the WSJ both noted that the breath of suppliers is one of the most notable elements of the recent teardown of the next generation iPad and further speculate that the reason may be a sign that Apple is more actively practicing supply risk mitigation because of the past Japan and other disruptive incidents.  A glance at the suppliers of mention also triggers the thought that each supplier’s main operations are located in different geographic regions.

On Supply Chain Matters we recently dwelled on the one year anniversary and noted specific actions that automotive manufacturers Toyota and Nissan have implemented as a result of learning from the recent quake. Toyota alone discovered that approximately 300 production locations could be at risk and has now asked these specific suppliers to implement risk mitigation measures. Last week, community blogger and Kinaxis executive John Westerveld added his commentary that it is shame that if often takes a significant event to make all of the organization sensitized to the importance of assessing supply chain risk and developing risk mitigation strategies.  Jim also argues that supply chain risk management should be integrated under the umbrella of the Sales and Operations (S&OP) planning process because of its current scope, process frequency and data utilized to make decisions.   This author happens to agree with Jim and encourages our community to have a dialogue of its own regarding this important topic.

What we are now beginning to understand is that even Apple, the largest global supply chain influencer, who managed to come through the Japan tsunami and later Thailand floods incidents relatively unscathed, has implemented discernable supply chain risk mitigation.  The takeaway for all others is that like other areas of supply chain capability, the gap among leaders and laggards continues to widen, and supply chain risk mitigation is another critical capability within this gap.

Once again, are you educating and influencing your senior management to the need for more active risk management identification and mitigation strategies?

Do you believe that this responsibility falls under the umbrella of supply chain management, as opposed to finance or enterprise risk management?

Do you view the S&OP process as a natural extension to inclusion of supply chain risk mitigation?

One year is a long time in the current dynamic clock speed of business.

Bob Ferrari

Supply chain management executives are tasked with many decisions every day, stemming from operational snafus, unplanned changes in supply or demand, or tactical decisions related to deployment of materials and resources.  This includes the ongoing participation and decision-making involved in the company’s sales and operations planning (S&OP) process.  In the past, decisions related to supply chain software needs and associated IT platforms were often deferred to an IT support team or peer IT executive.  That situation is quickly changing.

With the advent of cloud computing, a supply chain executive must now be able to independently assess the need for process enhancement, appropriate software application and IT platform.  The primary reason is that cloud computing options present opportunities to provide more advanced technology while allocating the cost as a recurring operational expense, sometimes under the functional budget.  Like it or not, this implies that today’s supply chain executives need to understand the differences implied with a cloud offering, and specifically the differences implied in information security or multi-tenancy.

Let me share just one example.  With many of the newer S&OP management and support or control tower like applications, vendors offer a cloud computing platform deployment option.  As one example, SAP’s pending S&OP powered by HANA application will initially only be a hosted, cloud-based offering.  When considering any deemed mission-critical application, one in which highly sensitive data resides such as an S&OP process, functional evaluation teams will need to determine how such data is stored in the cloud, what security measures are being taken to protect that data, and how the software vendor will assure protection of that data.  In this realm, executives will experience terms like public and private clouds, single and multi-tenant, peak-load capacity, etc.

We would like to offer one resource to help in your understanding.  Over on Hewlett Packard sponsored Cloud Source Blog, bloggers Christian Verstraete and Laura Mackey have provided an ongoing series of commentaries directed at helping non-IT teams understand the meaning and tradeoffs of these new cloud computing options.  In their posting, The business aspects of Cloud: Part 5 – Do you need multi-tenancy?  the authors do a great job of explaining the intricacies of these options.   We recommend our readers absorb this series along with other educational commentaries found on the web.

The option of cloud computing can provide a viable alternative for more timely implementation of select advanced supply chain focused technology with a more attractive overall cost.  Functional executives must, however, enhance their knowledge and understanding of the inherent architectural tenets involved in cloud and other platform offerings.

Cloud is a good option when you understand how to appropriately evaluate the options.

Bob Ferrari

©2012 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog, all rights reserved.

Supply Chain Matters has previously noted that in these challenging business times, even the best organizational supply chains can experience a snafu.

Procter and Gamble, on just about every influencer’s listing as one of the top rated supply chains, is experiencing an uncharacteristic supply snafu which is gaining wider visibility. The timing is not ideal since P&G recently disappointed Wall Street by reporting a 49 percent drop in quarterly profits (quarter ending Dec. 31), a hefty write-down of previous acquisition costs, and 1600 planned job cuts.  The Wall Street Journal reported that P&G lost market share in a greater portion of its business lines during the past quarter partly because competitors held back on product price increases while P&G raised prices. P&G is now reversing some of these previous price increases.

The supply snafu involves the market introduction of a new branded line of Tide Pods, a capsule blended laundry detergent that was originally planned for market introduction in August of last year.  P&G product management had to push the market entry date to this month, and it now appears that supply constraints may limit how much supply will be available at retail outlets to support a broad product launch.

An article published on the Cincinnati Business Courier web site cites a Deutsche Bank analyst as indicating a second supply delay involving Pods and that P&G is communicating to retailers that constraints will limit supply for shelf displays only, and that off-the-shelf volume promotions should be timed for no sooner than July of this year. Noted was that the “three-chamber unit dose” delivery system for Tide Pods required special manufacturing processes to be developed. A spokesperson for P&G noted: “Unfortunately, we recently experienced unexpected challenges as we ramped-up new manufacturing capacity and processes in mid-November and December. However, we continue to see improvements in the manufacturing processes and are confident we will achieve the manufacturing capacity we expect on Tide Pods.”

An article appearing on AdvertisingAge noted that P&G appeared to have a first-mover advantage in the biggest laundry innovation in 25 years, but these latest supply setbacks provide an opportunity for laundry detergent competitors to launch their own versions of blended product.  That article notes: “A slew of ultra-concentrated detergent “packs” that are slated to hit stores in February are expected to ratchet up marketing outlays in the category by nearly $300 million.” The article also cites an executive at a P&G competitor indicating that “retailers are furious” and that P&G’s sales force is “having to use up chips saying they’re sorry” for changing plans twice in six months.

While competitors will seize on market opportunity, P&G as a leader in global supply chain capability will eventually bounce back and manage this Tide related supply crisis. Articles have also noted that P&G has complete patent protection on this new formulated product. As is often the case, lessons will be learned, especially regarding the alignment of product management, sales, marketing, and global supply planning in new product introduction involving highly complex manufacturing processes. There well may be lessons related to the executive S&OP processes, and in handing competitors an unplanned opportunity to seize on supply constraints.

We suggest that the takeaway for readers is that even the best supply chain teams can stumble, and when it occurs in the public limelight, when disappointing financial news is being communicated the headlines well become magnified.

Bob Ferrari

©2012 The Ferrari Consulting and Research Group LLC, and Supply Chain Matters.  All rights reserved.