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

The following posting can also be viewed and commented upon on the Supply Chain Expert Community web site.

This posting continues highlights of the Kinexions 2011 conference being held this week in Scottsdale Arizona.  Readers can also reference our prior Dispatch One , Dispatch Two and Dispatch Three commentaries.

One of the new twists to this year’s Kinexions conference was an invitation for a broader group of industry analysts / partners / bloggers to not only partake of the conference but also attend a separate afternoon briefing session hosted by Kinaxis senior management and select customers. Seldom have I found software vendors willing to allow this grouping open access, and we complement Kinaxis for this effort.  As COO John Sicard explained to me, the company has reached a point where it requires broader market awareness of its capabilities.

The influencer briefing kicked-off with CEO Doug Colbeth and COO John Sicard jointly providing a history of the company both in its fabric and its technology development. Emphasis was placed on the current demonstrated scalability of RapidResponse and an acknowledgement that the application works best when in coexistence of existing ERP or legacy systems among its customers. Nearly 60 percent of Kinaxis existing customer base operate with an SAP ERP backbone system.  Also explained was that when users interact with RapidResponse they declare their work area responsibility, which the application then utilizes to tailor respective planning views. The application not only manages and processes large amounts of data, but also the business rules that exist regarding that data.  In our view, that characterizes RapidResponse as akin to a business process management (BPM) type of application, which the application accomplishes in its S&OP functionality. We were also briefed on why the new announced re-naming to Kinaxis RapidResponse Supply Chain Control Tower was a natural extension of the company’s current growth plans.  Although there was a on-stage demo, not a lot of information was shared in this session regarding the detailed functionality that is being planned for this extension of RapidResponse capabilities.

The remainder of the influencer briefing session focused on interaction and presentations from invited customers. Elisabeth Kaszas, Director of Supply Chain for Amgen, provided an update on that company’s multi-year transformational efforts towards more responsive supply chain business processes. A benefit mentioned, that was rather difficult to do in the existing ERP backbone system,was the need to provide various product costing structures beyond just standard cost data.

Chalam Kalahasti, Director of Global Planning and Fulfillment for Cisco Systems, described the unique challenges for planning a highly outsourced, globally extended supply chain.  Cisco has a very active S&OP process tied to RapidResponse, and a plan-of-record is created weekly. What is also noteworthy is that Cisco’s direction in more response-oriented planning has been motivated by previous incidents of supply chain disruption, such as earthquakes in Taiwan and China and the tsunami in northern Japan.  Cisco’s supply chain planning process is predicated on the ability to assess a definitive impact from an unplanned event and to provide different options and scenarios for responding to the exception.

Paul Lindblom, a member of the senior IT staff at Qualcomm QCT, provided a detailed perspective of how RapidResponse integrates with various other Qualcomm systems, along with the unique needs for planning in a combination push-pull, semiconductor supply chain.  Semiconductor wafers are long lead-time items subject to fab capacity considerations, and in the case of Qualcomm, multiple fabs are utilized to supply product.  Conversely, wafer packaging and testing are driven by customer buying and lead-time requirement cycles. Semiconductor planning needs which requires the unique ability to be supported for by-product and co-product production are supported in RapidResponse.

Due to time constraints, our final session featured Kerry Zuber of Kinaxis who provided an overview of the latest 10.0 release of RapidResponse, which includes a significant investment in demand management and product forecasting functionality.

Our briefing turned out to be a jam-packed session with a literal fire-hose of information.  Luckily, the customer appreciation event held on a reservation in the hills outside of Phoenix allowed ample opportunity to unwind and have great conversations with fellow attendees.

In a final posting, Supply Chain Matters will provide some final summary comments and observations regarding the Kinexions 2011 conference.

Bob Ferrari

Added Note: Kinaxis is one of other named sponsors of the Supply Chain Matters blog and the author provides services to this vendor.

The following posting can also be viewed and commented on the Supply Chain Expert Community web site.

This posting continues highlights of the Kinexions 2011 conference being held this week in Scottsdale Arizona.  Readers can also reference our prior Dispatch One and Dispatch Two commentaries  which highlight day one activities.

Day two of Kinexions kicked off with an uncensored presentation from former Gartner Vice President and supply chain sage Kevin O’Marah, who now characterizes himself as an independent thinker.  Kevin reflected on the history of business automation and innovation, the important trends that productivity and talent have brought to businesses large and small and his belief that large ERP vendors are not delivering the innovation required to enable the next era of business and supply chain process capabilities. Kevin referenced multiple survey data that reinforces that demand volatility is driving executives and supply chains literally crazy, and that the community needs to get ahead of these new realities of business. Kevin described the new wave as being led by human intelligence but with technology leverage.  Kevin was also kind enough to acknowledge our working relationship in the earlier days of AMR Research and I sincerely thank Kevin for the mention.

Day two customer presentations featured Lalit Pandit, the CIO of D&M Holdings, and Joe McBeth, Vice President of Global Supply Chain at Jabil, and Erwin Hermans, Vice President of Supply Chain Solutions, Celestica.  One of the extraordinary aspects of attending a Kinexions conference is that the audience can get perspectives from the key players located throughout many tiers of today’s global supply chain. The D&M Holdings story is one of a mid-market company that needed to transform its supply chain utilizing a planning and response management application that users could quickly adopt and leverage.  It is also an example of how a cloud offering is an important option for mid-market companies.

While there were many nuggets of information shared by all of today’s presenters, my personal favorite was Jim McBeth, who vividly expressed what supply chain response management really means for companies, and especially contract manufacturers. Jim reflected on the recent March earthquake involving northern Japan, and more recently, the devastating floods impacting Thailand.  Each had supply chain disruption implications, and as Jim best described it, “the guy who was the best information, wins”. In 48 hours, Jabil was able to provide risk assessments and impact analysis for its OEM customers and key suppliers. Jim noted that most organizations, consultants and pundits speak to constantly keeping inventory down, when the reality may be keeping partners in balance and inventory right-sized to buffer identified areas of component risk. Jim also spoke to the reality of planning at the EMS level, the mid-tier of high tech value chains when the bigger fish OEM’s will get the prime priority for available inventory and capacity. The reality turns out to be the ability to plan with predictive data, to proactively collaborate with OEM’s along with the ability to predict what requirements will be before the bigger players do the same.

This afternoon’s closing event was an interactive influencer’s panel discussion moderated by Trevor Miles of Kinaxis, which I was honored to be invited to participate.  Fellow panelists were Andy Coldrick, one of the original thought leaders in S&OP, Russell Goodman, editor-in-chief, SupplyChainBrain, and Predrang (PJ) Jakovljevic of Technology Evaluation Center.  Our goal was to wrap-up the conference by summarizing what we heard from customers and influencers, how we viewed the current state of  supply chain business process and technology innovation, and the notion of what is the state of collaboration in supply chains. A eureka moment came from an interchange of what comes next for S&OP?  Andy provided the perspective that as the originators of S&OP discussed what would be the next iterations, they also could not agree to terminology.  Andy’s charge to the audience, it doesn’t matter how you term the next iteration, what matters more is the objective your organization is seeking. Wise words from an original thought leader.

Supply Chain Matters will feature two additional Kinexions commentaries, one reflecting on this year’s briefing of key market influencers, and our conference summary impressions.

Bob Ferrari

Added Note: Kinaxis is one of other named sponsors of the Supply Chain Matters blog and the author provides services to this vendor.

Today, Supply Chain Matters attended the two-day Sales and Operations(S&OP) Summit meeting sponsored by IE Group. This was the second year that we attended this particular conference and hence we had a baseline of comparison.  As was the case last year, the conference was again filled to capacity, with a far larger meeting room.  Our unofficial estimate was a range of 150-175 attendees. In this Part One posting, we will highlight some observations and key takeaways from day one of the conference.

First, it remains striking to observe the continued wide-scale adoption of S&OP across multiple industry, production, and service industry sectors. Many of today’s presentations were insightful and helpful in understanding current process maturity levels. This is a process that continues to deliver value for many companies. Wide scale adoption brings continuous learning, and many speakers shared more of their learning.  To cite some examples, John Hellriegel, Global Director of Sales, Inventory and Operations Planning at Honeywell provided a key takeaway that to be successful; the S&OP process needs to:

•  Support each and every function for achieving individual goals
• Assess the business honestly
• Offer a realistic picture with options and solutions
• Be the one and only process to plan the business.

Cathy Budd, Supply Chain Director for Dow Chemical Company has had 18 years of experience implementing individual S&OP processes across the various business divisions at Dow. Budd shared her key learning:

Do not assume the process design is always easy. You sometimes have to take a step back to ascertain the overall strategic goals of the process.

• Keep it simple, even when the environment seems complex.
• Think broader than just demand, supply, and inventory.  For Dow’s insulation business, a key determinant to the planning process was freight cost optimization.  In other businesses, it can be profitability or customer service level.
• Stay focused on the questions you are trying to answer and the decisions that need to get made by the process.

Sean Willems, Chief Scientist, Inventory Optimization Solutions at Logility, and faculty member at Boston University made an outstanding argument for jointly optimizing production and inventory planning with S&OP.  Professor Willems was quick to note that inventory is often an outcome of the efforts of various planners yet most companies do not have an inventory planner. His key message is that all inventory is not equal, and consideration of all classes of inventory, along with where they are positioned in the value-chain, are required to jointly optimize supply, inventory and service level needs.  Incorporating multi-echelon inventory optimization in an S&OP process can enhance service levels and inventory mix.

Beyond these and other insights relative to the state of S&OP maturity, other speakers today spoke to thinking more about what teams should be considering in their evolution plans for S&OP.  This can sometimes be a topic with controversy, since many labels are affixed to the next iteration. Industry analysts and we in the blogosphere are sometimes just as guilty in arguing semantics and labels vs. objectives and needs. There are terms like integrated business planning (IBP), SIOP, RBM, IPP, and others.  Similar to our observation from last year’s event, a consensus of today’s speakers advised to avoid arguing the labels but rather focus on what the process needs to iterate to.  Listening to speakers such as Joe Boszarek of Jonova, Andy Coldrick of Ling-Coldrick, Don Wood of Cott Beverages, Rob Borrows of One-Point Group caused me to ponder that perhaps some of the classical process tenets of S&OP may need to be revisited in this new era of business.

As Rob Burrows astutely noted, S&OP thinking was incubated in a supply rich environment when excess production and inventory was far more tolerated. Today supply chains exist in an on-demand and pull-driven business environment where factors of market share, customer service and utilization of capital can outweigh operations driven planning.  One of the sacrosanct tenets of S&OP thinking is the “one-plan, one-number” perspective that drives the process. As Burrows noted, a ‘market-savvy’ S&OP that has a market-in and management by analytics perspective may call for scenario-based planning.  What’s the best-case plan for meeting required service levels?  What is the most profit optimized plan?  What is the worst case plan if demand falls short of budget or an unplanned supply shortage occurs?   Predictive analytics applied to S&OP introduce scenario and continuous planning, and in our particular view, an era where true business intelligence becomes the enabler of integrated business planning.

This is an exciting but least understood facet of next generation S&OP and Supply Chain Matters will feature additional commentary and insights in the coming weeks.

We look forward to day two of the conference.

Bob Ferrari

The following commentary can also be viewed and commented upon on the Supply Chain Expert Community web site.

Fellow supply chain expert community blogger Lora Cecere has started a Big Data Supply Chains dialogue on her Supply Chain Shaman blog.  Lora points out that supply chain “data volumes are exploding, data velocity is increasing and data types are proliferating.” Lora makes the argument that organizations increasingly need to embrace the concept of “Big Data Supply Chains” which are defined as “value networks that extend from the customer’s customer to the supplier’s supplier, that sense, shape and respond by listening, testing and learning with minimal latency.” Lora advocates that Big Data Supply Chains will transform Advanced Planning and Scheduling (APS) as well as redefine CRM and SRM applications. Some, such as ourselves, point to this new area as being the foundation for predictive analytics or supply chain cockpit capabilities. They are in essence, the next frontier for enabling smarter and more informed decision making in S&OP and other enterprise management processes.

Supply Chain Matters read a recent report published by Accenture that makes some rather important observations regarding the direction of predictive analytics.  Many of today’s business warehouse or business intelligence applications are built with design principles of data being attached to particular applications. For instance, SAP installed base customers are well aware that individual SAP applications feed data to SAP Business Warehouse (BW), and when applications such as SAP APO (Advanced Planning and Optimization) require more-timely data intensive reporting, a condensed copy of BW is actually affixed to the application.  Accenture points out those new data platform architectures will be selected primarily to cope with soaring volumes of data along with the complexity of data management, in effect, data de-coupling from individual applications.  The Accenture paper further advocates for streaming databases that include distributed ownership and control of data, not just the physical storing of data in different application silos and data centers.

In her commentary, Lora rightfully outlines some of the significant challenges involved towards achieving this concept. While these new approaches have the potential to allow the supply chain to “learn and predict”, they do present challenges for gaining executive level investment support, especially the CFO, not to mention the CIO who has to deal with the consequences of exploding data eating up IT infrastructure. That particular tenant is one we feel is the most important, since without executive level leadership and sponsorship, many IT initiatives have little chance of success. Also, as many in our community know, previous multi-year ERP implementation that ended up consuming far more management time and costing too much money have left a sour taste for technology leapfrog. The principles of predictive analytics imply that various supply chain functional teams will need to have much deeper skills in data management, trading partner collaboration and analytics disciplines. It further implies that trading partners and customers will be comfortable with sharing of sensitive data. There are also strong implications for some organizational centralization of analytics teams.

In our view, all of these factors point to fairly significant change management. Change does not occur until and unless organizational motivators for change exist. We continue to believe that success, for the business and for customers and suppliers, are always the best catalyst for change, especially in the current volatile and uncertain business environment.

Instead, why not channel big data challenges into baby step initiatives aimed at a portfolio at information hubs augmented with predictive analytics competencies. Consider pilot programs targeted at specific problems in demand sensing, supply risk, or logistics and distribution orchestration.

“Big data supply chains” are indeed overwhelming organizational and physical resources, adding more challenge to the needs for more timely and market responsive decision-making.   Work closely with IT, business and trading teams and channel the frustration toward a new framework of data architecture and predictive analytics capabilities.

Consider that if we are thinking of doing a major renovation of our homes, and we do not understand all that is involved, we often do some homework, seek knowledge from experts, set a reasonable budget and timeline and gain the support of fellow family members.  This same analogy can be applied to channeling the frustration of drowning in data into the harvesting of predictive supply chain capabilities. Walk before you run and take steps that bring teams to initial successes along the journey.

Bob Ferrari