Alignment. Results. Sustainability.
Part 2 - Ideas for Addressing the Hazards
In Part 1 of this article, we discussed why S&OP projects in mid-market companies are faster than in larger global corporations, but chiefly focused on the common hazards that mid-market companies face.
Summary of S&OP Hazards in Mid-market Companies
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- People resources
- Org gaps
- Mislabeling a tactical demand/supply balance meeting as S&OP
- Gaps in underlying processes
- Inadequate IT for the level of business complexity
- Multiple on-going initiatives
- Limited consulting budget
- Limited experience with best practice S&OP across the management team
While this is an onerous list often without silver bullets, these challenges can be mitigated, and S&OP projects can still be successful.
Ideas for Mitigating
People resources
Lean staffing in these companies is a way of life that won’t change. Thus, it is essential to structure the timeline of the project with realistic constraints in mind. We front-load our resource profiles (client team and consultants) and are more prescriptive in our approach with mid-market clients. This means that sufficient understanding of their business gained through the assessment, we provide starting point designs for S&OP items such as meetings, reports, and KPIs. Combined with best practice training, we then let them react to our suggestions, and finalize the design together. This significantly cuts time to launch rather than some longer blank sheet approach. We’ve also accelerated some of our work with large companies in this way too.
Org gaps
This is a tough one. We usually find this and sometimes the answer is a headcount or two if skills don’t exist or are available in the organization. During the assessment, we see and discuss the org gaps right away with a Steering Team. For this, we pretty much need to have the future design in our heads, which isn’t an issue given our experience. Our Sponsor usually knows what’s coming already.
If a project team member can fill-in temporarily for a missing role, we can proceed with a design phase. Our experience though in hiring externally, is that it will take longer than what is discussed. The situation isn’t ideal for several reasons, but it is possible to manage. Any hiring period shorter than 3 months will have some luck involved. We advise/write job descriptions, advise on salaries, help with interviews, and refer from our network when we can.
If addressing org gaps isn’t an option and the current org cannot support the design, we’ll likely recommend repurposing the project to make other supporting improvements (i.e., not full S&OP right away).
Gaps in underlying processes
We are usually able to make process improvements in parallel with a full S&OP effort. The acid test is, does enough process exist to be able have the culminating meeting in the S&OP meeting cadence? If for example, there’s no demand planning process or role that does that, we may recommend fixing that first prior to taking on full S&OP. While each approach is client specific, all require communication with our Sponsor and the broader Steering Team (which includes the CEO).
Inadequate IT
We know what we’re looking for in the assessment and where the go/no-go line is. As with the gaps mentioned above, much can be done in parallel with the right project design. Some mid-market clients have decent IT departments (e.g., those that support enterprise business applications), while others are more about basic infrastructure. If the latter, then S&OP report generation needs to be done in the departments, requiring report building tools and skills. This can work provided the data source is good. Temporary help can also be brought in, but that’s a good way to create unwanted dependencies.
If your business has become complex (e.g., many SKUs, multiple business units, channels, and geographies) and the management team asks a lot of questions, questions numbers, and has many data demands, then their job is to align IT resources accordingly. This is typically not black and white, with give-and-take over time. We work through it.
Multiple on-going initiatives
This one is in control of the management team. Leaders usually sees the gaps and needed projects, but doesn’t always agree on priorities or impacts, and we know the team (especially the CEO) feels the pressure to do it all now. Throw one more thing on the pile. Initiative priority needs to be evaluated objectively, using a cross-functional scorecard. We’ve done it many times with clients, ideally around ROI, which is often unclear without a proper analysis.
For S&OP, if you’re undergoing a complete ERP implementation or overhaul, we’ll likely advise we stagger an S&OP project considering resource and change tolerance in the organization. Some parts can be done in parallel, but it’s probably not full-steam ahead.
Finance projects, especially FP&A system-related, should be integrated with S&OP projects. You should NOT wait for the finance project to be completed first. There is too much integration required with S&OP. The risk of rework in Finance is high if you want financial integration (huge miss on S&OP if ignored). Why would you expect Finance to think about what is needed for a supply chain planning horizon or when during the month executives should review key metrics for the business, or even what those should be? Do you want two separate management systems that have some overlap that confuses people?
Limited consulting budget
What can I say here? Investment is required. Assessments aren’t too bad and will align your team around true current state gaps. If you skip a real assessment (in other words, conducted by an external expert), it absolutely will bite you in the project. There are just too many moving parts in S&OP, and it is too high profile to flop. We will have a point-of-view on the above items including the strength of your bench. We aren’t afraid to point fingers (hopefully with data) either.
We have a very mature S&OP Readiness methodology that evaluates the following S&OP prerequisites:
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- Sponsorship
- Team/org/capacity
- Burning platform/sense of urgency
- Underlying process strength
- S&OP knowledge and experience
- Product hierarchy definition and linkage
- IT ability to produce S&OP reports
- Change readiness
This review often comes out with a marginal rating for a go/no-go, but we know where the gaps are and design the project accordingly. With some level of budget, we can typically conduct an assessment, lead a design phase, launch the process, and implement a robust change/project management/coaching system. We can guide your people, but the onus will be on them to execute and deliver the full implementation unless the budget is extended. For most mid-market organizations, this approach is sufficient.
Limited S&OP experience on the management team
We need them for real S&OP and if their experience is with the “all-in-one” tactical demand/supply meeting that a supply chain manager leads, then you won’t get their attention or really progress without changing their perception. Certainly no executive behaviors will change. They are executives who are stars in their respective areas (maybe sales, finance, engineering, or science). It’s not their fault they aren’t experts in S&OP and have previously worked in companies without the real process.
The good news is that this is one we can control; you can teach a hockey star to at least play basketball.
Here’s the short list for fixing this one:
- CEO support (education if necessary), then mandate
- Executive training
- Involvement (Accountability) as Champions for each part of the project, aligned with the S&OP design
- Follow-up engagement
- KPI accountability
If this is just ALL TOO MUCH
I hear you. Mid-market executives are often put in challenging resource situations, and situations that are affected by deferred infrastructure investment. We have many clients with very tough investors/boards who need to manage scarce resources.
If what this article describes is just too much, we work with clients to at least do something, even if not full S&OP. We can sequence phases with the bigger path in mind. We can focus S&OP on the parts of the business where it has an impact, and the workload is manageable (pilot). We can also focus on something higher-level if the needed IT is just off the table. These short-cuts involve compromises though, that aren’t best practice. If short-cuts are taken, your team will need to embrace that and not continually point out shortcomings. Not ideal, but what is.
What is important is that you do something and make it better than where you are right now.
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We are a management consulting firm that specializes in Sales & Operations Planning and Supply Chain improvement. We leverage S&OP to be the platform for continuous improvement and profitability within client organizations. We also work with clients to improve organizational performance, structure, and enabling information technology. Consulting methods promote sustainability of performance improving behaviors, tangible results, and development of client team members. Our consultants are highly experienced business and consulting leaders with track records of delivering results for clients across the world, typically with larger well-known consulting firms. We are based in the Boston area, but travel worldwide to conduct training seminars, speak at conferences, and work with clients on high-impact, performance improving initiatives.
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