Oct 19, 2009 | Management, OE, Operations, Sales
Talking to a client last week about his S&OP processes, (or lack of them despite the software) I realised that we were both using English, but were talking a different language. This is often a challenge in S&OP implementations, and even amongst those who have successfully implemented in different businesses, as a local jargon usually emerges to accommodate the vagaries particular to the organisation, product type, and culture.
Following is a simplified list I gave to him as a basis from which the conversations could be translated, in the common order of S&OP preparation.
- Demand planning. A compilation of data (past sales, orders received & delivered, orders received and undelivered) and qualitative data from the marketplace (competitive activity, accounts won & lost, distribution changes, seasonal influence, and so on). This is not a forecast of what will be sold, it is a quantification of the influences on demand. This data is assembled in a huge variety of ways, often collated by the “Master Scheduler”, but not ideally to avoid capacity bias emerging too early, and the sales/customer management function, and operations management.
- Forecasts. A suite of forecasts for product families rolled into a consensus outlook based on the output of the demand planning process. At this stage it is unconstrained by questions of capacity & input availability. This is usually a specific role held by an individual, often titled “Master Scheduler” and is an ongoing responsibility, but signed off weekly for submission to the Capacity & planning meeting.
- Capacity & supply planning meeting, normally weekly. Puts the acid test of reality on the sales forecasts by adding the capacity and input availability constraints. The output is the daily/weekly production schedule to be executed based on the requirements and trade-offs/compromises that emerge from the more senior SOP processes.
- Pre-SOP. A meeting (normally bi-weekly) of the implementation level of management that makes the trade-offs and decisions that emerge from the Pre-SOP, ready for implementation, and identifies strategic resource allocation issues for resolution. This is the key meeting, and provides input to the senior S&OP meetings, and the capacity & supply planning meetings
- S&OP sign-off by senior management, normally monthly. Over time in successful implementations this becomes a rubber stamp on most occasions, but it retains the control of major decisions that need to be made that have more of a long term and capital utilisation impact than is available to the Pre-SOP management level. Things like new equipment, outsourcing, choices between major customers, contractual compliance, shift additions, and so on are usually signed off at this level.
Oct 18, 2009 | Demand chains, Management, OE
We can learn a lot about supply chain management from successful retailers.
To be successful, generally they have identified their logistics chains as a key source of competitive advantage and they work on it.
Their business model depends on having the stock on shelf when a consumer wants it, but with a minimum in reserve stock, and none “left over” that requires discounting or dumping to clear.
Li & Fung, the extraordinary Chinese supply chain manager who have had a key role in the boom in Asian sources fashion wear, Woolworths, the dominant Australian supermarket chain, and Spanish retailer Zara have all based their success on supply chain innovation supporting their service offer to customers.
A usual metaphor when explaining the Japanese Kanban system of managing “flow” through a process is of a supermarket shelf, a consumer takes one off, a replacement is delivered to the hole from a JIT flow from the supply chain. The appearance of a hole on a supermarket shelf is a physical representation of “pull” or demand, the basic building block of a chain that maximises demand chain efficiency, and builds a competitive advantage
Oct 15, 2009 | Innovation, Leadership, Management
It is not the words of a company vision that count, as much as the conversation that goes on around the water cooler about the purpose of an organisation. The notion of including all personnel in a conversation about business purpose is very effective.
Sam Palmisano, current CEO of IBM conducted a “Values Jam” on the IBM intranet over 3 days a few months after his appointment. This generated 40,000 “conversations” about purpose across the business, with Sam acting as both participant and final arbiter.
The outcome is a set of words that has stood IBM in great stead over the last 6 years, and all employees know, they have the opportunity to contribute.
Subsequently, the “jam” concept has been used by IBM to inform a range of other issues from their internal innovation “jam” in 2006 which resulted in 10 new businesses with $100 million in seed funding, to the 2008 “habitat jam” held on behalf of the UN.
These activities only work because they unleash the power of a common purpose in their participants, have you considered how to unleash the power of your networks?
Oct 14, 2009 | Demand chains, Management, Operations
If you want a prediction, go to the lady in the tent at the local fair.
If you want a forecast, talk to those who have an intimate knowledge of the drivers of the outcomes you are seeking to forecast.
Good forecasting is an iterative process, the more you do, the better you get, so long as you understand why the forecast is (almost) never right on each occasion it is done. Continuous improvement techniques are the core functions of good forecasting, and good forecasting is essential to smooth operations.
Oct 12, 2009 | Management, Sales
Selling is all about finding the way your product can add value to your prospective customer greater than the price you are asking for it.
Why is it then that most selling activities I see are the commercial equivalent of “flashing” your wares and hoping the” flashee” is interested in buying?
Surely asking questions is a better way to find out what they may have a need for, often unrecognised until you are able to demonstrate the value of your solution.
So, ask questions, keep them open ended, focus on benefits delivered by your product, not on their features, and discuss them in the context of the prospects environment, which you define by questions.
Looking at a sales pitch as a negotiation, rather than simply a selling exercise can assist the process of questioning, identifying the other parties “buttons” is a part of the game, and the way to do that is with questions.
Still the best sales book ever written is “Spin Selling” by Neil Rackham, and this focuses on the process of questioning a prospect, leading to a sale.
It works.
Oct 11, 2009 | Innovation, Management, Marketing, Small business
It is easy to see opportunities outside the “home base” often easier than seeing them close to home. However, success comes with exploiting potential in existing markets before you “export” resources to chasing new ones. Chase market penetration, cost reduction, value and innovation in your home and adjacent markets before you bet the farm on a new one.
These closer to home opportunities are rarely as sexy as building a business in a new area, but often they come with less risk, and investment, and usually a greater payoff.
Innovation is front and centre in this process of leveraging the existing base, but it is the grunt work of implementation, continuous innovation in small ways, and focus that will win.
My definition of marketing, not found in any textbook I have read is:
“Marketing is the identification, development, protection and leveraging of competitive advantage”
I have found if you apply this definition to all the activities of an enterprise, looking at each for its contribution to at least one of these parameters, your marketing focus will be crystal clear, and the process of sorting out strategy, and the supporting allocation of resources will be considerably eased.
