I reviewed with a client recently the overall historic progression of supply chain thinking, and it had a somewhat jarring effect. I think we’re all familiar with the early ideas of what I call “General Ledger” driven supply chain – there’s a line item for Procurement, there’s a line item for Manufacturing, a line item for Logistics… And you optimize those organizations to be very efficient.
The problem of course is that efficiency in any one focus area may drive inefficiencies in the other – great purchasing may drive inefficient manufacturing; great manufacturing efficiency may drive terrible logistics to the customer. The highlight of this kind of thinking is essentially that you’re not just inwardly focused; you’re even blind to the issues in your own company. The next stage was focus on the supply chain, the great discovery: how you focus on orchestrating activities cross-functionally to efficiently move a product to the customer. Unfortunately, there you can also evolve the “General Ledger” supply chain to the “Product P&L” supply chain – the vital link to the customer is still hidden, and while you may be very optimal for a product, you’re not optimal in a market. Continue reading
This month it’s exactly 20 years ago that I first traveled to the corporate headquarters in Houston to participate in a worldwide project to redefine the global planning process for Compaq Computer Corporation. At the time we did not call it S&OP, we called it supply chain planning. Our challenges then? We had 8 levels of judgment by sales, product managers, planners and procurement between the forecast in the sales offices and what we communicated to our suppliers as ‘the plan’. As you can imagine, with so many people making changes to the plan, the outcome was probably less reliable than rolling dice. When we started our journey towards a global S&OP process our suppliers awarded us the title of “least reliable in the industry”. Continue reading
Here’s the deal: You know your supply chain is special and using a one-size-fits-all approach like Sales & Operations Planning (“S&OP”) is not for you. Or you operate a process that is too complex. Or maybe it doesn’t require such a complex approach. And then when you tried it; the statistical forecast was inaccurate and executing the plan resulted in shortages and excess at the same time. You know you are right: S&OP is not for you. Or is it? Continue reading