What every "Supply Chain" boardroom should be thinking...
Image this. In one of your S&OP cycle meetings, Mr A from Demand Planning makes an adjustment to the Forecasting numbers of product X. Very recently he has been given to understand from the Engineering department that product X will be getting superceded by product Y in unforeseen future. Mr B from sales believes supply chain to be completely elastic. He expects supply chain to respond very quickly to any demand surges without any loss of sales. Mr C from Supply Planning side has allocated resources and materials in the supply chain based on product X's converted demand in the market. In many cases Mr C has been reprimanded for taking a conservative approach that results in stocks being unavailable when it is time to make hay. While Mr A has been experiencing the phenomena called "I perhaps know more than others", Mr B believes in "Stretch and compress the supply chain at will", Mr C has been experiencing a phenomena called "falling short today and hence make up by tomorrow". Sounds familiar ? It is. All of us are familiar with a situation where each team member believes in local maxima agnostic to global maxima.
In a supply chain boardroom, no one wins a slugfest. In fact everyone leaves out bruised and scarred. The war of the sensibles becomes war of the decibels. Particularly in context of corporations of today fighting to save each and every penny, the last one would want would be giving way to ego-fights and individual fiefdoms driven by their own secular view of the world.
As an independent supply chain thinker, the time seems to have come for thinking new and radical on how a corporate should organize its resources to manage its supply chain. Some of the suggestions that businesses of today could possibly apply:
1. Break the walls: It is time to make interpretation and dessimination of information more democratic. Have moderated platforms of information exchange in an organization, where any supply chain relevant information is exchanged with all key stakeholders - direct or even indirect in the process .
2. Specialists vs Generalists: An organization should really start evaluating the value of a specialist function in supply chain who sometimes has a deep parochial view of the world rather than a generalist who forces himself to think in an end-to-end manner. Example forecasting is not about accurate prediction of sales, it needs to be redefined as the best way a demand can be managed given the resources in the supply chain.
3. Create cross-functional positions: Organizing the supply chain functions based on a product division rather than departmental (like sales, demand planner or supply planner) makes more sense today - where the key is to manage a series of supply chain processes. The KPIs of today need to look at neither Forecast accuracy nor lost sales, but at converted demand to supply ratios.
4. Keeping things simple: The cost of maintaining complex processes is immeasurable. It not only requires very deep specialist skills but also makes the process overly dependent on people. Any decision node with multiple options thus needs to be very carefully evaluated in terms of ease of maintenance.
Supply Chains of today is all about keeping your businesses running, however we are getting to a point where we need to run to stand at the same place. Supply chains of tomorrow may very well need to fly to be where they are !
Comments
Forecasting must be the accurate prediction of demand without any consideration of supply constraints. That is the only opportunity to capture real demand, so it must not be a figure constrained by supply concerns.
What I have found lacking in traditional S&OP processes is a series of formalized, software-enabled steps leading upto the meeting (demand-supply matching, financial analysis, scenario analysis, etc). If these are in place, then the management can make informed decisions at the actual S&OP meetings.
Posted by: Amit Guha | April 15, 2009 10:52 AM