My second visit to Japan late last year was quite different from my first, which occurred a quarter century earlier. On the first trip I went as a student to learn about the phenomenon called the Toyota Production System in Japan, now known as Lean Manufacturing in the rest of the industrialized world.
On my visit late last year, I was no longer acting as a student but rather as a teacher. My mission: to teach Japanese executives and managers about Sales & Operations Planning (S&O). Some of you may be thinking: why? They’ve got a terrific process with Lean; why do they need S&OP or anything else?
THE LEAN/S&OP RELATIONSHIP
Do you have people like that in your company, people who say , “We don’t need S&OP; we’re using Lean?” If so, that’s too bad. To remedy the situation, I wrote a paper on this topic some time ago titled “Lean Manufacturing and S&OP: You Need ‘Em Both”, which made the following points:
THE PROBLEM IN JAPAN
But another group of companies, also among the leanest in the world, have not yet adopted S&OP and they’re feeling its absence keenly. Who are they? Well, do names such as Sony, Toshiba, and Toyota ring a bell? They’re in that group, along with many other household names based in Japan.
Industry in Japan has stagnant for quite a while, and that’s due not only to tsunamis, recessions, nuclear meltdowns and the like. A serious organizational dysfunction – the silo effect – is at least equally responsible, maybe more so. The silo effect means that the people in Silo A (for example, Operations) don’t cooperate much with the folks in Silos B, C, and D and vice versa. Plans aren’t synchronized, resulting in poor performance in the execution of these plans.
For decades, Japan dominated much of the industrial world through its exquisitely effective use of the Toyota Production System But not so much, anymore, because the rest of the world is closing the gap with Japan’s manufacturing prowess. This causes the difficulties created by the silos to become more severe, resulting in a less competitive situation, diminished market share, and lower profitability.
Coincidentally, we seem to have a silo problem in other places besides Japan. Niels Van Hove, who writes a blog called Supply Chain Trend, conducts an annual survey of S&OP good news and bad news. His 2012 results show organizational silos as #2 in the list of impediments to successful S&OP, second only to lack of top management support and involvement. My hunch is that the silos Niels is reporting on may be a bit more intense than those in Japan.
Here’s a tongue-in-cheek example of a top management mission statement:
KEEP THE HERD MOVING ROUGHLY WEST
In the world of silos, that objective is rarely achieved. Each department has its own set of objectives, which typically are not in sync with those elsewhere in the company.
S&OP helps a company break out of the silos and get everyone moving in the same direction, as shown in Figure 1. The left graphic depicts the people moving in many different directions, while the right shows the same group using effective S&OP. See Figure 1.
S&OP enables companies to do many things well: balance demand and supply, integrate financial planning with the operational side, do effective simulations of the future, implement strategic plans more quickly and more “sure-footedly,” and so forth. However, this energy alignment issue is at least as important as the other benefits. In many situations it may be benefit #1.
So, you may be wondering how S&OP helps with this energy alignment issue. Here’s how:
So Executive S&OP can play significant and very beneficial roles in both the strategic arena as well as tactical.
Strategy and S&OP is the focus of my latest book Sales & Operations Planning: Beyond the Basics, which contains examples of the three companies mentioned above – Cisco, BASF, Dow – and is currently being translated into Japanese.
Summing up, I can say that this development in Japan is yet another example of the enormous power contained within S&OP. It’s never ceased to amaze me, and I’ve been at it for over 30 years.
Thanks for listening,