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WORDS
FROM WALLACE
S&OP: GOING
GLOBAL?
Let's
talk about Global Sales & Operations Planning.
The phrase as used here has a double meaning: 1)
the extent to which Executive S&OP is being
used around the world, and 2) how global
enterprises use Executive S&OP to help run
their world-wide business better. Let's take a
look at the first one.
How
Widespread is S&OP? Is S&OP
used primarily in North America, where it was
invented, or has it spread around the world? Well,
I don't know about the entire world but, based on
first-hand experience, I can tell you that
S&OP is alive and well in both Australia and
Europe.
Last August in Australia, I
was impressed by the interest and understanding of
Sales & Operations Planning. They're using
S&OP very effectively down under, and they're
being innovative - using S&OP not only in
manufacturing companies but also in retailers and
in banks. Good, good things are happening.
I
just got back from three weeks in Europe (see Trip Report from
Europe). I spoke to surprisingly large
groups in London, Paris, and in Belgium near
Brussels. The size and composition of the groups
sent a clear message to me that the interest in
Sales & Operations Planning over there is both
widespread and intense.
How
is S&OP Used in a Global
Enterprise? In my book Sales & Operations Planning; The
How-To Handbook, 2nd Edition I addressed this
issue when I wrote about the Goliath Widget
Corporation, a fictitious composite of a number of
real multi-national corporations. Goliath is doing
a good job in using Executive S&OP to achieve
a high degree of global coordination. They believe
that S&OP provides the means to globalize
where necessary and appropriate, without
centralizing everything, taking away local
initiative, ownership, and energy. Here's how
Goliath does it:
-
The
world is broken up into sections, called
entities. An entity is defined as a geographical
area where demand and supply principally align -
specifically 80% or more of the demand is
satisfied by supply sources within the entity.
North America, Europe, Latin America, Africa and
Asia/Pacific are entities.
-
The
function of entities is to ‘localize' the
Executive S&OP process to the issues unique
to the area. It also helps deal with the
cultural differences of how they handle problems
and conflict, not to mention minimizing the
issues of time differences and geographical
separation. In other words, it gives ‘local
ownership' to the process, and it provides the
structure to deal with global issues as they
arise, through coordination among entities.
-
There
can be no entity if there is not both
demand and supply present within the
entity. For example: Australia has demand
but no supply, and thus they are not an entity;
their demand is supplied primarily by Asia and
secondarily by Africa. Thus Australia has a role
in the Demand Planning phase for those
entities.
-
Every
month, each of the entities does the standard
Executive S&OP process up through its
Executive meeting, (see Figure below, steps 1
through 5) led by a local process owner who
knows the people, the culture, and the demand
and supply issues. |
-
Please
note that inter-entity coordination occurs in
both the Demand Planning and Supply Planning
phases. This is to ensure that all relevant
demands are recognized and that the resources
are present to meet them. Cases where resources
are insufficient due to inter-entity demand are
addressed in the Pre-SOP step or sooner,
probably including further communication and
coordination among the involved entities.
-
Following
the Executive S&OP cycle in all the
entities, the results are sent to World
Headquarters, where it's consolidated (step 6 in
the figure).
-
The
World Wide Executive S&OP session (step 7)
then occurs, with many of the participants
attending electronically from around the world.
This session centers largely on the future
financial outlook but, on occasion, demand and
supply rebalancing can occur at this session.
A
CEO once said, "We are not a global company, but a
collection of local companies - with intense
global coordination." Executive S&OP can
help a lot in making this intense global
coordination a reality.
Thanks
for listening, Tom
Tip
from
Tom: Do you forecast in detail
far into the future - 18 months or so? Some people
do that as a part of their S&OP process, and
then roll up the detail into product families. In
most cases, that means more work and higher
forecast error - and it's almost always not
necessary. We recommend that, except in the short
run, you forecast in aggregate out across that
long horizon. Count on it to yield better results
with less work.
Bob
Stahl and I are writing a white
paper titled Lean Forecasting - How to Eliminate
Waste in Your Forecasting Process. We'll post it
on our Web site (tfwallace.com),
but until it's ready, you can get info on this
topic from an excerpt from our
book: Sales
Forecasting: A New
Approach.
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