Oliver EAME hosted the pre-conference day, for the first European Extended Supply Chain 2011 conference in Brussels. Entitled Advancing your sales & operations planning from supply chain to demand chain the event was a curtain raiser for the inaugural three-day conference and attracted 60 delegates from more than 30 companies from all over Europe.
Oliver Wight partner, Dave Manning, chaired the day’s events, which included inspirational presentations from Dell, Barco, and Phillips as well as Oliver Wight clients BP Lubricants, Cummins Generators and Molnlycke.
Manning’s history with S&OP goes back to 1983 when as a Rolls Royce manufacturing systems manager and programme manager for Class A, he attended the first UK S&OP conference by S&OP’s creator by Oliver Wight. Opening proceedings, he said: “Today is about how S&OP has evolved over the last 25 to 30 years into a fully Integrated Business Planning process, and what it can do for a modern day organisation.”
Gerard de Bruijn Global Leader Integrated Business Planning at BP Lubricants (Castrol) said although he has implemented IBP in three different companies each one presents new challenges. After three and a half years, IBP has been rolled out to almost the entire Castrol global organisation. “We call it LBM (Lubricants Business Management),” says de Brujn. “This reflects the fact that LBM is now the way BP runs its lubricants business.” He reveals that the process has led to top-line growth, reduced costs and a halving of SKUs, and has delivered what de Bruijn calls ‘triple digit numbers ($ millions)’ every year. Most of our business units have already achieved ‘capable’ performance – it’s crawl walk, run he says: ‘foundation, capable, mature’ - and over the next year, Castrol It is driving for Class A certification: among the items on de Bruijn’s agenda are data integrity and systems alignment, and a continued focus behaviour change, which is he says, “always the most difficult challenge”.
In a panel discussion (‘S&OP and people: cross-functional alignment to improve demand shaping and sensing’), Don Harding, MBM global project director of Molnlycke said. “One thing you can rely on is that forecasts are always wrong and apart from anything else, you need luck and hard work; the harder you try, the luckier you get. Manning says that in building a demand plan, it is critical to embrace the sales and marketing view and he compares forecasting to a top chef making soup, with inputs coming from multiple sources: “You have to have the finest ingredients, but putting them together is the real skill”.
Marco Katz, Director Global IT, Logistics and Distribution Cummins Generator Technologies said S&OP at his organisation didn’t start as a global initiative and initially S&OP sat on top of regional planning processes, but it was optimised for capacity revenue and margin, as well as supply and demand. The company has since established a single global and regional S&OP process and is now moving to a fully integrated business planning process, which the company calls Synchronised Business Planning. At the same time the company is in the middle of a 10 year programme to develop its IT systems and is searching for a solution to support a ‘capable to demand’ production model. The company operates what Katz calls ‘an eBay’ for production slots, whereby spare capacity can be filled in one part of the world, if there is unexpected or increased demand in another. He says S&OP is a journey: “You can start quickly but it takes a while to get results; and results don’t always stick because people leave or the organisation changes, so you have to keep working hard at it.”
In his presentation, ‘Moving from S&OP to an executive Integrated Business Planning process’, Dave Manning described IBP as state-of-the-art S&OP. “IBP is not a meeting or even a series of meetings,” he claims. It is a 24/7, 365 process to run the business. However he also points out that IBP should not be confused with a strategic planning process. “It is a strategic execution process. You must have a strategy but it is not the role of IBP to create that strategy; IBP is a deployment process.” He agrees with de Bruijn too, that behaviour is fundamental to the success of IBP and that education was critical to establishing the behaviours required. “Before you set any performance measures, you have to decide on the behaviour you want; then you set the measures. If you set irrational measures you will get irrational behaviour” He also eschews the notion of a financial forecast. “There’s no such thing. The forecast is based on product and the supply plan is set against that forecast; the financials are a consequence of that. Sure, you have a top-down financial ambition for the business, based on what you want to happen but the bottom-up figures are what you think will happen, given the truth as you know it.”
Oliver Wight partner. Jerry Shanahan, hosting a round table discussion on benchmarking and performance metrics, said “Benchmarking cannot only show what is required for your organisation to reach upper decile or best-in-class performance but it allows you to create the momentum for change across the organisation. It can be a costly mistake if you make assumptions about your performance compared to the competition. “ As well as providing a financial justification for improvement projects, benchmarking can prevent you from investing in unnecessary projects: “Is it appropriate to be striving for 95% performance in an area where the best in class performance is 75%?” Shanahan says you have to compare like-for-like; you need rigour so you’re not basing big decisions on irrelevant data or anecdotes. Crucially, you have to be clear about the purpose for benchmarking; it should be used to drive improvement; of course you can also use it as a sales tool, to show your customers and prospects, just how much better you are than the competition.
In his afternoon presentation, Molnlycke’s Don Harding repeated the mantra that behaviour change presents the biggest challenge for implementing IBP (Molnlycke calls it MBM, Molnlycke Business Management). The company achieved Class A certification in 2010 and Harding says people remain a constant issue: “You can design the process in a matter of weeks but changing behaviour takes considerably longer.” He also says it’s crucial to get finance involved in he implementation. “That was a game changer for us. The financials now come straight out of the MBM process; you can’t see the join,” he concludes.