Supply chain transparency and visibility are one of the topmost concerns for most manufacturing business leaders. Without the proper collaboration between the different players within the supply chain, it becomes difficult to create an S&OP that promotes productivity, reduces costs, and improves service levels. In this week’s ‘Supply Chain Talk,’ Arkieva CEO Harpal Singh discusses the top 10 rules for creating a collaborative planning process.
Collaboration is hard.
There is no system or panacea for overcoming conflicting metrics and goals within a company. To create this top 10 rules for collaborative S&OP, I have adapted a list that was created by a former colleague Jane Lee, who previously ran the S&OP processes at one of Dupont’s larger businesses. Jane also worked as a Senior Consultant at Arkieva for many years before retiring.
10 Rules for Creating a Collaborative Planning Process
If everyone travels on a different route, you may not end up in the same place. Operations, sales finance, R&D, and others need to have a plan to guide day to day decisions, but there is no guarantee that these plans are the same or even similar. Unless there is a consensus on goals, there is no reason to believe that day to day decisions support a company direction.
You don’t want to manufacture something that you don’t plan on selling. Just because you can make something, does not mean that you should make something.
Sales should not take orders for things which you cannot or don’t plan on making. Just because you made it before, does not mean you can continue to make it profitably.
If manufacturing cannot stop making something, sales need to go out and sell it. Especially in Chemicals, second quality and off grade are inevitable consequences of product transitions and disruptions. This material needs to be disposed of, and sales can help develop a market for it.
If you don’t know what you plan to make or sell, finance cannot estimate the working capital needed. Most companies don’t have the luxury of unlimited working capital. Finance works hard to make resources available for a company’s activities, and it would help to know what manufacturing and sales are planning.
Finance knows that obsolete inventory (unlike wine) does not improve with age, but sales should know that they too have a responsibility to dispose of it. Getting rid of obsolete stock is hard. You may have to develop a new market, take it on the chin as far as revenue (and sales commissions) are concerned, and potentially write-off assets. It is much easier to bear the pain if it is a shared pain.
If you are selling at a loss, you cannot make it up in volume. Higher sales don’t always translate into higher profits. Sales, operations, and finance need to agree on both costs and revenues, so they can march to the same tune.
If everyone cannot agree on what went wrong, you will probably end up in the same place again. An essential part of the S&OP is reviewing what happened versus what was planned. If everyone cannot agree on why things are different, there is little incentive to change behavior or processes.
Why plan if you don’t plan to execute? Developing a joint plan is an exercise in futility if parts of the organization don’t execute to it.
If you don’t have a stake in the plan, you don’t have a stake in its success.[Read more: 5 Fundamentals for Building a Collaborative Supply Chain]