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Global Supply Chain

Will S&OP or Demand Forecasting solve your Supply Chain Problems?

At the risk of sounding impertinent, or being seen as self-serving, the answer is that S&OP will probably not solve your problems.

Ned Blinick

Chief Product Officer at 3rdwave

At the risk of sounding impertinent, or being seen as self-serving, the answer is that S&OP will probably not solve your problems.  If you work for a very large company the answer may be "maybe".  But even in very large companies S&OP or Demand Forecasting success is at best,  tempered.  In small/medium sized companies, S&OP and Demand Forecasting have very limited chances of success.The reason I come to that conclusion is from reviewing the literature of independent analysts and consultants on this subject.  One of the best articles I have read was written by Lora Cecere of Supply Chain Insights titled: Seven Mistakes to Avoid in Sales and Operations Planning.  The title of the article could just as easily been: Seven Reasons why S&OP projects fail.This is a harsh statement, but failure is sort of a general truism when it comes to technology implementations in large enterprises.  Forbes and CIO magazines both report on the high rate of failure of large enterprise solutions which include ERP, S&OP, and Forecasting.  They are reporting failure rates north of 50%.  Following is my definition of failure in the context of an enterprise S&OP or Demand Forecasting project: Failure occurs when the solution substantively under-delivers on the objective results it was initially purchased for within 3 years of its acquisition.When I talk about the failure of S&OP or other large enterprise solutions it is not a reflection on the solutions themselves.  The reason that these solutions most often fail is related to the difficulties in the original implementation and the on-going alignment of the software to the processes of the organization.

Why S&OP implementations fail

The reasons for S&OP and Demand Forecasting project failures are simple and boil down to three (3) well understood but not well-accepted factors.  Fundamentally, to succeed large enterprise projects require:

  • cross-functional teams for project definition, implementation, and on-going support and alignment,
  • the involvement of very high-level senior management to affect collaboration across functional teams, and
  • synchronized, quality, and contextualized data

The first two reasons underlying success or failure of large IT projects are linked in that they are related to the demands on the human resources of the organization.  The last reason has more to do underlying information systems and their integrity.  In any case, in order to not fail at implementing S&OP it is imperative that all 3 elements align and remain synchronized.

Four (4) essentials ingredients necessary to avoid Enterprise (S&OP) implementation failure

When we drill-down into each of these 3 elements it becomes somewhat obvious why it is so difficult to achieve success in S&OP implementations.

  1. Cross-functional teams for project definition, implementation, on-going support, and alignment - To put in place a comprehensive S&OP program requires the involvement of many areas of the business, including engineering/product design, sales/marketing, purchasing, logistics, inventory control, and finance.  Each of these disciplines brings a perspective that is necessary to accommodate in order to define and achieve a common organizational S&OP outcome.  Getting the right players from the disciplines is difficult.  Getting the fight players from each discipline to agree to common S&OP objectives is problematic.  Having a team together over extended periods (read years) is a monumental challenge.  S&OP is an on-going process that takes years to implement and align.  Very few organizations have the internal drive and discipline to make commit the internal human capital to make it happen.
  2. Continuous involvement of very high-level senior management to drive collaboration across functional teams - To make S&OP work over time demands the involvement of senior management.  In order to bring together and manage a collaborative multi-disciplined S&OP team requires the drive from the top of the organization. A simple truism - most senior executives are great and conceiving of an idea but most are poor at overseeing the implementation of the idea.  S&OP demands that senior management stay engaged and continuously drive the process.  Without the commitment and drive of senior management, it is virtually impossible for a project of this magnitude and duration to succeed.
  3. Synchronized, quality, and contextualized data - Underlying a successful S&OP program is accurate and timely data that is synchronized and contextualized.  In most organizations, there is not a single repository for the data that drives S&OP outcomes.  Data is most often housed in multiple solutions that are not synchronized (more or less replicating the organizations siloed functional structure).  This failure to have a single foundational data repository that contextualizes information limits the ability of cross-functional teams to share information that leads to understanding and agreement on and implementation of common S&OP objectives.
  4. Commitment to continuous alignment of process and systems - The reason that the time frame for failure is measured in several years and not on initial implementation is that over a period of time there are often major changes in operational processes that go unaddressed by system alignment.  These changes in processes, if not addressed with system alignment result in critical gaps occurring in data management.  This, in turn, ends up with data being managed off-system - mainly in spreadsheets.  Gaps in data integrity usually evidence themselves within 3 years of the initial implementation and the S&OP system outcomes show significant deterioration in quality.

So what does all this mean?

For any organization to undertake a major, multi-disciplinary enterprise IT project requires the align of management, teams of specialists, and information around common objectives.But mostly, it needs senior management to:

  1. understand why enterprise system implementations so often fail
  2. recognize the scope of the project,
  3. recognize that the project evolves over a long period of time,
  4. commit to continuous involvement and support, and
  5. dedicate resources to creating both a physical and an information infrastructure that supports the overall objectives of the project.

Enterprise projects often get approved and purchased because senior management has been sold on the concept and promise of substantial benefits.  However, rarely does senior management understand the high risk of failure that is likely with these projects.  Nor does senior management understand that enterprise projects "never" end, they evolve.In IT there is a common adage:  A mediocre IT solution well implemented is dramatically better than a great IT solution poorly implemented.  This is too true of S&OP and other enterprise solutions.  There are numerous instances of good initial implementations of S&OP solutions that end up in failure because of the misunderstanding of the continuous need for on-going support.  This is not only true of S&OP but is true for almost any enterprise system.So the ultimate take away for organizations looking to successfully implement S&OP or other enterprise systems is to look at your organization and understand whether it has the internal commitment manage and align the resources over the full life-cycle of the software.  Secondly, it is critical that you have the support of the enterprise solution provider to work with the internal resources to constantly align the software with the processes.  Not executing on either of these dimensions leads to ultimate failure of the project.

About 3rdwave:

3rdwave simplifies global trade through automation. 3rdwave is a GTM platform that delivers total global supply chain visibility, minimizes manual data entry, streamlines business process, and provides contextual information enabling its users to make informed decisions to reduce global supply chain risk. It's a cloud-based platform that requires minimal IT resources for quick implementation.  3rdwave ensures that companies meet the highest levels of GTM execution and Trade Compliance conformance.

Ned Blinick is Chief Product Officer of 3rdwave.co.  He has been involved in global trade for too many decades.  Ned loves making the global supply chain simpler for everyone.  He can be reached at (416) 510 8800 ext 234 or at eblinick@3rdwave.co