Sales and Operations Planning (S&OP) is a continuous business process that enables firms from hospitals to electronic component manufacturers to respond to emerging situations in an intelligent manner that maintains a balance between demand and supply. The intelligence is achieved by collaboration and alignment throughout the organization supported by software across five major activities. The focus of this article is to make clear improving responsiveness is a journey unique to each organization where two critical success factors are agents of change and understanding real optimization.
What is the Maturity Model Buzz?
Aside from the terms big data and analytics , the most common buzz word in supply chain solutions is “Maturity Model”. As a 40+ year veteran of campaigns to bring better analytics to bear on key organizational decisions, my immediate reaction was: another buzz word with more hype than substance glossing over or ignoring a rich set of outstanding prior and current work that can be an inconvenient truth. Words of wisdom such as – how can we move forward, if we don't know where are going – seem obvious and a dangerous simplification! Yet, there is some excellent work under this banner – one is the Institute for Operations Research and the Management Sciences (INFORMS) analytics maturity model with its simple goal of helping organizations do an honest self-assessment that reveals how well they are using the new techniques of analytics (presentation INFORMS leader – Aaron Burciaga.)
It's the journey
The fundamental challenge that underpins the maturity model has been around since the dawn of civilization – how to make effective use of information and decision technology to improve organization performance (and support scientific discovery). To obtain helpful hints for readers, I turned to mentors: Peter Lyon and Gary Sullivan – both retired (but active) after years of proven success as agents of change at IBM making the impossible – possible – resulting in substantial improvements in IBM and its customer responsiveness – a term coined by Nick Donofrio, retired IBM senior executive for manufacturing. They identified three ingredients: journey, agents of change, and real optimization.
Sullivan observed: Maturity is a value judgment suggesting that the organization has been deficient in the past. The better term is journey. What the organization did in the past worked fine or was the best that could be done with the current technology or organizational readiness. Although there are lessons to be learned from other firms' journeys, each journey is personal– and the most innovative work is yet to be done.
Lyon, meanwhile, noted maturity implies a fixed sequence of steps with a known start and end. Any senior manager of strategic systems (the position he held for many years) is aware that you have a general direction and objective and one intelligently adapts along the journey to generate ROI for the firm. He pointed to Grant's Vicksburg campaign and stressed that successful adaptation requires an experience group of agents of change.
Agents of change
Many organizations talk about using more advanced methods from analytics to improve responsiveness, create tasks group (often with an outside consultant to help) to review the “as is”, examine other organizations, identify the “to be”, and create a plan for improvement. Many such efforts never get further than this or get started and quickly fade away. Few consultants and software providers have the experience and knowledge to improve the probability of real success – delivering an application planners and managers weren't certain they needed (or opposed) that initially upsets the social order and eventually emerges as “who could imagine life without this application. There are standard guidelines: executive support, identify data requirements, build relationships with users, etc. Lyon and Sullivan found the real key is a small team of agents of change which is described in a forthcoming IJIETAP paper by Dr. Milne and Dr. Wang (members of Peter's team) covering their IBM experience. Such groups are highly cohesive, have a broad range of technical skills from programming algorithms to the science of extracting insights from flawed data to the role of the central limit theorem to selecting the right combination of methods (or creating new ones) to the nuances of nudging an organization out of its comfort zone. In Google parlance – smart creatives.
Lyon emphasized, as important as these teams are, they will disappear quickly if organizational leadership loses focus on the need for innovation in its core decision technology. Sullivan noted, by necessity these groups live in the shadows and with the wrong management they are quickly singing the Animals tune – “we got to get out this place… if it's the last thing we ever do.”
Both agreed with Dr. Harpal Singh's assessment, successful teams understand real optimization! For many, optimization refers to finding the best initial solution (demand plan, supply plan, safety stock, etc.) using an ever impressive array of methods. Although this has value, the initial plan is the “starter set” for optimizing” the entire solution which is focused on identifying and resolving or repairing risks (unmet demand, capacity challenge, quality issue, etc.) to meeting the firm's near term and long term objectives. When satisfying a demand on time is in jeopardy the VP of operations expects the risk identified and a set of actions to mitigate the risk short term and long term. Informing the VP that the optimized model says this demand cannot be met and he or she has to live with this result is not the right answer.
Three keys & cleaning up after the Nobel laureates
There are many challenges in going from wanting to mature to actually maturing. We have identified three keys. We urge interested readers to examine the work by Dr. Karl Kempf, Intel and INFORMS fellow – the greatest agent of change of the modern era. His forthcoming presentation at the ICIAM meeting is titled: “Challenges and Frontiers of Decision Making in Large Companies – Cleaning up after the Laureates.” Additional information on the journey can be found at INFORMS.