Category Archives: Supply Chain

Is Your Retail Supply Chain Ready for the Holidays?

A recent article over on SupplyChainBrain on five key lessons e-Commerce merchants can learn from the 2010 holiday season identifies some key supply chain requirements for a successful holiday season that all retailers should keep in mind.

  1. Holiday Shopping Starts Early
    It is now stating well before Black Friday, so your outbound supply chain should be ready to ship as soon as Halloween is over. This means that you should already be starting to build up inventory for products expected to be in high demand.
  2. Cyber Monday Matters, but don’t ignore the rest of the week.
    Shoppers are looking for deals all week. Be ready for a consistent demand.
  3. CyberWeek is big, but the following weeks are bigger.
    Orders increase as shipping deadlines approach. Be ready for a lot of orders, and a lot of outbound shipments, as close to your shipper’s cut off dates as possible.
  4. Average ticket declines are not necessarily a bad thing.
    Especially when volume increases, which is the current trend.
  5. Vertical Markets Matter
    Apparel, Shoe, and Toy sellers increased market share, and may be on a trajectory to do the same this year.

In other words, you need to

  1. Prepare for early demand
  2. that will increase steadily until the shipping deadlines
  3. when you will have to be prepared to ship a large amount of product very quickly and deliver on time.

JDA and Oliver Wight’s Myths and Realities of S&OP – The Verdict Part I (III of IV)

In Monday’s post, we presented JDA and Oliver Wight’s 10 myths of S&OP planning, as laid out in recent white paper. Yesterday, we presented their 10 realities of S&OP planning. Today we review the myths vs. realities and offer our own verdict on the first five myths and realities.

  1. Myth: S&OP process should be owned by Supply Chain.

    Reality: S&OP is an executive process that must be executive-owned and led.

    Verdict: It definitely must be executive owned, but it should be CPO/CSCO led. Supply Chain has to get the goods in and ensure they are pushed out to where sales and marketing needs them, when they need them. And Supply Chain has the most to lose by not ensuring the process goes smooth. The CEO won’t have the time, the CFO will focus on cost, and the end result could be that no department will have their needs met. The CMO will be overconfident and / or overly risk averse and build up too much inventory. The COO (Product Management) will be overly focussed on product quality and not product delivery. And so on.

  2. Myth: S&OP is a tactical real-time process.

    Reality: Advanced S&OP is an aggregate planning process that occurs monthly.

    Verdict: S&OP must look at the aggregate, must look out into the future, and must be strategic, but it must also look at the high-volume items, must treat the short-term and long-term differently, and must adapt in near real time if need be. And monthly is not appropriate for fast moving / short life span consumer goods such as seasonal apparel, cell phones, and trend-based products. S&OP for fashion must be done weekly, over a three to four month sales window. Cell phones must be done weekly, especially just after launch, over a three to six month window. Etc. And if a major campaign is launched, or a competitor releases a brand new product that goes head-to-head with yours, the plan will need to be immediately revisited.

  3. Myth: S&OP doesn’t dive into the details.

    Reality: Aggregate plans from S&OP are translated as necessary into detailed product management plans.

    Verdict: This is correct. For low-volume items, or items with steady, level, sales, plans will not need to be revised or detailed often. But for fast-moving consumer goods, detailed plans will be required. This reality is on target.

  4. Myth: S&OP is really just a review of historical data.

    Reality: S&OP is a fact- and assumption-driven process, not a numbers-driven process.

    Verdict: WTF? Are they serious? Not a numbers driven process? The facts must be numbers based (such as, we have historically sold 100K cans of paste a month and we expect this new marketing campaign to increase sales 20%). Facts are based on data, and data is numbers — not gut feelings. And assumptions are based on upcoming actions, that are expected to impact sales — a number — in a definitive way. Plus, you NEVER ignore historical data. It’s your baseline. If nothing were to change, your sales would stay the same. This reality is from another dimension.

  5. Myth: S&OP is limited to quantitative views of supply, demand and financial plans.

    Reality: Fact and assumption management and the qualitative aspects of S&OP are more important than the quantitative aspects.

    Verdict: Again, WTF? I don’t get it. The whole point of S&OP is to come up with a sales plan that dictates expected demand over time to allow supply chain to define detailed volume and delivery timelines. This is extremely quantitative. And assumptions might need to be altered over time, so a baseline is needed to test what the impacts of an alteration would be. This reality is also from another dimension.

Tomorrow’s post will tackle the last five myths and realities.

Is Polygamy Good for the Supply Chain?

A recent article over on CFO by Shawn Casemore, President of Casemore & Co, on why you should “mend your spend” in order to grow, offered up Casemore and Co’s four crucial steps to building a big-business attitude. Step two, which stated that the procurement department is not the place for monogamy, caught my attention because sometimes “monogamy” is needed for successful procurement.

According to Shawn:

Human nature has demonstrated that the longer we remain in a stable relationship, the less effort we place into maintaining or improving the relationship. In a supplier-to-customer relationship, this tendency is often substantiated through escalating prices and diminishing customer service over time.

As an example, he gives the anecdote of when he worked with an organization that used a sole transportation source for all of its inbound and outbound freight needs — remnants of its early days when it was a small business. The prices offered by the carrier had been steadily climbing, and freight damage was quite prevalent. Despite those problems, the company president was hesitant to change. But when they moved the business away from the incumbent and divided it between two alternative carriers, service levels improved and the firm reduced overall transportation costs by nearly 10% per year.

And this is a common story among consultant firms that specialize in transportation / logistics / 3PL cost reduction. Competition is good for the corporate coffers. And in this situation, a secondary source of supply can mitigate risks and increase competition.

But this isn’t always the case. If you need a specialized widget, or microprocessor, and you split the award, you drive up costs as setup costs, which often involve new equipment purchases, for production of a new, customized, product are high — and you’re paying them twice and information protection and losses due to IP theft — as there are two routes IP thieves can take to steal your IP and produce black-market copy-cat products — are higher.

In other words, competition is great when you have a tactical category where there are lots of low-risk, high quality suppliers to compete for your business, but if you have a strategic category where there are few high-quality suppliers and set-up costs are high, sole-source (with production distributed at geographically dispersed plants) might be the way to go.

Your thoughts?

JDA and Oliver Wight’s Top 10 Realities of S&OP (II of IV)

In yesterday’s post, we stated the top 10 myths of S&OP as defined by JDA and Oliver Wight in a recent white paper. Today we define the top 10 realities of S&OP planning. Tomorrow we will review the myths vs. realities and decide what is myth, what is reality, and what is the real deal. But first, here are the:

Realities

  1. S&OP is an executive process employed to plan and manage the business that must be executive-owned and led.
  2. Advanced
    S&OP is an aggregate planning process that occurs monthly to ensure all company plans and strategies are aligned over at least a 24-month rolling planning horizon.
  3. Aggregate plans from S&OP are translated as necessary into detailed product management plans, detailed demand and replenishment plans, and item-level supply chain and production plans over the planning horizon.
  4. The focus of the S&OP process is on the future: the rolling 24-plus month planning horizon. S&OP is a fact- and assumption-driven process, not a numbers-driven process.
  5. Fact and assumption management and the qualitative aspects of S&OP are more important than the quantitative aspects of the business plans.
  6. When executives take control of the process, they define the information that they need and how they need to see it to make smart decisions.
  7. Demand-shaping strategies and scenarios are evaluated through the monthly S&OP cycle.
  8. Winning companies are collaborating with their trading partners more closely than ever before.
  9. The new paradigm for S&OP incorporates financial analysis into each key step of the S&OP process.
  10. S&OP must have a combination of people, processes and
    tools working collectively.

Now some of these are obviously realities. But are all of them realities? Or are some of them perceived realities through rose coloured glasses which look a lot different with the rose coloured glasses off? We’ll provide our take on the myths vs. realities in our next two posts.

JDA and Oliver Wight’s Top 10 Myths of S&OP (I of IV)

A recent white paper by JDA and Oliver Wight attempted to set out the top 10 myths and realities of Sales & Operation Planning. According to the authors, these are the

Myths

  1. The S&OP process should be owned or sponsored by the demand planning or supply chain function.
  2. S&OP is a tactical, real-time process that enables the quick identification and response to problems as they arise.
  3. S&OP deals with product families and a fixed hierarchy.
    The devil is the details and S&OP doesn’t go there. So that doesn’t really help us.
  4. S&OP is really just a review of historical data. There is no ability within the process to do any simulation of suggested changes, let alone compare a differing scenario to the optimal plan.
  5. S&OP is limited to quantitative views of supply, demand and financial plans. Just look at the numbers and you’ve got what you need to support decisions.
  6. S&OP is just another executive meeting; nothing really ever comes out of it. Decisions made in the meeting stay in the meeting and rarely get executed.
  7. S&OP relies on a fixed demand plan or statistical forecast. It doesn’t emphasize how we may need to shape demand up or down to meet business objectives.
  8. S&OP processes are too complex and difficult to manage — especially when trying to systematically incorporate external trading partner feedback into the internal consensus demand and supply plans.
  9. We spend so much time striving to create a perfectly balanced supply and demand plan, yet too often it’s a futile exercise. The finance team is just going to override any S&OP plan that we create, so why bother?
  10. S&OP can be solved with the implementation of a tool. Just configure the software and turn on the “black box”.

Now some of these are obviously myths. But are all of them myths? We’ll review the crux of the realities in the next post as a first step in our effort to understand to what extent these are myths and to what extent they are just minor misunderstandings.