Author: Allie Laurent
Expert Insight: 'Demand-Driven Supply Chains Do Not Work Without S&OP'
We sit down with Robert Dietz, Vice President of Supply Chain at Charter Steel
Published by Innovation Enterprise Ltd
on 27 Jun 2017
Since 2010, leading American supplier of carbon and alloy steel bar, rod, and wire products, Charter Steel, has undergone significant business process re-engineering within demand planning, procurement, supply planning and logistics teams. They are now an industry leader in both on time delivery and low inventory. Vice President of Supply Chain at the company, Robert Dietz has proven himself a visionary leader focused on improving integration, automation, and optimization across the entire supply chain, overseeing significant Procurement and Logistics cost reductions over the past 3 years.
We sat down with him ahead of his presentation at the S&OP Innovation Summit, taking place in Las Vegas January 25-26 2017.
How did you get started in your career?
I led a Total Quality Management program as a Lieutenant in the US Navy. Both Deming’s TQM approach and the book ‘The Goal’ were extremely interesting to me so I decided to pursue a civilian career in Supply Chain management. I thoroughly enjoy both the tactical and strategic challenges associated with leading Supply Chain organizations.
S&OP has undergone something of resurgence in recent years, what do you think has been behind it?
Business leaders now have a better understanding of the impact Supply Chain can have on the bottom line if it is proactively managed to more optimally balance the conflicting objectives of Operations, Sales, and Finance. Likewise, many companies are also emphasizing the importance of giving Supply Chain a seat at the executive table. S&OP is the cornerstone of the Supply & Demand Planning processes. As the awareness of Supply Chain has increased, so has the awareness of S&OP.
Is IBP a progression of S&OP, or is it just an issue of semantics?
I look at Integrated Business Planning (IBP) as the integration of the S&OP or tactical planning processes with the strategic planning processes and the execution/order management processes. The emphasis on an overall Integrated Business Planning process helps companies better understand that there is a difference between the strategic, tactical and execution processes. I have seen many companies fail in their attempt to implement S&OP because they tried to merge the tactical/master planning and execution/scheduling into one process. Linking S&OP into the Budget or Plan process streamlines and reduces much of the work typically required with annual Budget or Plan processes.
What do you think are the main benefits of S&OP?
S&OP forces the integration of the Supply Chain from end to end at the tactical or master planning level which enables the proactive and more optimal alignment of supply and demand throughout the company. Demand driven supply chains do not work without S&OP.
Where do think some companies fall down?
As stated earlier, I often see companies try to merge both the master planning and scheduling activities into one process. Many companies also believe more complex technology solutions are needed to implement S&OP. Getting the process right is the most important part of an effective S&OP process. (The two most effective S&OP processes I have experienced leveraged MS Excel over existing ERP software.) Other errors include choosing to forecast at the scheduling/order entry level. Only forecast to the detail that capacity decisions are made and ensure the S&OP horizon exceeds the lead time required to change capacity.
What do you consider the most important aspects of an effective S&OP strategy?
The primary objective of an S&OP process is to align supply with demand. To do this effectively, the ‘right’ amount of inventory based on forward looking demand needs to be defined. The supply chain from end to end must also be reviewed so you can identify potential bottlenecks and proactively resolve them as needed. Be aware that non-manufacturing operations such as procurement, warehouse storage capacity or transportation can also be a constraint. On the demand side, know if your short term demand is tracking with longer term sales goals. If not, discuss what actions are needed to resolve the gaps. Include both customer service and financial results in your monthly meetings as execution issues may be preventing companies from achieving their business goals.
Which technologies do you see as having a major impact on S&OP in the future?
Solutions that leverage optimization tools that both automate and more optimally align supply with demand are the most apparent ways companies can increase existing supply chain competitive advantages. More work can be done with existing tools that allow companies to better integrate costs into the supply vs. demand process.