Demand planning and collaboration solutions support S&OP

Managing the juncture between an enterprise's business and operational plans often gets hampered by one basic factor, as Tom Dadmun sees it: human nature. More specifically, the culprit is the natural tendency of professionals to stick up for their point of view. Dadmun is VP of supply chain operations at ADTRAN, a Huntsville, Ala.

By Roberto Michel, Senior Contributing Editor March 1, 2007

Managing the juncture between an enterprise’s business and operational plans often gets hampered by one basic factor, as Tom Dadmun sees it: human nature. More specifically, the culprit is the natural tendency of professionals to stick up for their point of view.

Dadmun is VP of supply chain operations at ADTRAN , a Huntsville, Ala.-based manufacturer of network access devices. He helped institute a sales & operations planning (S&OP) process at ADTRAN. S&OP seeks to align sales, financial, and operational plans via regularly held meetings, but such alignment can be difficult without the right decision support and best practices.

“Sales & operations planning is all about consensus, but consensus is difficult to reach because the different departments in a company have their own interests, and those often play against each other,” says Dadmun. “So if you attempt to institute S&OP without what I call ‘management by facts’—or MBF—you end up in a pointing game. Engineering blames sales, salespeople blame operations, yet operations says the forecast was off—and sales wants to know why there was no alternate product on the shelf.”

ADTRAN’s S&OP evolution owes much to the deployment of some demand-planning software that enabled better forecast accuracy and armed managers with better facts. While ADTRAN has taken other steps that experts see as S&OP best practices—such as hashing out market intelligence in premeetings—use of the software by product managers paved the way to effective meetings, says Dadmun.

“You can say you’re going to change your mind-set about forecasting and reaching consensus,” he says, “but if you don’t have the data available to discuss the information within a forum of managers who have already looked at their own metrics, then you don’t really have an S&OP meeting.”

Validating the need

In a recent study based on 470 validated respondents, San Mateo, Calif.-based Ventana Research found only 16 percent of companies could be considered innovative with S&OP. Ventana VP Colin Snow says true innovators follow S&OP best practices, such as ensuring S&OP’s output becomes the plan of record for all departments. For example, an innovative company would not only adjust sales and supply plans, but perhaps product development, field service, or call-center plans.

Most of companies surveyed have a solid idea of the software needed to support S&OP. At the top of their wish lists are “what-if?” analysis tools, real-time S&OP dashboards, and demand planning. However, software isn’t a cure-all. Its benefits, says Snow, “also are dependent on how good the S&OP process is, and how many inclusions there are in a company’s integrated business plan that allow for scenario planning.”

Supply chain evolution

For ADTRAN, a corporate goal of becoming more demand-driven set S&OP’s foundation, explains Dadmun. The company identified a need for better demand planning tools, which led to the deployment of Demand Planner from i2 Technologies in late 2002. It also uses i2’s Factory Planner for supply chain optimization, as well as a Web-based collaboration tool from i2—packages that Dadmun says make ADTRAN more nimble on the supply side.

Improved forecasts transformed what was a monthly forecast meeting into an S&OP meeting, says Dadmun, because managers were able to put faith in the tool’s output and use the meeting as a forum for studying which items were furthest off in the previous forecast—and why—as well as examining operational adjustments.

To gain the confidence it needed in Demand Planner, the company tested a year’s worth of data with the tool, and compared the output with actual production. “This step was important in establishing a proof point for the solution, as well as believers in its ability to turn things around,” says Dadmun.

Today reports from Demand Planner are viewed live during S&OP meetings to study the outliers and ascertain root causes. Participants also have access to supply-side reports. “If you don’t do a root-causal analysis of why you were off, you are forecasting the same number again, and expecting a different outcome, which is the definition of insanity,” he says. “You need this closed-loop process.”

At the same time, it’s important to use premeetings to assess the impact of carriers running new promotions, or whether a major account is expanding facilities. “When you go into a monthly S&OP with senior management, you don’t want to address low-level questions,” says Dadmun. “You want to go in with some answers.”

The ability of the Demand Planner to aggregate forecasts by product groups, rather than by stock-keeping units, leads to more accurate forecasts because variations are less pronounced in the aggregate. Since deploying the software and instituting S&OP meetings, forecast accuracy has risen by about 20 percent.

Use of i2’s software extends to the supply side, where Factory Planner can quickly simulate materials needed on unexpected or larger orders, while the Web-based procurement software allows suppliers to respond with supply commitments in as little as a day. Next up, ADTRAN wants to get engineering more closely involved with S&OP to better coordinate operational issues pertaining to new product launches. The participation of finance, says Dadmun, also may evolve toward more budgetary flexibility as part of scenario planning.

Focused meetings

Other S&OP practitioners agree that most contingencies should be ironed out in advance. Bill Conklin, a demand planner with Cherry Hill, N.J.-based Pinnacle Foods , says the manufacturer works major contingencies into its forecasts before its monthly S&OP meetings.

Pinnacle uses Voyager Demand Planning from Logility as its forecasting tool, says Conklin. As demand planner for the Lender’s Bagel brand, he feeds intelligence such as new ad campaigns or store openings into the tool before the monthly meeting. Voyager generates a forecast, and a summary spreadsheet is distributed to managers. The report gives sales, marketing, account management, and manufacturing and distribution managers solid forecast numbers to begin with. At the meeting, they drill down and determine why they think forecast numbers might be off, rather then the previous “meet-in-the-middle” approach of arriving at an average of individual best estimates.

“Now everyone comes to the table with where they think the business might be going, and they have to sit and justify any differences,” Conklin says.

In some instances, Conklin adds, new information from the field surfaces—or managers reconsider a previous estimate—and the forecast is reworked with the Logility tool, with comments added to an override field. The revised forecast in effect becomes S&OP’s output.

But the benefit of the software goes beyond being a workbench for overrides, says Conklin. The tool’s core value comes from assessing forecast numbers at different levels, including stock-keeping unit, product type, brand, and distribution centers. “Interactivity among those levels enables you to achieve a better forecast,” says Conklin.

Picking participants

Vertical-industry imperatives seem to influence the makeup of S&OP committees. With Pinnacle’s consumer goods pressures, the deployment planners are key participants, says Conklin, ensuring that the forecasted volume and mix can be properly distributed. For a discrete manufacturer such as ADTRAN, product life-cycle issues bring engineering personnel more closely into S&OP.

For David Lifschitz, CIO and CFO of Gehr Enterprises , S&OP meetings aren’t even known as such. Gehr—a Los Angeles-based enterprise that outsources much of the manufacturing of the surge protectors and other electrical products it supplies—demand and supply planning meetings are held twice a month, but not under the specific banner of S&OP.

Yet Lifschitz says the company does apply rigor to its forecasting and supply analysis, and uses twice-monthly meetings as a forum to make decisions and conduct “what-if?” analyses. Gehr deployed Control, a business intelligence application from KCI Computing , to perform such analyses more easily than the previous method of using Excel spreadsheets.

“Previously these types of analysis would require complex formulas and multiple spreadsheets,” says Lifschitz. “The beauty of Control is that it’s so much easier to test many scenarios.”

Control has built-in forecasting capability, and can apply assumptions across different time horizons, says Lifschitz. For instance, if Gehr wants to test the impact of an annual 50-percent volume increase for a product, the tool can spread that increase down to weekly or even daily buckets while accounting for seasonality. Comparable analyses are tough to build in Excel, says Lifschitz, though Excel is still used to summarize or further analyze trends.

To be sure, one thing all observers agree on is the value of better analytics. As Lifschitz concludes, “What these packages like Control give us is the ability to create more robust models that allow us to perform on-the-fly analyses for quick decision-making.”

S&OP vendors at a glance

Adexa’s Sales, Inventory and Operations Planning solution considers the whole picture. It enables optimization of inventory buffers across the supply chain, reduces customer lead times, increases order fill rates, and avoids capacity and materials shortages.

Aspen Technology
aspenONE is an application suite that integrates and optimizes engineering, manufacturing, and supply chain operations for the process industries. Unlike point solutions that only address specific process areas, aspenONE addresses inefficiencies end-to-end throughout the plant.

Cognos Sales and Operations Planning Blueprint enables management to reconcile sales and demand forecasts with supply plans using a single integrated performance management framework that ensures enterprisewide alignment.

Demand Solutions
Demand Solutions Sales & Operations Planning (DS S&OP) automates the annual business-planning process, allowing businesses to anticipate and plan for changes, and enabling management to gain control of enterprise resources. This powerful tool allows you to consolidate supply chain data easily.

Effective execution of an S&OP process doesn’t necessitate large-scale systems, but does require a group of data collection, organization and preparation, manipulation, and presentation utilities, as well as formats. EnteGreat has a library of these utilities and templates.

Glovia Supply Chain Planning enables manufacturers to synchronize enterprisewide production and supply with enterprisewide demand. The solution allows manufacturers to aggregate total demand and centrally plan for the production capacity and supplies required to satisfy that demand.

i2 Technologies
Collaborative materials management can help companies gain greater efficiency by synchronizing and automating the material planning and procurement processes, and help them react much faster through rapid “what-if?” scenarios and incremental planning to changes in demand and supply.

Interlace Systems
Interlace Integrated Business Planning complements and leverages existing business planning and execution systems. It integrates relevant data from these systems and establishes an environment for enterprisewide planning.

JDA Software
JDA Demand solution leverages multiple forecasting algorithms and methodologies to drive forecast improvement across all types of products—fast- and slow-moving, lumpy, short life cycle, trending, steady, highly seasonal, causal-driven—across the customer-driven value chain.

John Galt Solutions
John Galt’s S&OP Module, part of the Atlas Planning Suite, supports the sales and operations planning (S&OP) process. With S&OP you can gather, analyze, and reconcile many departmental plans and make adjustments.

Kinaxis RapidResponse allows global manufacturing leaders to respond rapidly to constant changes in extended supply chains. It establishes complete supply chain visibility with access to real-time manufacturing information, and delivers superior supply chain agility with fast assessment of action alternatives.

Lawson Software
The Lawson M3 Supply Chain Planning application is a comprehensive set of modules encompassing forecasting, planning, and scheduling for manufacturing and distribution companies.

Logility Voyager Solutions deliver the visibility and automation needed to proactively plan, source, schedule, produce, store, transport, and trace supply chain activities in industries with distribution-intensive supply networks.

M2M SCM offers flexible forecasting, planning, scheduling, and execution tools that will maximize unique production environments. Use any or all of these tools in any combination of finite/infinite planning and scheduling, depending on the environment.

Manhattan Associates
Integrated Planning Solutions address today’s challenges with forecasting, and planning and replenishment capabilities. By combining proven forecasting techniques with sophisticated demand cleansing and day-of-the-week and seasonal profiling tools, the highest return on inventory investment is ensured.

Oracle Demantra
Oracle Demantra Real-time Sales and Operations Planning extends demand-driven adaptive planning across a company. Implement a comprehensive S&OP process that balances demand and supply around a one-number forecast to drive operational excellence and achieve profitability goals.

The SAP xApp Sales and Operations Planning (SAP xSOP) composite application helps companies align business units on the best-suited, lowest-risk plan for financial success. The application enables finance, sales, purchasing, and production departments to collect, analyze, and track all sales and operations planning data in a central location.

Steelwedge Software
Steelwedge helps companies take top-down (and bottom-up) control over every aspect of the revenue-planning process with an easy-to-use, dashboard-driven approach tailored to the needs of individual sales organizations.

Supply Chain Consultants
Zemeter Sales & Operations Planning is a five-step improvement program that enables a solid foundation for supply chain planning. It provides both software and business process deliverables at each step, establishing a performance-driven, shared-forward view of business operations.

Preactor International and SYSPRO, a supplier of enterprise software for SMB manufacturers and distributors, have entered into an agreement that enables SYSPRO’s products to integrate with Preactor software, a family of planning and scheduling solutions, from “out of the box” products such as Preactor Lite to Preactor Enterprise.

S&OP study: recommendations for users


Broaden deployment to include executive management, finance, manufacturing, demand planning, supply planning, marketing, product engineering, and design and IT functions.

Use a cross-functional team for plan development and reporting.

Have all departments use S&OP as the plan of record—including Finance.

Engage the CEO or CFO as a sponsor.


Use S&OP to align operations with corporate strategic objectives.

Have regular formal demand and supply review meetings and look at actual-versus-forecast targets.

Plans should cover 18 months and include multiple lines of business or brands, and multiple factories or regional operational facilities across product lines.

Source: Ventana Research