Argon & Co is facilitating the supply chain revolution by assisting its customers with becoming more resilient, efficient, and agile. Chris Foord, Associate Partner, speaks to MHD about how this is achieved via enhancing tactical planning capability.
Argon & Co as a global management consulting firm who specialise in operations and transformation is helping its clients navigate inventory, service, and adaptation issues in a post-COVID environment and encouraging them to become more resilient, efficient, and agile in responding to unexpected disruptions by doing tactical planning.
Some of the ways companies can improve their operations is by embracing cross-functionality and implementing Sales & Operation Planning (S&OP) to maximise opportunities while mitigating risks as they balance sales revenue, margin levels, capacity constraints, and working capital.
A robust and flexible planning operating model along with leveraging Advanced Planning Systems can transform S&OP capability.
Futureproofing with S&OP
Many businesses have faced numerous challenges coming out of the COVID-19 pandemic as they’ve dealt with high inventory levels, poor service on key items, struggled to react to external changes in the market, and operated as teams in silos rather than in a cross-functional capacity.
“Supply chain planning historically looked at things in retrospect, measure performance and adjust their plans based on what’s happened,” explains Chris Foord, Associate Partner at Argon & Co.
“All the traditional ways of planning went out the window during the pandemic. For many organisations’ inventory became the answer during that time and acted as a buffer, but for others it has created pain right until this day.”
Post-COVID, there’s plenty of commentary about supply chain moving away from just-in-time to just-in-case. This has changed the way businesses consider suppliers, capacity and inventory. There’s now a need for resilience, efficiency and agility.
While S&OP has existed for a while, it hasn’t been at the forefront of business. Chris says that as companies mature, de-risk their supply chains, and prepare themselves for more unexpected disruptions, they’re focusing more on these practices.
“By embracing S&OP and a cross-functional set of processes that flex with the constant uncertainties and challenges, businesses can future-proof themselves,” he says.
S&OP requires a company to look at the next three- to thirty six-month period, focusing on what’s changing and being more right than wrong. It also bridges operational execution and strategy by turning a strategy into a plan with operations that can be easily executed.
Argon & Co is seeing organisations develop what-if scenario capabilities, enabling speed of response, quality decision making, and service level protection and productivity. They can test different inputs to determine the best output to see what could hypothetically happen.
Chris notes that it’s all about stress testing the plan and answering all the potential questions that you have in real time.
Embracing cross-functionality
Embracing cross-functionality is important because a genuinely cross-functional set of processes and methodologies can help companies respond to uncertainties and spontaneous challenges.
Without cross-functional input, a plan can’t exist. Only an individual or functional view of what can be expected or what may happen is possible.
“With cross-functional input you gather broader insight and have to balance expectations, wants and needs across the entire business,” explains Chris. “The best way to reach consensus in this situation is to negotiate and manage trade-offs.”
For example, an organisation can establish what’s important within other functions by ensuring its sales team knows a particular shipping lane has a capacity constraint so that they are able to prioritise and manage customer demands and expectations.
Additionally, if a new product line is to be launched successfully in six months’ time, it is imperative that the procurement team know what new ingredients or parts are needed so it can plan accordingly.
Many companies have the foundations of cross-functional ways of working. S&OP formalises the process and lifts cross-functional understanding and alignment behind the plan.
S&OP is all about maximising opportunities, mitigating risks, balancing sales revenue, margin, capacity and working capital. These metrics provide both a lag and lead input to a robust S&OP cycle.
Best practice sees S&OP as not only a supply chain process, but as the business planning process.
A normal S&OP cycle will cover Product Portfolio Review (SKU range), Demand Review (Sales forecast and promotional activity), Supply Review (Procurement, Manufacturing, Logistics, Inventory), Reconciliation Review (gaps/reconciliation to financial plans, assumptions), Executive Review (leadership sponsored action to direct the business PLAN).
These steps are generally owned across the organisation: Product & Demand with Sales & Marketing, Supply is Operations, Reconciliation is Finance, and Executive is the Leadership Team.
“An aligned plan, stress tested with what-if scenario planning provides the ideal business outcome,” says Chris. “Reality shows us that things will change along the way, but mature organisations have a playbook to sense and respond rapidly across the end-to-end supply chain.”
Transforming operations with Advanced Planning Systems
A S&OP process that is mature and agile enough requires a focus on building a robust yet flexible planning operating model, providing companies with the ability to leverage great processes and enhanced digital capabilities.
A clear people, process, and technology roadmap incorporates the following elements, says Chris:
“Start with a future state process design – define what you want and need to be able to do. Don’t constrain your thinking based on what you currently do or what your existing solutions are capable of. Think ‘future’”;
“Search for the right balance between human and digital resources – focus your people on true value add activity, solving problems and managing real exceptions. Let the machines do the rest”;
“Digitise your supply chain to enable agile orchestration of the full value chain in a more dynamic way – move away from functional to end-to-end optimisation”; and
“Plan a phased roadmap, layering digital capability as your process and people capability matures – it’s hard to make one giant leap forward.”
“Advanced Planning Systems provide the backbone of planning processes,” notes Chris.
“The APS market is mature now with options for small to large organisations. It’s at the heart of digital transformations to improve operations management – they enable better forecasting using AI/ML or real-time sense and respond capability to react to issues as they arise rather than waiting for the next planning cycle.”
A business’s APS should enable its S&OP process, removing the manual process steps of creating reports and S&OP presentation packs by systemising the process flow, generating reports and end-to-end dashboards.
Coupled with real-time what-if scenario planning, businesses cancheck or adjust in the moment to align on the best plan.
“ANZ companies have tended to be behind the curve investing in APS solutions, however, with the market expanded and matured, there’s benefit to starting the journey,” adds Chris.
“The benefits we usually see are 20 per cent reduction in working capital, three per cent reduction in COGS, six per cent reduction in logistics costs, 10 to 20 per cent improvement in forecast accuracy, and improved customer service.
“Self-generating demand, self-adjusting supply with control tower oversight and human augmented decision making is here. Jump in and embrace digital transformation of your S&OP process to unlock enhanced plans, resilience, efficiency, and agility.
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