1. What does each functional area focus in the article "All Fired up"?

2. What is the % perfect order for this restaurant?

3. How can you improve the data gathering for the S&OP process?

4. What is the key to getting S&OP working?

Artical

All Fired Up

At the start of her shift, a chef meets the fresh fish shipment at the back of the restaurant. Upon inspection, she finds the fish isn't exactly fresh, so she refuses delivery. Meanwhile, her poultry supplier drives up with twice as much chicken as was ordered, and the chef gratefully accepts the overage, seeing as she no longer has any fish to serve that evening. She tells the line cooks that salmon is off the menu and to prepare for lots of chicken orders. However, the host is not made aware of these issues, so he features salmon on the specials board; after all, seafood is more and more popular these days. Customers soon arrive, and wait staff begin taking orders. When asked what they recommend, they suggest the filet mignon because, let's face it, it's the most expensive thing on the menu and they're working on tips. In no time, the line cookswe'll call them the manufacturing staff are faced with dozens of orders for salmon (of which there is none) and steak (of which there soon will be none). The hostalso known as marketingfinds himself with angry customers who won't be coming back. The wait staffthe restaurant's salespeopleare disappointed by their very low commissions. And let's not forget the boss and her 30 pounds of rotting chicken. Ask anyone who's spent time in the restaurant industry, and they'll tell you how quickly things break down if the different people involved aren't working in sync. That's why successful restaurants hold a mandatory preshift meeting, during which the chef, host, and wait staff get together to review the evening's plans, taste and familiarize themselves with specials, and find out which menu items aren't availableor have been 86ed, as restaurant insiders say. Everyone has the chance to communicate and prepare in order to avoid unnecessary problems later in the evening. It's only natural that people tend to concentrate most closely on their own sets of assumptions and goals. Visualizing how your actions will affect someone else is not always easy. Manufacturers focus on part numbers and stockkeeping units (SKUs), marketers contemplate trends and product lines, and salespeople think about customers. Each one has a unique perspective and, very often, incompatible goals. "Culturally, it's very difficult sometimes for people to accept that it's [not] just their area that they manage and that other people need to see it as well," says Clive Seabrook, sales director at Douwe Egberts Coffee and Tea UK. "Knowing what effect promotions are having on our business, what effect forecasting changes are having on our business ... You need to have trust and confidence that it's being managed well and correctly and that you're not going to get any surprises." In the food and beverage industry these challenges become life-or-death business issues when compounded with rapid turnaround time; extremely short shelf life; a constant influx of new, improved, and differently flavored products; climate and weather-related threats; and high variability. Food and beverage professionals would do well to learn from their counterparts in the restaurant business and rethink their "preshift" practices. Company leaders must bring together all elements in the enterprise, integrate key data, and provide a strong framework for improved business processes. Many industry experts believe the way to achieve these goals is through effective sales and operations planning (S&OP). "S&OP is the only mechanism I know of that provides an objective forum of information that's right out in front of everybody for discussion and to take action on," says Mike Campbell, president of Demand Management Inc. "[It's] proven to be able to bring the different interest groups in the company together whether it be engineering or production or finance or sales or marketing or new product development." Debra Hofman, service director for AMR benchmark analytics at AMR Research, finds that food and beverage companies lag behind other consumer product companies in terms of their perfect order performance, which she defines as providing orders that are complete, accurate, on time, and in SPOTLIGHT FOOD AND BEVERAGE INDUSTRY 34 July/August 2006 APICS magazine flawless condition. "What we've seen is about a 73 percent perfect order," she says, "whereas the non food and beverage companies run at about 80 percent." In addition to measuring the perfect order performance and other operational metrics, Hofman also assesses enablersincluding the use of application technology and certain best practicesand how those things connect to the performance they're supposed to be supporting. "Food and beverage companies on average seem to use an S&OP process less than companies that are not food and beverage companies," she says. "And that's a very key best practice." On the S&OP scene "There is so much confusion about [S&OP], and so many people define it in so many broad and nonspecific ways. But it's a very specific activity that can be learned and applied," says Robert A. Stahl, CPIM, a consultant and author of numerous books on S&OP. The APICS Dictionary, Eleventh Edition, defines S&OP as a process to develop and bring together tactical strategies in order to establish a final, integrated set of plans. Stahl argues that it's really more of a forum, in which people talk about strategies on how to balance demand and supply. He also adds that the key to successful S&OP for food and beverage companies is to use it to discuss how to increase speed. According to The Handbook of Sales and Operations Planning Technologies, an AMR Research publication, S&OP is a collaborative, multiyear project that should reflect supply chain constraints in order to translate upstream data from frontoffice processesmeaning, sales and marketinginto actionable operational plans for logistics, manufacturing, and procurement. Most experts agree S&OP should be performed at least once a month and reviewed by company managers at an aggregate level. "One of the key elements of S&OP is bringing raw data up to a level that can be dealt with in a very timely fashionlet's say up to a product line level or a family level," Campbell says. "The food and beverage industry and consumer goods in general can benefit from [the Demand Management product] because of the aggregating of data to an informational level, allowing people to pay attention to product lines and brand performance, for example, as opposed to worrying about the day-to-day ability to ship or deliver." Dominick Corigliano, vice president of sales and marketing for Supply Chain Consultants, says S&OP needs to be combined with an accurate performance measurement technique or a performance management solution. "Overall, that will lead to higher visibility and achievement of metrics that need to be put in place," he says. Sweetening things up Corigliano began working with Sunsweet Growers when company decision makers there chose Supply Chain Consultants to provide the technology behind their new S&OP process. The world's largest producer of dried fruit, Sunsweet's supply chain was severely limited by its spreadsheet-based planning system. Planners were spending a great deal of time on work that was largely repetitive and could be easily automated. Company decision makers wanted to find a better way to take and use valuable data to reduce order lead times, cut transportation costs, and improve the overall bottom line. "We were very limited in the criteria we used to make business decisions. We had a lot more data than what we were able to leverage because a lot of it was manual and done in spreadsheets," says Harold Upton, Sunsweet vice president of strategic business processes. "The largest challenge we had was probably just the volume of data coming from multiple sources and the timing of that information. [They] had their own independent cycles of information and weren't necessarily all in sync with each other. Pulling all of that together with only what we had was very, very labor intensive." Company leaders chose to replace the spreadsheets with a business solution that could improve the supply chain while automating repetitive tasks. Using the Supply Chain Consultants Zemeter planning suite, Sunsweet employees now easily and effectively manage forecasting, collaboration, inventory planning, supply planning, and finite scheduling. The suite also enables managers to generate a statistical forecast based on history, rather than guesswork. "It allows us to more accurately forecast not what we want to happen but what we think realistically will happen," Upton says. "We have a lot better collaboration across the organization, which is a huge benefit." The software makes it possible to monitor the performance of the plan against actuals. If a critical threshold is hit, it automatically issues e-mail alerts to the appropriate users. "We've seen our obsolete materials go down. We've increased product efficiencies as a result of being able to optimize our production bottlenecks. We've seen better yields in production, as a result of optimizing what product is being run at what time," Upton says. Being a cooperative, Sunsweet managers have no control over their prune suppliers. "When they deliver the fruit, we have to deal with it. It doesn't matter if it's what we want or what we need, so we have to be able to factor that in," Upton says. The Zemeter early warning system alerts managers about inventory Food and beverage companies lag behind other consumer product companies in terms of their perfect order performance. APICS magazine July/August 2006 35 levels, forecast or open order discrepancies, and other potential problems, enabling them to react as much as two to three weeks earlier than before. With its new S&OP process, Sunsweet already has realized savings by lowering its number of production lines, reducing changeovers, and eliminating substantial and costly overtime. As a result of more accurate forecasting and planning, production overruns also have been cut from 30 percent to 12 percent. "Before, we were limited to how many constraints we could pay attention to at any given time," Upton says. "Now we can look at not only customer satisfaction and order fulfillment, but also overtime in the plant and distribution coststhe whole nine yards." When S&OP gets brewing Company leaders at Douwe Egberts Coffee and Tea UK, part of the global Sara Lee Corporation, also recently decided to upgrade from spreadsheet-based monitoring of forecasts and promotions to a highly effective S&OP process. Their goals included achieving heightened levels of clarity, fewer surprises, and happier customers. Recognizing the power that promotions and special offers have over consumer spending habits, Douwe Egberts decision makers needed a better way to handle constantly changing customer preferences. They chose the Demand Solutions DS One product to help them meet this objective. Douwe Egberts's Seabrook says Demand Solutions gave leaders in his organization the flexibility to mold the solution around the business and evolve it within the S&OP process they were establishing at the time. With the new technology and upgraded S&OP practices, Douwe Egberts salespeople now can input what they will sell at their desks, by SKU, account, year, month, and week. When company leaders are working on their annual planning, they can discern the base rate of sale and calculate the effect of promotions on top of that in order to formulate an annual numerical picture. "It's about understanding our own promotions, what we'll get with our own product, and the total effectthe complete, multidimensional relationship," Seabrook says. Douwe Egberts leaders report seeing very good results in volume and financial forecasting, which have led to improved planning and demand visibility. Plus, as employees gain more and more experience with S&OP, the figures have become increasingly accurate. "It allowed us to see very quickly the effect that changes have on our business," Seabrook says, adding that a monthly automated process uploads key data on spend and volume, with which employees in various departments can easily see and work. "We're managing the business rather than the business managing us. And we're able to look longer-term as well," Seabrook adds. "Once you know that the next 6 to 12 weeks are in place and managed correctly, and everything's in place to ensure that there aren't going to be any surprises, you can start to look longer term. It's about confidence." The tricky part Perhaps the biggest challenge faced when food and beverage companies implement S&OP is getting everyone on board and working together effectively. Still, industry experts overwhelmingly say it's the willingness of people to cooperate for the good of the whole that really makes S&OP work. "We have seen companies that have invested solely in technology, hoping that would solve their supply chain challenges without addressing the process improvement changes," Corigliano says. "And they have had unsuccessful S&OP implementations." He urges his clients to carefully examine organizational, knowledge, and behavioral issues and says the key is to implement best-practice process improvements alongside the supporting technology and then reinforce them with strong education. "The main challenges are organizational," Corigliano says. "The executives at the top must communicate the benefits of implementing an S&OP process and how it will benefit each area of the company and then put in place metrics that support each area of the company and the company's goals and objectives." Charles Smart, president of Smart Software Inc., says his experiences illustrate that good S&OP relies upon a business making highly reliable, highly accurate demand forecasts and using the key information coming out of the analytical process to generate the correct service-level inventories and safety stocks. "But this assumes a certain amount of collaboration between departments," he says. "If the collaboration exists, [S&OP] tends to be more successful." Smart adds that educating everyone involved on the need to collaborate is essential to the success of any S&OP process. "In other words, coordination and communication between departments may be almost a prerequisite to using whatever upstream data you have available to you," he says. "People hate planning; it's the nature of the beast," Campbell says. "It's much easier and requires less brainpower to react, rather than try to plan ahead and anticipate." True, but in an industry as complex as food and beverage, planning may mean the difference between a full house and having to shut your doors.