This excerpt from the new book The Market-Driven Supply Chain explains what makes a productive and effective sales and operations planning (S&OP) team and outlines what that team should accomplish.
Robert P. Burrows III is founder, managing principal, and chief strategy officer of the On-Point group, a firm that applies the quantitative science of operations research to supply chain management.
Numbers are frightening. Working outside the comfort of your functional organization is frightening. So asking individuals to come together, use numbers to communicate, and achieve complete alignment of their plans with all other departments is very frightening.
Analytics resolve differences of opinion but are often seen as dispassionate. A behavior change is required to make analytics less frightening and even sought after. I have found that people will change their behavior if a consistent and well-reasoned approach is designed. One essential element in the process of accomplishing the behavioral change is to make the analytics standard and familiar month to month. Albert Einstein once said, "It is easy to make things complex; complex to make things simple." Simplicity is the key to familiarity and understanding.
In a collegial sales and operations planning (S&OP) team, the numbers are discussed, rather than personalities or opinions. Everyone's opinion is sought initially, but opinions must be supported by the numbers in the end. To have a collegial team, some basic team protocol is required. We define the elements of this protocol as we discuss the arduous monthly planning process design.
The 7 characteristics of strong teams
Great productivity and effective innovation emanate from teams if they are structured according to some disciplined rules. There are seven characteristics of a strong team for use in the month-to-month processes of market-savvy S&OP. A strong team is:
1. Well founded in analytics
Broadly cross-functional
Capable at problem solving
Composed of role players
Specifically tasked
Jointly accountable
Disciplined in approach}
Well founded in analytics
Teams work best when analytics rule the discussion. In keeping with our management by analytics principle, teams are a natural part of the market-savvy S&OP design. So often we find S&OP run by one department or dominated by sales lore or historical conventions that go unchallenged but drive decision making almost unwittingly. As an example, at almost all the medical technology companies I have worked with, the sales representatives insist that for every one set of devices delivered to an operating room, you actually need two sets just in case a nurse drops something. This doubles the inventory, of course, and causes all sorts of profit and cash-flow problems throughout the supply chain, but the notion goes unchallenged for the most part. If a cross-functional team studies the issue by asking the customer if two sets of everything are needed, the team is surprised to find the answer is almost always no.
When a meeting relies on subjectivity and the opinions of the most articulate, when the less-demonstrative participants are not encouraged to have a voice, when bias and prejudices dominate, it is not a team meeting. The meeting is a power struggle, and the power of the team is lost. A strong team culture calls out these issues and insists on analytics. A meeting that relies on facts presented in a way that encourages understanding and participation becomes a team meeting. In market-savvy S&OP, the team should have a standard set of analytics designed for communication and alignment, as detailed later in this chapter. S&OP is, at its core, all about alignment of each functional area's work to accomplish the strategy. The analytics must focus on alignment. For instance, a basic dashboard showing historical and future sales, production, and inventory is a display of whether or not the work of many functions is in alignment. If sales are going up and production is not following, plans are not aligned.
Given a standard set of analytics used each month, the team becomes comfortable with the information flow and gains an in-depth understanding of the information and its impact on accomplishing the team's purpose. Without a standard set of analytics, the individual members would normally present different numbers from a different set of starting points and assumptions each month, thus greatly reducing the communicative values. The analytics must be generated from a known base of data so everyone is comfortable with the accuracy. The team can then bypass the time-consuming and counterproductive discussions about whether the data are of value to instead focus on meaning and trends in the information.
Broadly cross-functional
The market-savvy S&OP team needs to have as senior a representation as possible from each functional area, including legal, finance, operations, logistics, marketing, sales, research and development (R&D), and planning. The cross-functional team, over time, becomes capable of looking at problem solving in a way that has strong potential for success because everyone's requirements are being addressed. Of importance is the fact no one is left out, so finger-pointing is minimized. The primary goal of market-savvy S&OP is alignment of each functional area to the customer's planning and operations. No one can be left out of the alignment process if a complete strategic implementation is to be achieved.
Capable at problem solving
The team will not be successful if it is always looking outside itself for creative ideas. Many companies find they need to change personnel to satisfy this requirement. In almost all of our engagements, this has been the case. The employees who have become dependent upon their own functional area exclusively for promotion prospects, increased status, comfort, and camaraderie are not good team players. Employees who are basically good businesspersons work well in teams because they seek perspective and insight. Problem solving requires looking for solutions that may be contrary to the accepted methods and policies. Problem-solving skills can be taught; the best approach is the long-proven scientific method. We use this rather than the techniques taught in Lean or Six Sigma (such as the cause-and-effect fishbone charting) because the issues in market-savvy S&OP are normally more complex than the ones for which these techniques are best suited.
We apply the standard method of problem solving using the simple progression DHSSD, which stands for Discover, Hypothesize, Simulate, Select, and Deploy. Simply stated, the Discover step is the current-state definition. Hypothesize is the examination of solution alternatives through a highly participative, cross-functional set of discussions. Simulate is where each alternative is reduced to numbers, and Select is the step in which risk of implementation is balanced with benefit potential. Finally, Deploy is when a final decision is made and action is taken. DHSSD is a technique that is attractive to senior managers because it requires financial analysis as well as creative thinking.
Composed of role players
A team must have at least one person capable of filling each of the following four roles: a decisive person, a salesperson, a quality-control person, and a loyal worker person. These roles are commonly found in a group of people but may not be found in a smaller unit of assigned team members. We actually use personality testing to determine who on the team fits each of the required roles. We then teach how each role works for the betterment of the team as a whole.
Team members must respect the need for each role and actively work to encourage one another in their natural roles. How should you deal with each of these people? To start, recognize that a team will not have its ideas and recommendations heard and approved without the salesperson, but the salesperson may not be the quality-control person. The quality-control person may be somewhat irritating, always pushing for details and refinements, but he or she ensures that the team is not brushing past important aspects of a problem. The team would work hard but never produce a report without a decision maker who keeps an eye on the bottom line, even though the decision maker may be misunderstood as insensitive. In addition, the team needs at least one, but probably many, loyal workers. These are the people who do the analyses, are always in the meetings and on time, and keep the lid on disagreements. They may also stay in analysis forever unless drawn to a conclusive point by the decision makers and salespeople. Don't ask a loyal worker person to give a presentation; he or she would rather just leave the team. Always recognize the salesperson, and let the quality control person show the numbers. The decision maker may be impatient with the team, so keep on point.
Specifically tasked
A team needs a very clear charter or purpose. The purpose statement should be a formal one with a good deal of joint thought going into its development at the very early stages of the team's life, such as days one and two. In market-savvy S&OP, each team has sole responsibility for one market segment. The purpose is defined by looking to the go-to-market strategy and the specific benefits defined in the strategy. Each team member should have one page that has the purpose statement written at the top, followed by the quantified goals/benefits, the names of the team members, the team's sponsor or responsible executive, the basic approach to be taken to do the business of the team, and a timeline to establish the monthly processes and to accomplish near-term and longer-term goals.
Jointly accountable
The team should be seen as a cohesive unit with each member accountable in tangible ways. In many cases, compensation systems need to be changed to fully realize this aspect of the team. Certainly, the team makes joint presentations to senior management and jointly defends recommendations. Team members cannot sit back and say, "Well, I don't agree, but you guys go ahead anyway." There also needs to be accountability between team members. Each person must be willing to submit to the authority of the team and become a team member in good standing.
Disciplined in approach
Discipline is composed of time commitment, meeting protocol, structure, and an ordered approach.
First, a time commitment is required. The process design must define how much time will normally be required each month from team members, and then the team members must arrange their schedules to meet those commitments. The strongest S&OP teams have essentially 100 percent attendance at meetings by senior members and the profit-center executive. The monthly cycle of multistep S&OP processes must be clearly stated and religiously followed. Market-savvy S&OP has a palpable rhythm and cadence that actually frees up more time than it consumes.
Second, a meeting protocol is essential. Cell phones, e-mail, etc., must be completely banned at team meetings. Having executives pull out for an important conference call or another meeting must be rare occurrences. This is a matter of respect for colleagues and the team priorities. People must come on time and prepared. Reports should be distributed or available on the team's shared website well ahead of the meeting in time for a proper review.
Third, a meeting structure is needed. The meetings should be scheduled months in advance, have specific agendas published at least a week in advance of the actual meeting dates, and have a stated time limit and a formal note-taking and follow-up process. A detailed, written record of the proceedings is a requirement. The output of the market-savvy S&OP process each month is very likely to require the electronic equivalent of a full four-inch, three-ring binder.
Finally, an ordered approach to the team's work is necessary. If the team is charged with developing a new path for one of the processes involved in S&OP, the ordered approach to the team's work will be more like a project in nature. If the team holds a group meeting monthly on an ongoing basis to lead a process such as S&OP monthly planning, the ordered approach is to follow the process design and to continually work on improving the process.
The first condition, time commitment, requires a generic structure. I have worked with the High Performance Management System (HPMS) developed by Richard C. Palermo Sr. in the 1970s and 1980s while he led Xerox Corporation to success in earning the Malcolm Baldrige National Quality Award. I have seen Palermo's system used very effectively in several major companies, with spectacular results. (You can pick up a book about HPMS for a thorough reading and understanding. I recommend Leadership ... A Return to Common Sense, by Richard C. Palermo Sr., published by Strategic Triangle Inc.) In essence, the practice starts with setting a vision, selecting a destination for the overall business, then selecting high-impact, revolutionizing things to implement. You can look at these revolutionizing things as the "vital few." Palermo points out that for a business to be successful, it must have excellence in three areas, as follows:
A Successful Business = Satisfied Customers + Motivated Employees + Satisfied Shareholders
One right thing or revolutionary idea needs to be defined for each of the three areas of a successful business stated in the equation above. A job ticket is then written for each of those ideas. The job ticket has eight major steps—always the same steps for each thing you choose to be one of the vital few things you do. The eight steps are as follows:
1. Write a purpose statement for the project with a quantified goal, if possible.
Define the major work steps, using the generic group at a minimum.
Select a team leader with passion about the project, a sponsor from senior management, and team members.
Document the current state, including doing benchmarking internally and externally.
Define the future state.
Develop a transition plan and gain approval from senior management to implement it.
Implement with high quality.
Monitor results.
These eight steps are always in the plan of work; some specific substeps will likely be needed as well. The first six steps should be completed in about six weeks, or at most nine weeks. Team members should be asked to devote a minimum of 25 percent of their time to the project during steps one through six, and very likely 50 percent or more.
The team approach is always founded on analytics. In HPMS, full participation by team members is required, and analytics are the rule. Teams, whether they are ongoing S&OP teams or project teams, work best when they have a foundation in facts rather than opinions. The effective team has an abundance of proper analytics upon which to draw conclusions and make decisions.
Editor's Note:The Market-Drive Supply Chain: A Revolutionary Model for Sales and Operations Planning in the New On-Demand Economy is available in both hardcover and electronic editions from Amazon.com, Barnes & Noble, and other booksellers.
Economic activity in the logistics industry expanded in November, continuing a steady growth pattern that began earlier this year and signaling a return to seasonality after several years of fluctuating conditions, according to the latest Logistics Managers’ Index report (LMI), released today.
The November LMI registered 58.4, down slightly from October’s reading of 58.9, which was the highest level in two years. The LMI is a monthly gauge of business conditions across warehousing and logistics markets; a reading above 50 indicates growth and a reading below 50 indicates contraction.
“The overall index has been very consistent in the past three months, with readings of 58.6, 58.9, and 58.4,” LMI analyst Zac Rogers, associate professor of supply chain management at Colorado State University, wrote in the November LMI report. “This plateau is slightly higher than a similar plateau of consistency earlier in the year when May to August saw four readings between 55.3 and 56.4. Seasonally speaking, it is consistent that this later year run of readings would be the highest all year.”
Separately, Rogers said the end-of-year growth reflects the return to a healthy holiday peak, which started when inventory levels expanded in late summer and early fall as retailers began stocking up to meet consumer demand. Pandemic-driven shifts in consumer buying behavior, inflation, and economic uncertainty contributed to volatile peak season conditions over the past four years, with the LMI swinging from record-high growth in late 2020 and 2021 to slower growth in 2022 and contraction in 2023.
“The LMI contracted at this time a year ago, so basically [there was] no peak season,” Rogers said, citing inflation as a drag on demand. “To have a normal November … [really] for the first time in five years, justifies what we’ve seen all these companies doing—building up inventory in a sustainable, seasonal way.
“Based on what we’re seeing, a lot of supply chains called it right and were ready for healthy holiday season, so far.”
The LMI has remained in the mid to high 50s range since January—with the exception of April, when the index dipped to 52.9—signaling strong and consistent demand for warehousing and transportation services.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
Grocers and retailers are struggling to get their systems back online just before the winter holiday peak, following a software hack that hit the supply chain software provider Blue Yonder this week.
The ransomware attack is snarling inventory distribution patterns because of its impact on systems such as the employee scheduling system for coffee stalwart Starbucks, according to a published report. Scottsdale, Arizona-based Blue Yonder provides a wide range of supply chain software, including warehouse management system (WMS), transportation management system (TMS), order management and commerce, network and control tower, returns management, and others.
Blue Yonder today acknowledged the disruptions, saying they were the result of a ransomware incident affecting its managed services hosted environment. The company has established a dedicated cybersecurity incident update webpage to communicate its recovery progress, but it had not been updated for nearly two days as of Tuesday afternoon. “Since learning of the incident, the Blue Yonder team has been working diligently together with external cybersecurity firms to make progress in their recovery process. We have implemented several defensive and forensic protocols,” a Blue Yonder spokesperson said in an email.
The timing of the attack suggests that hackers may have targeted Blue Yonder in a calculated attack based on the upcoming Thanksgiving break, since many U.S. organizations downsize their security staffing on holidays and weekends, according to a statement from Dan Lattimer, VP of Semperis, a New Jersey-based computer and network security firm.
“While details on the specifics of the Blue Yonder attack are scant, it is yet another reminder how damaging supply chain disruptions become when suppliers are taken offline. Kudos to Blue Yonder for dealing with this cyberattack head on but we still don’t know how far reaching the business disruptions will be in the UK, U.S. and other countries,” Lattimer said. “Now is time for organizations to fight back against threat actors. Deciding whether or not to pay a ransom is a personal decision that each company has to make, but paying emboldens threat actors and throws more fuel onto an already burning inferno. Simply, it doesn’t pay-to-pay,” he said.
The incident closely followed an unrelated cybersecurity issue at the grocery giant Ahold Delhaize, which has been recovering from impacts to the Stop & Shop chain that it across the U.S. Northeast region. In a statement apologizing to customers for the inconvenience of the cybersecurity issue, Netherlands-based Ahold Delhaize said its top priority is the security of its customers, associates and partners, and that the company’s internal IT security staff was working with external cybersecurity experts and law enforcement to speed recovery. “Our teams are taking steps to assess and mitigate the issue. This includes taking some systems offline to help protect them. This issue and subsequent mitigating actions have affected certain Ahold Delhaize USA brands and services including a number of pharmacies and certain e-commerce operations,” the company said.
Editor's note:This article was revised on November 27 to indicate that the cybersecurity issue at Ahold Delhaize was unrelated to the Blue Yonder hack.
The new funding brings Amazon's total investment in Anthropic to $8 billion, while maintaining the e-commerce giant’s position as a minority investor, according to Anthropic. The partnership was launched in 2023, when Amazon invested its first $4 billion round in the firm.
Anthropic’s “Claude” family of AI assistant models is available on AWS’s Amazon Bedrock, which is a cloud-based managed service that lets companies build specialized generative AI applications by choosing from an array of foundation models (FMs) developed by AI providers like AI21 Labs, Anthropic, Cohere, Meta, Mistral AI, Stability AI, and Amazon itself.
According to Amazon, tens of thousands of customers, from startups to enterprises and government institutions, are currently running their generative AI workloads using Anthropic’s models in the AWS cloud. Those GenAI tools are powering tasks such as customer service chatbots, coding assistants, translation applications, drug discovery, engineering design, and complex business processes.
"The response from AWS customers who are developing generative AI applications powered by Anthropic in Amazon Bedrock has been remarkable," Matt Garman, AWS CEO, said in a release. "By continuing to deploy Anthropic models in Amazon Bedrock and collaborating with Anthropic on the development of our custom Trainium chips, we’ll keep pushing the boundaries of what customers can achieve with generative AI technologies. We’ve been impressed by Anthropic’s pace of innovation and commitment to responsible development of generative AI, and look forward to deepening our collaboration."
Specifically, the new global average robot density has reached a record 162 units per 10,000 employees in 2023, which is more than double the mark of 74 units measured seven years ago.
Broken into geographical regions, the European Union has a robot density of 219 units per 10,000 employees, an increase of 5.2%, with Germany, Sweden, Denmark and Slovenia in the global top ten. Next, North America’s robot density is 197 units per 10,000 employees – up 4.2%. And Asia has a robot density of 182 units per 10,000 persons employed in manufacturing - an increase of 7.6%. The economies of Korea, Singapore, mainland China and Japan are among the top ten most automated countries.
Broken into individual countries, the U.S. ranked in 10th place in 2023, with a robot density of 295 units. Higher up on the list, the top five are:
The Republic of Korea, with 1,012 robot units, showing a 5% increase on average each year since 2018 thanks to its strong electronics and automotive industries.
Singapore had 770 robot units, in part because it is a small country with a very low number of employees in the manufacturing industry, so it can reach a high robot density with a relatively small operational stock.
China took third place in 2023, surpassing Germany and Japan with a mark of 470 robot units as the nation has managed to double its robot density within four years.
Germany ranks fourth with 429 robot units for a 5% CAGR since 2018.
Japan is in fifth place with 419 robot units, showing growth of 7% on average each year from 2018 to 2023.
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."