The main topic of the third edition of S&OP Flavour Day on November 15, 2023, was how to improve the resilience of your supply chain. As numerous supply chain disruptions force companies to improve their resilience, it also means they need to take their S&OP decision-making process to the next level. But how do top supply chain executives rise to this challenge? During this Supply Chain Magazine event, supply chain experts from global brands, such as Mars Wrigley, Henkel and ADAMA, shed some light on their experiences. Solventure CEO Bram Desmet also gave his view on S&OP trends in practice and moderated one of the panel discussions at the event.
Bram kicked off his keynote by stating that the volatility of the COVID and the post-COVID supply chains necessitate an integration of financial planning (FP&A) and supply chain planning (S&OP/S&OE). Add to those challenging circumstances the growing set of environmental targets and social regulations, and you get a dire situation in which to revamp your supply chain. So, how do you connect the isolated siloes of finance, supply chain, and many other planning processes
“The first step is to find common ground between the departments involved and connect the different functions and people between Supply Chain and Finance,” according to Bram. “The key issue is the lack of buy-in: people don’t understand the value of such a partnership and they don’t want to collaborate in cross-functional processes. Unfortunately for those non-believers, cross-functional collaboration is exactly how companies create value, as processes flow from Sales and Marketing, to Research & Development and Manufacturing, and eventually to suppliers and customers. And, of course, Finance and HR have their own eco-systems on top of this organizational flow.”
“If this is what we need to manage, how many processes do we need to do so?” Bram continues. “Now, most companies have a financial planning process, a supply chain planning process, a resource planning process, a sales planning process, and perhaps a trade promotion planning process and a portfolio planning process.
And all these processes are equally fragmented and supported by separate planning systems, without companies asking the question how they should be integrated with each other. Not integrating these processes is the exact opposite of creating agility. If you want to be responsive, you need to know how the information flows.”
“The logical question is then: ‘how can we clean this up?’. The first step is to integrate supply chain planning and financial planning, especially when you consider that 75% of their processes are already the same, and that both are fully connected from end-to-end. Finance can also benefit from the controlling and analysis data which Supply Chain does have, and Supply Chain doesn’t have the proper financial information to make decisions. So, if you combine the two processes, you get an output like a working capital forecast, which I explained in more detail in my last book.”
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“I truly believe that we need to integrate these two to have a solid foundation to connect with the rest of the planning processes (step 2), such as a give-and-take of useful information between trade promotion planning, capacity planning and workforce planning. After these interfaces have been made, step 3 would be to integrate your planning processes with those of your customers and key suppliers. And finally, in step 4 you would integrate environmental and social metrics (on top of service, cost and cash metrics) into the heart of business decision-making. Only this way will you ever have a holistic view on the impact of your S&OP on your employees, the environment and society as a whole, and grow beyond level 5 S&OP maturity.”
Following up on Bram’s keynote, Edith van Erp-Slot – EU Market Collaboration Director at Mars Wrigley –, Ariane Longpré – Director Global Planning at Henkel –, and Annika Goudswaard – Regional Supply Chain Manager Europe at ADAMA Ltd. – gave the audience a unique insight into their recent Supply Chain transformations. Afterwards, the three ladies sat down together with Bram to discuss how they have tackled the integration of supply chain processes at their companies.
Regarding the connection between Supply Chain and Finance, Mars Wrigley has made some significant strides according to Edith van Erp-Slot: “We already have a pretty connected team, with our CFO frequently being the partner in crime of Supply Chain. One thing we can still improve though, is the connection with Sales, which is a lot less strong. Looking ahead, we want to move from an 18-month horizon to a 3-year outlook with our strategic planning, which will allow us to detect gaps and address them earlier.”
Ariane Longpré also made some clear steps at Henkel recently in planning integration: “Even though we have moved forward in this, we’re still hindered by the 1-year financial planning cycle, while Supply Chain needs to look much further than that. In our case, we have created an internal exercise to talk to each other at least once per financial year to ‘financialize’ the supply chain planning and find a common language between Finance and Supply Chain. The key to this is, in my opinion, data on pricing and elasticity. How do we get more information on this, with whom do we share it, and what is the impact of price on our volumes? These are questions that are equally important to Finance and Supply Chain, and that need to be solved if we want to move forward.”
At ADAMA, the planning integration is a more continuous process, Annika Goudswaard explains: “We normally start from our S&OP process and make adjustments along the way to arrive at an agreement with Finance, but it can be challenging to find the right compromise. A 3-year account plan is in the works, but we still need to find an agreement with key customers to decide where we’ll end up.”
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Even though the positives of a strong integration of supply chain and financial planning are clear, there are still quite some hurdles that are holding many companies back. Annika Goudswaard: “The seasonality and year-in-target of financial planning are a terrible disruptor for supply chain planning. We need to find a balance in this if we want this integration to succeed.”
Ariane Longpré agrees: “We need to figure out through which planning lens we’ll be looking at our planning processes. This is especially tough when Supply Chain explains reality in real detail (bottom-up), while Finance starts from theoretical numbers (top-down), and the level of understanding between the two is lacking. Edith van Erp-Slot went further on this point of understanding: “A transformation like this only succeeds when employees have the motivation to change. That’s why having someone dedicated to change management is crucial to counter resistance and convince everyone of the benefits of the integration.”
In the end, the whole panel agreed with Bram that supply chain and financial planning should become one planning. Ariane Longpré concluded this talk very succinctly: “I’m certain our business would be a better place as a result. It all goes back to speed and efficiency which are key to survive in an uncertain global market. I think it’s a lack of humility to think you can do it on your own, and I believe cross-collaboration has the power to create a common opinion of the future.
Balancing service, cost and cash is a major challenge. To improve this supply chain triangle and to steer your organization towards success, a mature, Executive Sales and Operations Planning (S&OP) process is key.
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