Control Towers: Solving for Short-Term Disruptions
Below we present key insights from a roundtable discussion led by Nik Coffrin, VP of Industry Solutions at o9 Solutions, on how control towers can transform sales and operations planning (S&OP) for consumer packaged goods companies.
Common S&OP and S&OE Challenges
Nik began the conversation by asking participants to identify their main S&OP and S&OE challenges. The challenges included:
- Having different pieces of data across functions
- Synchronization of processes
- Translating strategy into effective decision-making
Participants shared that having visibility of all data is crucial for fostering collaboration and trust within the organization. Collaboration with suppliers and customers is also essential. S&OE was identified as an important element of S&OP, with the concept of planning "horizons" as a key challenge. Nik explained that using a control tower—a digital nerve center—to gather data across multiple planning horizons can help optimize S&OP. Pierre Mille concurred, saying, “You don’t need an opinion when you have the data. Data is not disputable.”
“You don’t need an opinion when you have the data. Data is not disputable.”
Planning Challenges for CPG Companies
The discussion continued with an exploration of planning challenges for CPG companies. Chiefly among them were functional silos. Siloed functions within organizations can lead to a range of issues, including the collection of tribal rather than system-wide data, difficulties in achieving forecast accuracy and accountability, slow decision-making processes, a disconnect between planning and execution, a lack of alignment between strategy and execution, and a reliance on Excel and PowerPoint rather than user-friendly systems. Dennis Donelon shared that a unifying force was necessary to bring these independently-acting functions together, "There needs to be a team that acts as the umpires that can get everyone, especially suppliers, aligned using data towards a common objective."
"There needs to be a team that acts as the umpires that can get everyone, especially suppliers, aligned using data towards a common objective."
Another planning challenge mentioned was that sales teams may set achievable targets that are not necessarily aligned with the needs of the business and may not provide the necessary details on variable volumes and sizes of products needed to meet revenue goals across different channels. Said Nik, "One of the things we see in CPG organizations is that there isn't necessarily a natural flow in terms of how the functions are aligned. Marketing tends to be product or category-focused, Sales is almost always customer-centric, and Supply Chain can be a combination of both, but typically Product or Category."
The Right Time Frames for S&OP and S&OE
The discussion then addressed the appropriate time frames for S&OP and S&OE, with Nik emphasizing that these time frames depend on the level of control a company has over its distribution channels. Dennis provided an example of PepsiCo, which might conduct S&OP monthly, led by the business unit and involving representatives from Sales, Finance, Supply Chain, and Manufacturing. This process would take a 30, 60, or 90-day view to assessing any changes while always keeping the annual target in mind. S&OE, on the other hand, would involve weekly service review meetings that focus on the previous week, with a 3-4 week horizon in mind. This time frame allows for internal corrective actions to be taken in the event of a supply problem so that customers are not impacted.
The Key Capabilities of a Control Tower
The participants identified key capabilities they believed a control tower should have, including scorecards, cross-functional visibility, multivariate scenario building, flagging, lost sales visibility, and prioritization.
Additionally, Nik emphasized the importance of a control tower being able to detect and respond to internal and external demand and supply disruptions, understand the risks and impacts of such disruptions, provide decision support with multiple resolution alternatives, facilitate communication between functions to break down silos, continuously learn and adjust resolution protocols, and enable process orchestration.
Nik closed the discussion by emphasizing that a control tower should help to optimize and orchestrate the entire supply chain by using machine learning to recognize issues and implement resolutions based on market knowledge models, with a high degree of automation. Pierre followed with a real example of the benefits of this automation, saying, "One of the clients I was working with receives over 15,000 signals per day from an S&OE perspective, and a control tower can filter out 99% of these signals, with 98% able to be resolved automatically by the system as it learns to identify, prescribe, implement, and suggest solutions to problems. Humans cannot handle this volume of signals, and some companies simply go by the gut feeling of planners under pressure. A control tower enables businesses to allocate resources more efficiently, allowing planners to focus on tasks that require human expertise rather than being overwhelmed by data."
"One of the clients I was working with receives over 15,000 signals per day from an S&OE perspective, and a control tower can filter out 99% of these signals, with 98% able to be resolved automatically by the system as it learns to identify, prescribe, implement, and suggest solutions to problems."
1. Visibility and collaboration are crucial for optimized S&OP and S&OE processes. A control tower enables this by providing data visibility and a real-time collaboration capability between the departments involved in S&OP and S&OE.
2. Organizations must have a unifying force—a team—that breaks down functional silos and aligns the functions involved in S&OP and S&OE, including suppliers, toward a common objective.
3. S&OP and S&OE time frames need to address the unique pain points of the business, and customer collaboration is important in determining them.
4. A control tower will filter out noise, identify issues and recommend resolutions, and free up planners to focus on high-level strategic decisions. It can also continuously learn and adjust resolution protocols and enable process orchestration for better, faster decision-making.
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