Manufacturing

Business Process Management: The Key for Successful IT Intervention

With the influx of so many advanced technology breakthroughs like Advanced Sensors, Cloud Computing, 3D Printing, Mobile Collaboration, Agile Robots, Virtual Reality Devices and much publicized and celebrated Digital Revolution, it really makes it hard for the corporations to resist the lure of these promising developments, which not only seems to change the future of business landscape but also inducing innovative and ground breaking business models in the market. Even the big corporations, that once upon a time seems “too big to fail” are hard pressed to innovate faster and extract the best out of these technologies to not only hold their grounds but also to beat their newly developed competition.

The Tricky Part

Now to be in sync with the market development and at times to make a great leap, companies often got hurried up in adopting these fast paced evolving developments, without exercising much due diligence of the impacted business processes that ultimately cause adverse effects on desired performance KPIs like increasing service level, reducing cost, increasing turnover etc.

The problem here doesn’t lies in embracing these IT systems and technologies but in the mindset of its adopters who basically always want to maintain status quo in their business processes yet like to create the maximum impact with just the inclusion of these IT systems. They are open to implement new advanced IT systems and processes but are reluctant to tweak or say transform their operational model because of many reasons that are out of scope of this blog-post.

My focus here are not on the revolutionary firms that had disrupted the market with their state-of-art business model by harnessing these radical technological developments but are aimed towards those organization that have a well-established business running from the past but presently struggling to exploit the potential benefits out of their aspirational technology investments to cope up with fast changing business dynamics.

Business Process Management: The Definition

This concept is around for a long time now but with the pace of developments happening around, the risk of ignoring it or any lapse in its planning, evaluation or execution could have multifold negative repercussions  for the business.

To put it succinctly, Business Process Management is an activity to identify different processes undertaken, define measure for its effectiveness and efficiency, monitor the process, detect bottlenecks or constraints by analyzing its results and re-engineer the process to generate desired optimal output.

If you are looking for standard definition from industry, it is defined on bpm.com site as:

“Business Process Management (BPM) is a discipline involving any combination of modeling, automation, execution, control, measurement and optimization of business activity flows, in support of enterprise goals, spanning systems, employees, customers and partners within and beyond the enterprise boundaries.”

Business Process Improvement, Optimization and  Re-Engineering are one or the other forms of Business Process Management with strong interlinking.

The Necessity

To support this, I like to quote a reference from a study mentioned in one of the best and most reliable resource material for Supply Chain Management, titled “Designing and Managing the Supply Chain”. The research study focused on unraveling the linkage between supply chain performance and the maturity of business process and IT infrastructure. The research identified seven planning areas from supply chain to assess the maturity of business processes and systems at each level and the result obtained are described in brief as follows:

  • The most significant and surprising revelation of this study was that the companies who invested only in IT infrastructure but not in supporting business process perform even worse than those companies that doesn’t have both mature business process and systems.
    • One of the explanation for this dichotomy is cited as IT infrastructure requires significant investments which only results in information, and in absence of a structured and optimized business process the transformation and utilization of this information for an insightful decision making and continuous improvement seems to totally ineffective resulting in a bad strategy.
  • Companies with mature business processes and aligned IT systems achieve significant improvement on operational performance resulting in 75% higher profitability compared to market average.
  • Companies investing modestly in business processes have improved bottom line profitability and operational efficiency even if they don’t have mature IT systems in place and have 27% improvement potential when supported with relevant IT infrastructure

If this wasn’t proof enough, I got convinced of this hypothesis when one of our client approached us with the same problem, where they had invested heavily and implemented an ERP system but not getting promising results as sold by their respective implementation firm.

We analyzed their system and came to conclusion that their system are implemented as per individual stakeholder requirements but there is no synergy in their business processes across functions. Every department in isolation treated it as process automation where there current activity is performed through system now and even then all the operational stakeholders didn’t bother to even analyze their current business processes to make further improvements in their operational performance.

This kind of situations cause confusion and multi-fold damages to the firm. Now to add to it with our consulting intervention (further investment for the company)  led to streamlining their business processes with optimal resolution and delivering the much improved operational performance through integrating and aligning all functions of their organization to achieve targeted business performance. Also don’t forget the whole activity results in revised implementation of ERP system(another incurred cost)  but this time with meaningful intention generating focused results and achieving perfect coherence in between Business Processes and IT Systems.

Now some of the proven benefits of Business Process Management are mentioned as follows:

  • Increased efficiency and effectiveness through higher resource utilization.
  • Increased flexibility and adaptability to align with changing business dynamics along with reduction of cost for change management.
  • Business Value Chain creation with removed redundancies and non-value adding activities.
  • Consistent and optimized cross functional collaboration to enable continuous improvement.

The Path Forward

Now some of the IT integrators seeks that optimizing IT process is possible without changing the associated business process but the other way round , that is optimizing business process without IT is impossible to imagine. Well I agree to some extent for the later thought but in my view the first statement reflects a myopic view of their intentions and approach in their efforts of optimizing the results of intended business processes for the organization.

Well in my opinion any IT intervention should be first seen as business problem aimed at fulfilling specified business objectives. All the elements involved, like current IT Systems, Tools, Processes, Human Involvement(Knowledge, Skills, Participation) should be duly considered and evaluated before embarking on an aspirational journey of transforming business for the good with revolutionary yet expensive technology available at organization disposal.

The BPM Sources

Once organization realized the importance of Business Process Management for a successful IT intervention, there are many tools and frameworks available in the market to efficiently execute this activity.

Also it is recommended to get an expert help or hire consultant as their experience in enforcing best practices and optimization methodologies would help in optimizing the overall productivity and profitability by setting the right step in the direction of Process Improvement and Optimization and achieve stipulated goals in a timely manner.

Please follow links below to learn more about BPM and set yourself to fly safe and sound into the future:

A blog listing with I guess everything on Business Process Management(BPM)

https://bpmfundamentals.wordpress.com/resource-list/

 A site dedicated for Business Process Management(BPM) professionals

http://bpm.com/

S&OP: The Evolving Supply Chain Lifeline

Being a Supply Chain Practitioner, Observer and Analyzer, recently one concept that really caught my imagination and seems to be the Holy Grail for manufacturer, distributor or retailers is “Sales and Operation Planning”. Now one would say, we all do it, we have the whole process sorted out with plethora of meetings scheduled each month or quarter and that very interestingly involves most of the business functions like Finance, HR, Sales , Marketing, Materials, Product, Operations.

But even if the whole recipe for an effective planning is established , the companies are still facing regular challenges of  Stock-outs, Low inventory turnover, Lost customers, Supply interruption, Forecast errors, Inventory Pile ups, Markdowns, Customer Service Degradation,Increased Obsolescence, etc.

These persistent issues have provided enough inkling to revisit the S&OP basics and track down the real obstruction for materializing an effective S&OP, build with enough tolerance in order to counter the ever changing dynamics of supply chain and deliver results as per the strategic goals targeted by an organization.

S&OP As They Say:

APICS defined it as “A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer focused marketing plans for new and existing products with the management of supply chain.”

  • The Process brings together all the plans for the business(sales, marketing, development, manufacturing, sourcing and financial) into one integrated set of plans.
  • The plan covers horizon for near to intermediate term and links the strategic plans for the business with its execution and reviews performance measures for continuous improvements.

To put it succinctly, I like to quote Tom Wallace and Bob Stahl as they define S&OP as “a set of decision-making processes to balance demand and supply, to integrate financial and operational planning, and to link high level strategic plans with day-to-day operations.”

S&OP: Supply Chain Nerves Control

S&OP forms the brain that controls the whole supply chain nerves directing what products to make, how much to make, where to make, how much to procure, right inventory level, where to distribute, what products to be introduced, promotions, etc. in terms of both value and volume and are soundly based on the signals received through demand forecasts, capacity constraints, financial constraints, company policies etc. along with strategic objectives of organization.

Today it’s just not the organizations that are in competition but there is whole “Supply Chain Network War” out there and to grab a winning edge by providing the desired product at the right time and place, an effective and collaborative “S&OP” plays the most crucial role.

S&OP: What’s Different Now

The table below very clearly depicts the required elements gone into standard S&OP process. Implementing the underlined process with a disciplined and structured approach have served some of the organizations well by reaping in benefits like efficient operation, reduced costs etc. but with the increased complexity in form of ever changing customer loyalty and

BCG

requirements, shrinking lead times, short product life cycle, evolving technologies etc. has called for a much more sophisticated, collaborative, robust, agile and responsive S&OP processes in place. The time to react in the marketplace is constantly getting shorter and organizations need to continuously reconcile their supply chain strategy in order to fulfill the strategic objectives of the company.

With the elongated supply chain both downstream and upstream there is increased complexity in value chain resulting in little control and visibility over the processes, demand and resources. The frail relationship within the supply chain stakeholders has only aggravated the situation, where the supposedly well run S&OP processes are now struggling in making accurate forecasting and planning.

Today’s global business environment demands for an integrated decision making, encompassing even the company’s customers and suppliers, along with internal functional departments of the organization. Working in silos will not serve any benefits but a focused integrated effort to realize strategic goals by establishing a collaborative network of retailers, suppliers and manufacturers will go a long way in creating a win-win situation for all the stakeholders involved.

Below are some complexity challenges highlighted that have an impact on current S&OP practices:

Booz

Advanced S&OP: Integrated Business Planning(IBP)

The increased uncertainty and volatility induced by above mentioned complexity factors has compelled the organizations to look beyond ensuring alignment and synchronization of company’s internal functions through making an earnest effort in understanding and decoding the dynamics of external environment and its effect on their supply chain as well.

evolution

Source: Transitioning from Sales & Operations Planning to Integrated Business Planning, Oliver Wight Americas

This shift to Strategic Management is termed as Integrated Business Planning and has following additional S&OP attributes associated with it:

  1. More Robust Financial Integration
  2. Inclusion of Strategic Plans, Initiatives and Activities
  3. More Robust Product and Portfolio Review
  4. Improved Simulation Modeling and Scenarios
  5. Improved Operational Risk Visibility and Management
  6. Gap identification, improved decision making
  7. Improved Trust Across the entire management team
  8. Easy Effective Translation- Aggregate and Detail

Source: Transitioning from Sales & Operations Planning to Integrated Business Planning, Oliver Wight Americas

S&OP/IBP: Seize The Winning Edge

Involving all the concerned stakeholders and implementing S&OP in the right spirit is of paramount importance to get the supply chain right in the first place and is inevitable to create a win-win situation for all the stakeholders in supply chain.

Success realized, not only could be depicted by quantifiable parameters like reduction in forecast error and inventory, increase in inventory turn & service level, contribution to top line growth and SKU rationalization but also instill improvisation in coordination, communication, anticipating risks, machine and resource utilization, which ultimately led to fulfill customer needs with utmost efficiency and effectiveness.

S&OP Journey to Advanced S&OP/IBP has elevated the role of this process and is now the central element in achieving strategic business goals of an organization. Although there are still some refinement possible to extract the best out of S&OP process. Some of those are as follows:

Harnessing Information: Till now technology has aided in bringing more structure, increase collaboration but the real glory lies in harnessing the ever growing data to have better intelligent insights not just of markets but of their partners also.

Prompt/Unobstructed and relevant information flow and visibility with complete synchronization of all levels of decision makings: strategic, tactical, operational and execution is vital for swift decision making.

Building capability to tap into the available granular information of external factors linked to demand and supply, like new channels, new regulations or new alliances between competitors or suppliers, customers’ buying behavior, competitors’ products and pricing, etc. is the need of the hour and adapting the available technology to do so brings in the real competitive edge for the company.

Value Chain Driven: In today’s global business world planning between sales and operation should not be restricted with sales playing major role in determining demand but here supply side should also play a bigger role by reaching to extended supply chain integrated with complete visibility of tier-1 to tier-2 suppliers, having complete clarity of sourcing places, constraints, vulnerabilities, capacity, innovation potential, to optimize the product quality with reduced cost and putting out the right product in right quantity in the market.

Decision making should be driven based on trade off keeping in account the total cost to serve across the entire value chain.

Bespoke Strategy as per the Business Streams: As each business streams demands different service levels, extent of collaboration and information sharing, an enterprise needs to prioritize and adapt their S&OP activities, investments and attention based on product, channel and customer segmentation and molding their policies based on the strategic importance and its supply chain impact.

Streamlining Key Performance Indicators (KPI): Renouncing KPI’s assessing functional performance of different departments to a more integrated value chain specific KPI’s could help in deep diving and resurfacing the core problems hindering the optimized supply chain performance. Establishing a shared functional and performance metrics aligned with organization strategic objectives will help in increased collaboration, where incentive gained of value chain will far outweigh the results of functioning in silos.

Leadership Commitment: Last but not the least: Finally the right intention, right commitment, clear objectives and greater sense of purpose induced into organization culture is the only way to dispel distrust or any dysfunctional interaction among internal and external stakeholders. Continuous and dedicated engagement of top leadership is quintessential to set and drive the right behavior and balance in organization.

Just to conclude I like to quote one of my favorite lines from Kirby Ferguson:

‘We are not self-made. We are dependent on one another. Admitting this to ourselves isn’t an embrace of mediocrity and derivativeness, it’s a liberation from our misconceptions.” 

References:

George Palmatier and Colleen Crum,Transitioning from Sales & Operations Planning to Integrated Business Planning, Oliver Wight Americas (http://georgepalmatier.com/white-papers/transition-sop-ibp-palmatier.pdf)

The Hidden Supply Chain Engine: Sales and Operation Planning, BCG India,(http://www.bcgindia.com/documents/file83399.pdf)

A Fresh look at Sales and Operation Planning: Booz & Company (http://www.strategyand.pwc.com/media/file/Fresh_Look_Sales_Operations_Planning.pdf)

Sales and Operational Planning Process: Anand Subramaniam (http://www.slideshare.net/anandsubramaniam/sop-process)