the strategic adaptive loop
Managing the Strategic Relevant Range
adaptive sales & operations Planning
Adaptive Sales and Operations Planning is the integrated business process that provides management the ability to strategically define, direct and manage relevant information in the strategic relevant range and across the enterprise. Market Driven Innovation is combined with Operations Strategy, Go-to-Market Strategy and Financial Strategy to create strategic information and requirements for tactical reconciliation and strategic projection to effectively create and drive adaptation.
Dick Ling and Carol Ptak walk through the aspects fo Adaptive S&OP. This video is from the April 2020 Webinar Series.
The Basics of Adaptive S&OP
The Adaptive S&OP process manages the strategic adaptive loop in the "Strategic Relevant Range" and performed by the Integrated Reconciliation Team (IRT) in conjunction with senior management. The composition and size of this team is relative to the size and complexity of the organization. The typical roles in the Adaptive S&OP process are:
Management Business Review. The MBR is chaired by the General Manager/CEO with the participation of the GM/CEO direct reports.
Integrated Reconciliation Team. Typically, these are the trusted “right-hand” personnel to the executives who participate in the Management Business Review. They are extremely knowledgeable about the reality of the operational environment and their respective functions. In small companies, typically the Integrated Reconciliation Team is the same as the participants in the Management Business Review and the process is led by the General Manager/CEO. In larger companies these are two separate teams.
IRT leader. The IRT is led by a trusted and respected strategic-minded leader who is good with detail management and cross-functional communication.
DDS&OP team leader. The DDS&OP team leader provides critical insight to the Demand Driven Operating Model capability and the tactical implications for the proposed strategic directions. The DDS&OP team leader participates on the Integrated Reconciliation Team. Learn more about DDS&OP.
S&OP analysts. In larger companies several analysts may be required to document, integrate, and build communication vehicles to support the Integrated Reconciliation Team.
There are seven elements to Adaptive S&OP.
The composition of our product offerings now and in the future.
Forecasted demand given across the portfolio based on what we know and what we are planning.
The planned Demand Driven Operating Model capabilities in the strategic relevant range.
The relevant financial performance factors over the strategic time frame.
Integrated Strategic Reconciliation
The ongoing assimilation, reconciliation and modeling of the the portfolio, demand, supply and financial inputs.
A final feasibility, modeling and projection check to align the emerging strategy with the necessary operational capability.
Management Business Review
Executive review and input resulting in approval or additional adjustments.
is your organization ready for Adaptive S&OP?
Adaptive S&OP is typically not the starting point for most of today’s organizations as it has some basic starting prerequisites. Some of these prerequisites are straight forward and standard for executives familiar with any S&OP process. Others are indicative of fundamental operational shifts that must occur to enable the enterprise to become adaptive, typically starting with the implementation of DDMRP. There are eight critical starting prerequisites for Adaptive S&OP. Plainly said, if these prerequisites are not in place, Adaptive S&OP cannot and will not operate properly.
Prerequisite #1: There is a defined strategic direction for the enterprise.
This is one of those familiar prerequisites. Strategy can be expressed or implied, but every company must have a strategy. Senior management must clearly articulate a strategy, or the subsystems will assume what it should be, easily making invalid assumptions (with all the best intentions), thereby potentially pursuing different strategies and risking organizational coherence. The senior management team is responsible for envisioning and articulating the desired future state and how the company will innovate to sustain and grow market pull in the future.
Prerequisite #2: There is an existing (at least partially established) business plan.
Another familiar prerequisite. The Adaptive S&OP process adapts and/or updates the business plan based on things like:
New directives from senior management
New opportunities in the marketplace
New product timing
Deviations from the business plan
Supply and Demand Driven Operating Model problems or opportunities
Impact of external factors (currency shifts, new regulatory requirements, global crises, competitive threats, etc.)
Prerequisite #3: The future will look different from the past.
The Volatile, Uncertain, Complex and Ambiguous (VUCA) world we operate in today requires that we understand the basic nature of complex systems and the dangers associated with making future commitments and decisions based on the past repeating itself precisely; it NEVER will.
Prerequisite #4: An understanding of and commitment to flow-based efficiency.
Management has a solid understanding of and commitment to managing the organization for flow-based efficiency versus cost-based efficiency. Flow-based efficiency is mathematically supported by management accounting, physics, lean, six sigma and economics.
Prerequisite #5: The organization has at least a partial flow-based operating model (Demand Driven Operating Model) in place.
Without this type of operating model, assets will continue to be misaligned from actual market requirements, obscuring relevant information and increasing waste. The most commonly observed effect of this misalignment is that the organization has excess inventory positions while simultaneously suffering from chronic and frequent shortages throughout the supply chain.
Prerequisite #6: Demand Driven S&OP is understood.
The organization has the capability to adapt, shape and/or reconfigure the Demand Driven Operating Model based on its past performance and/or the or emerging business strategies produced by Adaptive S&OP. Without the ability to tactically reconcile and reconfigure a DDOM, innovation, adaptation, and system efficiency will be stifled in the short and long term.
Prerequisite #7: The organization can use roughly right numbers effectively.
Information can be presented, translated and understood as a roughly right range rather than precisely wrong discrete numbers and all levels (strategic, tactical and operational). The DDOM and DDS&OP process lends itself to this basic requirement since discrete buffer sizing numbers always translate back to ranges of buffer capability and performance. This is in contrast to the specificity of the Master Production Schedule.
Prerequisite #8: The Demand Driven Adaptive Enterprise model and its characteristics in relation to complex adaptive systems is understood.
It is important to remember that DDS&OP has a critical role in the strategic recommendation process. A company does not implement a Demand Driven Adaptive Enterprise model directly. It must first implement an operating model with DDMRP at its core, then implement DDS&OP to manage the tactical range and then integrate this with the Adaptive S&OP process steps to transform the overall management processes and therefore become “adaptive.”
learning more ABOUT Adaptive s&op
This immersive one day workshop led by an Endorsed DDI Adaptive S&OP Instructor will expose senior leadership to:
The basic history of S&OP and its primary objectives
The prerequisites of relevant information in order to put a company on a path of growth
The inability and failure of conventional approaches to produce relevant information
An organizational framework called the Demand Driven Adaptive Enterprise Model
The seven elements of Adaptive S&OP
How to begin to implement the DDAE Model
This seminar is designed for executive teams looking to dramatically change the trajectory of their organization and overhaul the way the business connects strategy to operations and operations to strategy. The seminar is typically delivered on an in-house basis to executive teams.