“There was no alignment between the interests of the various de- partments; S&OP was necessary to achieve that.”
Dutch population. In concrete terms: over 16 million babies are born in China each year, compared with approximately 170,000 in the Netherlands. Thierry Durupthy, S&OP Milk Director Europe at Danone Early Life Nutrition, spoke about Danone’s S&OP adventure at the same conference as Gerard de Bruijn. Regular out-of-stocks in various countries, crisis situations at a number of suppli- ers, and operational teams that spent too much time firefighting – three clear signs of the need to take action. “We had to extend our horizon,” said Durupthy.
Cholesterol
Fredrik Olsson, Syncronic: ‘It’s difficult to get Finance involved in the meeting if Sales isn’t completely on board.’
Henrik Knak, Syncronic: ‘Sales is often focused on the top line of the balance sheet, but in IBP the focus is actually on the bottom line.’
The first step was to set up weekly and monthly
routines between production
part of the decision-making process every month,” adds Van Koetsveld. She believes that IBP makes it easier to weigh up the options by providing clarity about their consequences for the margin. “Now, we not only know which volumes we need to produce, but also what the return will be. Furthermore, IBP creates more buy-in. It’s always difficult to talk to Sales about volumes if they are mainly focused on turnover.”
Short and long term
Van Koetsveld echoes that leadership is crucial for S&OP success. Senior man- agement must regard it as important and understand how the process works. The S&OP leader should report directly to top-level management, irrespective of whether to the CEO, CFO or COO. “That also means that we provide training at that level, for instance. They must under- stand the underlying idea and also convey it to the rest of the organization,” contin- ues Van Koetsveld. Additionally, she emphasizes that the S&OP process must be aligned with the business strategy, and there should be regular checks on whether the decisions made really do contribute to the accom- plishment of the strategic objectives.
“Incidentally, that doesn’t mean that each individual decision has to be aligned with the strategy. It can sometimes be neces- sary to deviate from it in the short term, as long as you don’t lose sight of the strat- egy in the long term.” Van Koetsveld cautions against becom- ing blinded by unexpected events. “Just because the acute demand for a product rises unexpectedly, it doesn’t mean that it will remain so for the long term, so you should avoid the temptation to implement all kinds of ad-hoc measures. Needless to say,
it’s important to investigate what
the unexpected rise means for long-term demand. Are the assumptions still cor- rect? Is it necessary to explore new sce- narios? We’ve learned that it’s crucial to differentiate between the short and long term.”
One company that has completed its tran- sition from S&OP to IBP is Danone Early Life Nutrition. The need for the transi- tion was driven by the strong worldwide demand for Nutrilon, Nutricia’s baby and infant milk formula. Due to the huge level of demand, primarily from China, prod- uct availability to parents in the Nether- lands has been under pressure for some time. Each year, China’s population grows by roughly the same amount as the entire
sites and sales departments. Subse- quently, a harmonized inventory method was implemented. “Inventory is just like cholesterol; you have good stock and bad stock,” explained Durupthy. The founda- tions for S&OP were laid in 2014. The forecast
horizon was extended to 18
months at SKU level in the 15 key coun- tries. The S&OP schedule was given a monthly rhythm. That not only meant that the company was anticipating a period of at least 12 months, but it also improved the forecasting accuracy. Moreo- ver, customer service was improved with- out increasing the stock levels. Proactive interactions with the business ensured that only relevant discussions were held. Then in 2015, Danone Early Life Nutri- tion worked towards a global roll-out and a consolidated overview through a series of pilots. When it came to cross-regional problems, it expressly had to be a closed cycle. This created a clear focus on global challenges with a rolling horizon of 18 months. “This also made it credible that we could take the business a step further,” said Durupthy.
The deliveries were now back on track, but that wasn’t enough; S&OP should guide the medium-term worldwide growth, which Durupthy described as the ‘holy grail’. Last year the company, with its CEO’s sponsorship, launched a ‘Global Planning System’ (GPS) which is the name Danone uses for IBP. The GPS,
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SUPPLY CHAIN MOVEMENT, No.29, Q2 2018
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