Executive Spotlight Series: Keeping the S&OP Process Simple

Sue_Armstrong.jpgAs Chief Operations Officer for Nature’s Sunshine Products, and a recently named supply chain "Rainmaker" by DC Velocity, Sue Armstrong is known for her ability to create order amidst a complex supply chain. 

Nature’s Sunshine, a nutritional supplement company based in Utah, operates in a largely regulatory landscape – they serve 43 international markets, manage over 4,000 forecasted SKUs, use over 900 raw material ingredients, and source from over 250 vendors. Over 90% of everything sold globally is manufactured in its Utah facility.

Overseeing worldwide sourcing, manufacturing, distribution and information technology, Sue leverages lean principles to drive collaboration, innovation, and operational excellence, bringing stakeholders together to drive solutions. Among these solutions are re-designing global supply chains, simplifying processes, removing waste and excess inventory while creating a holistic, collaborative team of skilled individuals working towards common goals. To that end, over 80 people have been accredited through internal lean programs in two years.

This focus on lean and collaboration coupled with supply chain complexity has changed the way Nature’s Sunshine does sales and operations planning (S&OP). We interviewed Sue on S&OP and the proven best practices that have led to her organization's success.

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HOW DOES YOUR INDUSTRY AFFECT YOUR APPROACH TO S&OP?

In the nutritional supplement supply chain, changes in the regulatory landscape often present challenges in S&OP. The testing, registering, and reformulating of products can greatly impact overall lead time of the value chain. At Nature's Sunshine, we have to rely on market regulatory experts to a large extent. Pending product changes due to high quality standards and regulations can cause long delays in products going to market. Coupled with regulation challenges is our business model. Multi-level marketing and direct selling encourage promotional activity that drives demand, thus it's difficult to match our financial forecast to the demand plan.

WITH THOUSANDS OF SKUs and changing regulations, how do you accurately forecast demand?                                                                                                         

S&OP should be owned by operations, and the demand forecast inputs must be at a level of granularity that operations can execute.  At Nature's Sunshine, we practice delayed differentiation techniques when possible to mitigate risk against inaccurate forecasts. For example, the Latin American market has 40-60 different SKUs. We're able to forecast at the SKU level by market tiers, not the formula level. Each set of market requirements runs through the same forecasting process, but the S&OP process handles tiers differently.

In your experience, what are the keys to success for launching an S&OP process?

S&OP has to be supported by leadership and led by someone on the executive team. As a core process for the organization, there needs to be a disciplined management system to sustain it. I've found that if you bring in the stakeholders and tell them 'what's in it for them,' they'll be more willing to actively participate. Stakeholders need to know what inputs are required and what outputs desired.

S&OP meetings need to have purpose and defined roles and responsibilities. Stakeholders need to feel empowered to make decisions. I've found it's wise to provide data and facts for people to review beforehand so they're not walking into the meetings 'cold.'

Other tips for S&OP meetings include:

  • Provide a divisional/regional aggregation of information during meetings
  • Kick off the meeting with the demand forecast and feed into supply review (overlaying with product launches/exits, currency problems, political constraints, etc.)
  • Always keep a financial perspective
  • Maintain a contingency structure between meetings to allow for flexibility 
  • Keep ownership in the hands of people doing the work
  • Protect the S&OP process from becoming overly-beaurocratic
Thanks, Sue. Is there anything else you'd like to share? 

S&OP should be the spine of an organization; it's not a process that happens on the side, but interweaves with every aspect of the business. Having a collaborative process with the right people is critical to success.


 

Posted by Derek Browning

Derek has ten years of supply chain and logistics experience, including transactional transportation management, performing logistics network and route designs, supply chain and facility assessments, lean cross-dock and distribution center projects, people development, and the deployment of lean principles and practices in cross-functional areas. These areas include: logistics and warehousing, purchasing, human resources, creative design and marketing, accounting and finance, sales, and executive leadership teams. Derek has trained thousands of students and professionals in lean, six-sigma, and supply chain through LeanCor’s Training and Education courses as well as the University of Kentucky, Saint Louis University, Georgia Tech University, and Monterrey Tec’s Extension Campus in Mexico City, Mexico.

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