15.5 Tools: The Cadence Call

Figure 15.7 depicts the S&OP planning process, which relies on five monthly review meetings (i.e., cadence calls) that take place in the same sequence each month. During the first three meetings, functional leaders evaluate and revise forecasts for product changes, sales, and production. The fourth meeting, reconciliation, is the key. Specifically, each function has different ideas about how the future will turn out and thus different forecasts. These differences lead to conflict. Reconciliation is where you get together to identify and resolve the conflicts that surfaced in the product, demand, and supply reviews. Some conflicts, however, can't be resolved at the functional level. Marketing might demand more production. Supply might argue that materials are not available. You take these "problems" to senior management in the business review. During this review, you align plans and decisions with overall business goals. 2

For S&OP to deliver a more accurate forecast that everyone agrees to use, you need to cultivate two behaviors:

1. The Ability to Listen and Compromise. The whole idea of S&OP is to get managers to share their best insight into the future. People will only share when they believe that others are willing to listen. Likewise, everyone must be willing to compromise. No one can "have it their way" all the time. Anyone who tries to impose will lose the confidence and trust of colleagues.

2. Discipline. S&OP only works when you adhere to a consistent cadence. Sticking to the calendared review meetings—and making them productive—is absolutely crucial. Trust in the process is almost as important as trust in your colleagues.

CPFR does the same thing across buyer/seller relationships as S&OP does across functions within the firm. CPFR helps trading partners (i.e., a buyer and supplier) work together to build a single, agreed-upon forecast. CPFR argues that someone already knows what your company's sales will be. That someone is your customer. If you could get your customer to tell you what its purchase plans and promotion schedules are going to be for the next 18 to 24 months, you could dramatically improve your forecasts and operating efficiencies, couldn't you?

Figure 15.8 depicts the CPFR process for a manufacturer and a retailer. You need to go through four key steps to set up and run an effective CPFR process:

1. Strategy and Planning: You hold a kick-off meeting to establish on the ground rules for the collaborative engagement and develop a business plan.

2. Demand and Supply Management: This is where the cadence call comes into play. Once a week, say Tuesday morning at 9:00 am, you talk with your trading partner. What do you talk about? You address the following questions.

   • What does each partner's sales forecast look like?

   • When are upcoming promotions and what impact are they likely to have on demand?

   • What other events that might impact future demand—or the ability to meet it?

3. Execution: Based on the plan you developed in the first two steps, you place orders, prepare and deliver shipments, receive and stock products on retail shelves, record sales transactions, and make payments.

4. Analysis: To improve performance, you perform an after-action report to answer these questions: What worked? What didn't? Why? What do we need to do differently?

The cadence call is the tool that enables IBP. However, to work more effectively with your suppliers to achieve high levels of collaborative success, you need the following.3

• Leadership Commitment: IBP won't go anywhere if top management isn't on board.

• Trustworthy Suppliers: IBP requires that you share sensitive market and product plans. You need partners you can trust—and who are equally committed to working together.

• Confidentiality: You need to protect supplier information with the same vigor you expect suppliers to guard your sensitive information. News spreads quickly when you violate confidentiality.

• Change Management: Supplier integration creates vulnerability. You can't force people to collaborate. You need great change management skills to get your team (internal and external) to want to work together to improve performance and achieve the best results.