What S&OP/IBP practitioners can learn from Frederick Taylor?
Oswaldo D′Andréa Neto, MS, MBA, CTSC, CSCP, CPIM, BB
Supply Chain and Operations Executive | Achieving results through others
Frederick Winslow Taylor is the father of scientific management which he presented to the world in 1911 in his book Principles of Scientific Management. Despite developing a whole philosophy of management with fundamentals, principles and mechanisms, he is mainly known for the time and motion study, which is only one of the mechanisms used, not making him justice to the broad management philosophy he had created.
Over the years, Taylor’s philosophy has been criticized by many experts and today it is seen as outdated and in a pejorative way. Some even go as far as saying that it is detrimental to the business.
The author of this article believes that this criticism comes from not understanding the essence of his ideas, only some of the mechanisms he used. Fail implementations due to this very problem helped to strengthen it. Another source of criticism was simply people echoing and amplifying earlier critics without reading Taylor`s works firsthand. Intriguing the fact that Taylor warned exactly about the danger of the former.
Sales Operations planning/Integrated Business Planning - S&OP/IBP - is a decision-making process to deliver the objective of the business by executing its strategy based on the integration and reconciliation of core functional and hierarchical levels plans and communication of it throughout the organization.
It can benefit enormously from Taylor`s ideas as some of them are not just applicable, but crucial to success and therefore should be implemented in order for the business to have a process that bring results. Those ideas are discussed below:
Scientific approach to decision making. Taylor advocated a scientific approach to decision making. Its hallmark is facts rather than, in the best scenario, rule of thumb which is developed and refined over time by experience of the people working in the business and, in the worst, pure guesses.
As mentioned before, S&OP/IBP is a decision-making process. These decisions must be taken based on relevant facts that tell whether by taken the decision the business will get closer to its objective. These facts must consist of data, expressed in both quantity and monetary units, its underlying assumptions and the story behind it.
A system is superior to another if and only if yields better results. Only by meeting this condition it justify its implementation and continuity. In the aforementioned book, to prove that Scientific Management is greatly superior than other types of management, what Taylor called ordinary management, he chose what he thought was its best representative in common use at the time – management by Initiative and Incentives - and showed that Scientific Management yielded better results - maximum prosperity. Prosperity for the employer at the same time for the employee while, firstly, providing benefits to the customer, which, by buying the company products and services, in the end pays both the profit for the employers and wages for the employees. He also wrote that due to this superiority, scientific management would surely replace the existing management practice and become the norm.
S&OP/IBP is no different. Customer are buying products. Products are being manufactured with parts. Parts are being purchased from suppliers. People are managing and executing those activities. In summary, businesses are being run one way or another. Why, then, in a logical way, would a business change from its familiar process to S&OP/IBP? Answer: better results.
Running S&OP/IBP effectively requires time. It is unreasonable to think that separating relevant information from the ocean of it available, understand its implications on the various functions and overall business, synthesize it to propose actions and alternatives can be done in no time. It is not just pressing a button in the computer and immediately get all of it. It does take time, brainpower of capable employees aided by technology.
Taylor wrote repeatedly that the time spent in Scientific Management would pay off as the maximum productivity achieved would pay its costs of it several times. For S&OP/IBP is the same thing. It only can be considered superior to others mid to long term management processes if, brings better results, both in financial terms and performance in the core activities of the business. To justify its implementation and continuity those results must be not just slightly better, but orders of magnitude better and benefit, at the same time, the company, employer and consumer. Otherwise, it will be seen by the people involved as a stale process that waste their scarce time and will fade away. In summary, S&OP/IBP is a mean to an end. If results are not coming it should be critically reviewed and improved, fast.
There is no panacea to all troubles of the company. Taylor wrote there is no system of management that can ensure continuous prosperity of the business as prosperity depends on so many factors that are entirely outside the control of the employers and employees and so, it is inevitable periods of prosperity and decline. However, by having a strong system, the prosperous periods will be more prosperous and longer and the decline periods will be shorter and less bad.
In S&OP/IBP it is the same. Caution need to be taken to not regard S&OP/IBP a fallacy due to a decline period, failing to recognize that the situation would have been worse without it. To proper address this situation, it is imperative to quantify and monitor the benefits and communicate them to the whole organization frequently. This simple action strengths the process and take “ammunition” from the naysayers, always trying to discredit it.
Importance of change management. Taylor was aware of it and warned strongly on the danger of not doing in the proper way. Not having full support from the leadership, implementing just the new mechanisms letting aside the underlying philosophy, speeding up the process without giving time to the workers to buy in and change their mental attitude and habits, in his own words, would lead to disastrous results.
Paraphrasing Taylor, no case should managers undertake the change from the existing process to S&OP/IBP unless the leadership of the company fully understands and believe in its fundamentals and appreciate all involved in making this change, particularly the time required, and unless they want S&OP/IBP greatly. Otherwise, the process is fated to fail, people will be frustrated, and the company might find itself in a worse situation than when it started.
Even if the leadership is onboard, this change is no small endeavor. It requires a change in the mental attitude and habits of the people involved in the process. The S&OP/IBP mechanism and changes to implement it are comparatively quick. But the mental attitude and habits are much slower and can be achieved by demonstrating the people involved the great advantage they will gain by cooperating with it.
The superior results yielded by S&OP/IBP is not attained by the superiority of the mechanics of the process, but rather by the superiority of its set of underlying principles.
Clearly defined tasks increase efficiency. According to Taylor the motives that influences men is extremely important and the most important one is the idea of task in the efficiency of the workmen. This meant that each worker must be assigned a specific task which he should perform in a given time which constitutes a good a proper day’s work instead of vague tasks. This mechanism would provide the workmen a clear-cut standard – challenging but achievable - which the he could measure his progress. Also, it enables management to identify, quantitatively, workers that are not performing and arrange individual support to turn him into a high-class worker. Still, if the worker does not meet the expectation, this process allows management to identify if a job that this worker is better suitable considering his natural talents or, as a last resource, dismiss him. This ensures a team operating at maximum performance.
Another key of S&OP/IBP is the business scorecard and action planning. The scorecard should contain between 3 to 5 relevant measurements for the business. Relevant means that they show if the company is getting closer to its objectives. Succeeding or failing to execute the strategy. These measurements must have a goal that is hard to achieve, but still achievable. Each month they should be reviewed and, in case of gaps to the goal, the root cause should be identified, and actions defined to eliminate it. These actions must contain, at minimum, what needs to be done, when needs to be done by and who is going to do it. Important to always have one individual accountable. Actions must be documented and reviewed routinely for completion and effectiveness. In cases of actions not being executed or not resolving the issue, management could arrange support to the worker and, if it still it does not work, take the actions Taylor recommended.
Management responsibility for training. One principle of Scientific Management is that management should train and coach the workmen according to the one best way of working. Not allowing the workmen learn solely by watching others work using their own ways developed over time. He even wrote that this cooperation is the essence of his scientific management.
The chair of the S&OP/IBP review, the person ultimate accountable for it, usually the general manager for the business for the whole process and his functional leader for the functional reviews must make sure the process is relevant and is adding value to the business. This means not only having a process in place, but most importantly, capable people with the right knowledge, skills and behaviors. The way of achieving this is by, firstly, having the chair provide the team what he needs to take from the review and then the participants work to deliver it, instead of the participants bring what they think it is important.
And secondly, the chair needs to be with the team, training, coaching and ensuring that the participants are working and behaving according to the S&OP/IBP way. Also removing obstacles that might appear. This involves subjects such as process and meeting discipline, collaboration, decision making, conflict resolution etc.
Standardization of procedures. Taylor was strongly against having the workmen working the way they think is best and using his own implements. It is inefficient and they won’t achieve high class work this way, he wrote. So, he advocated workmen to work following the one best way which was determined by the management using scientific methods.
One of the keys of S&OP/IBP is the integration and reconciliation of functional and hierarchical plans. It cannot be done efficiently without standardization. Integrate and reconcile product, sales, supply and financial plans or local and regional into one plan would be cumbersome and can only be done by using the same templates, formats, calendars etc. By following standards, people get used to it becoming more efficient in managing information resulting in accurate and timeliness decision making. Focus is on the content rather on what and how to show information.
Benefit of having a specific organization. Taylor suggested that scientific management requires a specific organization with skilled people to determine the science of the trade, train and coach people throughout the process.
S&OP/IBP can benefit enormously from a dedicated organization. This organization would pay itself many times over by supporting high performance of the process routinely and continuous improvement. This organization would consist of people dedicated all their time to developing standards, conducting assessments, benchmarking etc. In the majority of cases, people with a business responsibility (e.g. operations), simply do not have enough time to focus on this kind of activity. To get more productivity, usually hey work harder instead of working smarter. Running the operation is their main priority, as it should be, but takes almost all their time.
Well-done Mr. Taylor!
Supply Chain and Operations Executive | Achieving results through others
3 年Thanks you!
CEO at Linked VA
3 年What a great resource for businesses, thanks for sharing.