The Commercial/Supply Chain Partnership in Pharmaceuticals
In my previous post Arm-in-Arm or Arm's Length?, I outlined the emerging need for cross-functional working in the pharmaceuticals sector based on sector-wide pressures on innovation, growth, margins and working capital.
In particular, I proposed that a key success factor for the industry is enhanced partnership and integration between the Supply Chain and Commercial functions using the vehicle of Sales & Operations Planning (S&OP).
So what does great cross-functional partnership look like in this context? In this article, I briefly explore this question based on my experiences and perspectives in the pharma sector as a senior commercial leader who has driven a major change programme in this field.
I have consistently observed three attributes in high-performing cross-functional S&OP teams;
1. Strong process discipline
A highly effective and sustainable S&OP process requires thoughtful design and must include an array of elements spanning processes, structures, systems, data and capabilities. These are well-known and considerable research and detailed insight into these areas is published in the supply chain literature.
However, what I have seen really makes a great cross-functional team stand out is its discipline in the execution of this process. Each member of the S&OP team, regardless of their function, understands the specific role they are expected to play in the process and consistently delivers it.
Two important aspects of this process discipline are;
Ensuring that the process focuses on the medium-term horizon (typically from 3 months out to 24/36 months) and avoids being drawn into tactical deep dives on short-term issues for which alternative processes are more suitable
Ensuring that decisions are taken in the relevant S&OP meetings with their agreed cross-functional representation and are not deferred to other forums, either formal or informal outside S&OP
The most effective S&OP teams also use specific lead and lag measures and KPIs to track this discipline and consistently use them to go beyond simple process adherence to continuous improvement of the process itself.
'Sticking to the process' may seem an obvious requirement. However, the S&OP process often replaces a fragmented way of working in which individuals or functions would leverage networks, relationships or information to achieve a more favoured outcome for themselves (although sub-optimal at corporate level). Adhering to the discipline of the S&OP process eliminates this but could also be perceived as reducing the power and autonomy of the individual function. This is a major change, especially in the pharma sector where historically there has often been low levels of genuine Commercial/Supply Chain partnership. Addressing this requires full commitment to the concept of the cross-functional S&OP team working in alignment for the strategic goals of the enterprise (see below).
2. Clear alignment on the goals of S&OP
As outlined above, commitment to the cross-functional approach requires the individual contributing functions to let go of previous practices and trust in the benefits of the S&OP process.
To facilitate this deep understanding and alignment, engagement of the team needs to go beyond broad or high-level statements of the improved growth or profitability that strong cross-functional partnership can deliver. It is critical to achieve a more granular appreciation of exactly how the improved cross-functional partnership delivers this. Strong cross-functional S&OP teams invest time to co-create this deeper shared view on how their partnership supports the business’ strategic goals (and this dialogue often leads to a discussion on the need for shared incentives and measures across the functions). With this clarity on how the strategic goals of the business are supported by their efforts, the team have a shared platform from which to drive sustainable change.
However in my experience it is also important for each function to be able to go further than this and identify and communicate clearly the tangible benefits for them which goes deeper and applies more specifically to them than just their contribution to the higher-level corporate goals. This is important as very few managers would openly oppose an enterprise-wide initiative to drive a strategic goal but they can often find a way to kill it quietly if they don’t believe it adequately supports their function’s goals on a more tactical basis.
Cross-functional alignment on the S&OP goals is so pivotal that in many cases driving incremental improvement on alignment would yield greater outcomes than incremental improvement on the process design.
3. Supporting mindset & behaviours
A third and decisive attribute for the high-performing cross-functional S&OP team, and which underpins the other two, is the adoption of mindsets and behaviours which fully support the defined process.
An important example of that is the expectation that Commercial and Supply Chain representatives can and do contribute as equal partners. My observation of the highest-performing S&OP teams has shown that all members feel valued and key to the success of the process and this leads to for example, relatively junior members feeling empowered and enabled to challenge the forecasting assumptions of commercial leaders.
An important mindset attribute I have also observed in high-performing S&OP teams is trust. There is of course no quick solution to building trust but successful S&OP teams identify this as a key enabler and then specifically work on behaviours (eg feedback and recognition) to support increasing levels of trust. Without high levels of trust, genuine openness and collaboration is significantly limited and given that S&OP is heavily dependent on sharing information across functions to drive optimised decision-making, this is a critical enabler.
Despite being the softest and least tangible of the three traits I have named here, I believe this requires consistent attention to ensure that behaviours are evolving to sustain and improve the execution of the process as small shifts, both positive and negative, can influence the power of the S&OP process rapidly and significantly.
Making it happen
In this article I have provided a high level view on three key attributes of a strong cross-functional S&OP team. I hope this illustrates that whilst our tendency may often be to focus on the detail of the S&OP process itself (especially given the detailed and sometimes complex content), the decisive elements of a successful execution of cross-functional working in S&OP are often more related to softer issues such as building alignment, trust and collaboration.
In future articles in this series I will provide some further insight and suggestions on how to start building this effective cross-functional S&OP capability and, importantly, sustaining it.