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How the 'Human Factor' Affects the Digitalization of Business Processes
When implementing innovative solutions, the level of customisation and even the specifics of localisation play a huge role. We tell you what you need to consider and how to speed up the modernization in the company.
About the expert: Dmitry Leshchenko, supply chain digital transformation expert at Novo BI, a supply chain planning software developer and Skolkovo resident.
Why Digital Transformation Is Necessary?
Business needs digital transformation to bring it in line with the challenges of the time and new trends: they quickly turn from innovation into a necessity, without which it is almost impossible to grow. Companies that have not even established internal business processes run the risk of encountering emergency situations more often and coping with them less effectively, even when using the most advanced digital solutions. Today, this need includes the organization of sales and operations planning - Sales & Operations Planning (S&OP). Businesses need it to balance supply and demand. However, with the right processes set up, S&OP becomes a great tool for managing the entire organization.
Sales and operations planning has been around for many years, but modern technology has greatly transformed the S&OP process. Demand planning used to be easy using Excel spreadsheets, but now digital solutions with artificial intelligence algorithms and machine learning come into play, helping to quickly respond to market changes. And the involvement of partners in the demand planning process - raw material suppliers, goods manufacturers, logistics companies, retailers - increases the efficiency of the entire chain. An integrated business planning approach can help logistics, marketers, and supply chain managers transform a company's strategic goals into an operational plan. It is based on the concept of CPFR (collaborative planning forecasting and replenishment - joint planning, forecasting and replenishment). This approach combines the efforts of partners within the supply chain they have created, simplifies communication in supply chains and allows departments to calculate their capabilities and limitations in production, sales, and transportation due to various circumstances.
Sales and operations planning has been around for many years, but modern technology has greatly transformed the S&OP process. Demand planning used to be easy using Excel spreadsheets, but now digital solutions with artificial intelligence algorithms and machine learning come into play, helping to quickly respond to market changes. And the involvement of partners in the demand planning process - raw material suppliers, goods manufacturers, logistics companies, retailers - increases the efficiency of the entire chain. An integrated business planning approach can help logistics, marketers, and supply chain managers transform a company's strategic goals into an operational plan. It is based on the concept of CPFR (collaborative planning forecasting and replenishment - joint planning, forecasting and replenishment). This approach combines the efforts of partners within the supply chain they have created, simplifies communication in supply chains and allows departments to calculate their capabilities and limitations in production, sales, and transportation due to various circumstances.
Difficulties on the way to business digitalization
At first glance, it seems that everything is very simple, but one of the most important aspects of digital transformation, despite the fact that many processes are controlled by artificial intelligence, remains the coordinated and well-organized work of the team. S&OP is not just a plan, but a whole culture that cannot be implemented in one month. Many people are involved in it, and in order for the S&OP process to truly become a culture, top management must convey this idea to the masses. And here you can encounter a number of barriers.
- Difficulties in communicationFor example, a situation where the sales department and the logistics department cannot establish effective interaction, because each department considers its own financial result to be the most significant, without understanding the impact of the other department on the value chain. It is necessary to improve the relationship between functions in the company in terms of understanding the importance of each, otherwise it will negatively affect the entire process.
- Functional Focus and ObjectivesOften a particular department works only for its own focus and purpose and is not particularly interested in what is happening in other departments, even if the implementation of certain tasks may somehow negatively affect colleagues. Therefore, functional focus can also be a barrier that needs to be removed.
- Distrust of people and numbersIt happens sometimes, that an employee presents figures to the manager, but he does not believe him. Many teams finish the meeting to agree on the plans of the sales department without finalizing the forecast, because for each figure there were questions about where it came from, why it was calculated exactly the way it was, what data was used. Such distrust can greatly hinder the implementation of the S&OP process. In this matter, the data-driven approach adopted in companies helps out, where they rely on analytics and teach employees to do this.
The role of the 'Human Factor' in software development
Software is like a living organism, where every cell, and in the case of software, a button, has a lot of work and great functionality. Everything should be built in such a way that the user's eyes do not twitch from disproportionate tables, so that everything is conveniently laid out on shelves and intuitively understandable. If a person enjoys working in the system, this will have a positive effect on his productivity. This is the basis behind which many other aspects are hidden, and one of the most important is adaptation to local specifics.
For example, Russian users may perceive information differently than, for example, users from Brazil or France. Or take the United Arab Emirates, where everyone reads from right to left, so it's not enough for them to simply translate Russian software into Arabic. There are so many moments like this. The extent to which such details are taken into account directly affects the perception of the interface.
That is why any digital solution that is created for human use should be able to be customized. Different enterprises have a different structure, and similar positions may be called differently, so they can be reflected in the system exactly as approved in a particular company, so as not to mislead employees. Such aspects may be revealed during usage, so the project office should assist the client with the implementation and customisation of the system until it starts to show a stable positive result.
For example, Russian users may perceive information differently than, for example, users from Brazil or France. Or take the United Arab Emirates, where everyone reads from right to left, so it's not enough for them to simply translate Russian software into Arabic. There are so many moments like this. The extent to which such details are taken into account directly affects the perception of the interface.
That is why any digital solution that is created for human use should be able to be customized. Different enterprises have a different structure, and similar positions may be called differently, so they can be reflected in the system exactly as approved in a particular company, so as not to mislead employees. Such aspects may be revealed during usage, so the project office should assist the client with the implementation and customisation of the system until it starts to show a stable positive result.
How to get people involved in software development
To involve the entire team in the sales and operations planning process, there are several rules to follow.
First, each employee is required to see a clear relationship of their own metrics to the company's objectives. To build team engagement, you need to match the business objectives to each employee's KPIs. For example, for manufacturing FMCG companies it is possible to define these metrics:
Third, the company needs a dedicated position responsible for monitoring the entire S&OP process. In most cases, this is a commercial or operational director, but the main customer may also be a logistics director or even a marketing manager.
First, each employee is required to see a clear relationship of their own metrics to the company's objectives. To build team engagement, you need to match the business objectives to each employee's KPIs. For example, for manufacturing FMCG companies it is possible to define these metrics:
- Reduction in unit costs that go into unit of output or transportation, improvement in customer service (e.g. reduction in under-sales of goods due to poor demand forecast accuracy or manufacturing failures).
- Reduction of working capital losses (inventory turnover, debtors and creditors, and so on).
Third, the company needs a dedicated position responsible for monitoring the entire S&OP process. In most cases, this is a commercial or operational director, but the main customer may also be a logistics director or even a marketing manager.
How to accelerate the digital transformation
Depending on the size of the company, S&OP implementation lasts from several months to a year. The process can be accelerated by weekly theme-based S&OP meetings, training sessions, digital solutions (the tool itself creates a culture), and a set of transparent KPIs. The implementation process can also be accelerated through the development of a soft-skills in the team. Here are the four points that can be highlighted.
So, there is no technology that can totally replace humans, especially in an unstable time. Software is designed to scale the capabilities of people and reduce the risk of human mistakes, but not to work instead of people. Therefore, even in the S&OP process, where everything is digitalised as much as possible, there is still so much that relies on the team and the team's culture. For example, the quality of input data, without which no plan is possible, ultimately depends on how carefully it is collected, structured and stored, while the speed of S&OP implementation depends on the preparation and coherence of the team. In this sense, it is incredibly important to properly organize communications between departments, which is a kind of measure of the maturity of the company's business processes. In order to run S&OP at maximum performance it is necessary to have personal responsibility of each employee and the manager within the competence, as the success of the company is still determined by the people, but not by the innovativeness of the software.
- Leadership. Build a team climate in which all employees, through to board members, have a strong interest in accurate, realistic demand forecasts, ambitious but achievable sales targets, efficient production, profitable purchasing, and managers attend meetings in a supportive and engaged manner. It is crucial to set your own leadership example.
- Discipline. All processes need to be clearly structured. The standardisation process can prescribe specific roles within certain meetings for each employee. Also, make sure all deadlines are met and promises are kept.
- Honesty. To remove barriers of mistrust, you should start with something - for example, by being open. Don't be afraid to show up miscalculations, backlogs and production or transport breakdowns. Be sympathetic to the mistakes of your colleagues and provide them with assistance in various situations. Cross-functional communication is essential to a successful S&OP in a company.
- Objectivity. Every aspect of the company's work must be accompanied by accurate data, which means that employees must strive for objective assessments. This is necessary in order to track performance and progress.
So, there is no technology that can totally replace humans, especially in an unstable time. Software is designed to scale the capabilities of people and reduce the risk of human mistakes, but not to work instead of people. Therefore, even in the S&OP process, where everything is digitalised as much as possible, there is still so much that relies on the team and the team's culture. For example, the quality of input data, without which no plan is possible, ultimately depends on how carefully it is collected, structured and stored, while the speed of S&OP implementation depends on the preparation and coherence of the team. In this sense, it is incredibly important to properly organize communications between departments, which is a kind of measure of the maturity of the company's business processes. In order to run S&OP at maximum performance it is necessary to have personal responsibility of each employee and the manager within the competence, as the success of the company is still determined by the people, but not by the innovativeness of the software.
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