Expert Insight: Guest Contribution

By Trevor Miles

Director, Industry and Applications Marketing, Kinaxis

Date: January 28, 2010

Supply Chain Comment: S&OP at Risk

Keeping the S&OP Heart Beat Going

Traditionally, when companies think of supply chain risk management they think about “big” risks -- floods, strikes and other major events.  But,  today’s complex supply chains and volatile demand means there are also hundreds of smaller risks popping up every day that taken in sum can have a material impact on a business’ performance.  Constant change is now among the top risk factors for organizations.  So many companies are now applying risk management strategies to their S&OP process.


For many, the sales and operations plan (S&OP) is the heartbeat of the company ….or at least it is supposed to be.   Like the human heart, it must be fully functioning all the time.  And if there’s an unexpected obstruction, it needs to be fixed fast.  Finding out what went wrong after the fact is too late. 

A Monthly Check-up is not Enough

To take our heartbeat analogy further, while you should do your quarterly/monthly check-ups, it’s the way you maintain your health in the interim that can really minimize your health risk.  Creation of the S&OP may be on a regular schedule, but in a highly volatile
environment where the sales and operations plan quickly become at odds with reality, sticking to a monthly process won’t cut it.  Course correction in response to changing supply and demand conditions should happen every day.  How many have waited in anticipation for month-end reports, only to ask …’what happened?’  


At the risk of overkill, let’s keep going with our analogy. For the S&OP to stay relevant it needs the equivalent of a heart monitor that follows performance, alerts you to variances, and lets you proactively address events and activities that put the plan at risk.  And when things go awry, it requires a defibrillator that can quickly stabilize the plan’s pulse.  In other words, S&OP should be a continuous process with ongoing adjustments during the month.  The S&OP objectives may not change, but the manner in which the targets are achieved may need to be changed on a daily basis.  With the lines between the planning process and the operational/ execution processes blurred, companies are focusing not just on improving the planning process itself, but on executing to the plan in the face of volatility.

The Prescription

Despite big investments in traditional planning tools, many decision makers still rely on manual efforts -- complicated spreadsheets and other makeshift measures -- to analyze data and act upon it in between planning cycles.  This is no longer sustainable. 
Organizations must adopt risk-mitigation (heart monitor) and rapid response (defibrillator) capabilities to their S&OP process.  They need: 

  • The ability to collaboratively exchange comprehensive S&OP input data and achieve consensus / alignment on the plans with all parties including extended supply chain participants;
  • The ability to perform S&OP on-demand and in real-time based on changes in the demand or supply environment;
  • An advanced S&OP workbench that supports rapid simulations (modeling the entire supply chain) along with the evaluation of plan options and response alternatives against key measures of corporate performance.

These measures are what will keep the S&OP’s vitals strong.

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About the Author
Trevor Miles is Director, Industry and Applications Marketing, at Supply Chain software provider Kinaxis.

Miles Says:

For the S&OP to stay relevant it needs the equivalent of a heart monitor that follows performance, alerts you to variances, and lets you proactively address events and activities that put the plan at risk.

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