Expert Insight: Guest Contribution
  September 27 , 2007  

S&OP Thought Leaders Discussion:  An Integrated View of S&OP Technology Support


What Separates Those Companies Achieving High Levels Of S&OP Excellence From The Rest?

Pandya Says:
Technology is critical to manage the S&OP process to reduce latency.

What do you say? Send us your comments here

Supply Chain Digest’s Dan Gilmore recently spoke with Gaurang Pandya of i2 on several themes related to S&OP.

Gilmore: It is often said that "most companies do S&OP, but few do it well." Is that an accurate summation of current conditions?

Pandya: I think so. The definition and understanding of the S&OP process varies across almost all companies. For some, it is merely a sales forecasting process, for others it is a more tactical process of making sure that demand is met. More often than not, neither considers the implications the tactical decisions will have on the overall business targets. There are varying levels of maturity and very few companies would qualify for what we see as the top 2 levels, which are “consumer driven-demand synchronization” and “consistent profitability.”

Gilmore: What separates those companies achieving high levels of S&OP excellence from those that are mediocre in this discipline?

Pandya: Leaders focus on developing a plan aligned with overall business goals – things like profitability, market share, revenue, etc. They then focus on executing that plan to achieve consistent results. They achieve this by such processes as establishing performance metrics that are tied to financial metrics at each level of the organization; establishing process playbooks to deal with supply or demand “upsets,” enabling then to sense and shape supply and demand; using financial instruments for risk and reward analysis; enabling joint decision making on planning and execution; analyzing the effects of trade-offs such as promotion versus logistics costs and production versus warehousing costs; and finally taking a Six Sigma approach to minimize process variability

Gilmore: "Discipline" is really the right word to use here, isn't it - meaning both S&OP as a process, as well as the discipline it takes to do it well?

Pandya: I agree. First, for S&OP to be successful it is imperative to have executive level process ownership to bring together the different “silos” of the organization and have a cross functional focus. Secondly, adherence to the process and the execution of the process and the decision-making requires absolutely requires strong “discipline." This discipline has to be inculcated top down and ingrained into the culture of the organization for success.

Gilmore: What do you really see as the role of technology support for S&OP excellence?

Pandya: As in other areas of the supply chain, technology remains a key enabler. Combining the right process with the right people to leverage the technology that supports process execution leads to success of all three components. 

That said, I think technology plays a major role in several ways for S&OP.

First, it enables a company to synchronization for a single version of truth. Every function and stakeholder within the S&OP process has its own plan.  However, the objectives and metrics, plan contents, granularity, and planning cycle frequency are different for each. The S&OP process aims to synchronize the plans in the context of overall business goals.

The synchronization needs to be bi-directional across different levels of granularity to ensure that each planning cycle closes the loop with the next level as well. Technology is required to create a “system of record for the plan” for synchronization and enabling cross-functional visibility to potential exceptions.

Second, you need tools that support proactive Performance Management for making the plan happen and to drive process improvement.  Proactive performance management really is essential for creating an empowered organization and for making the plan happen. The organization must be able to establish balanced scorecards at all levels, from the highest level of business to the individual level, to ensure alignment across the enterprise. We believe these scorecards should contain role- and domain-based indicators associated with performance metrics. The metrics should be monitored continuously, and alarms should be raised based on defined thresholds, with capabilities for notification and escalation of alerts for resolution. Technology is a key enabler for these capabilities and advanced capabilities such as the ability to determine and analyze the root causes of the deviation with advanced capabilities such as guided, decision-tree logic.

Third, technology plays a key role in creating feasible plans that meet the business goals and can be executed. To be realistic and executable, every plan within the S&OP process should consider the constraints of the enterprise and should meet the business goals as well. To manage the risk of potential supply or demand upsets, a structured process for scenario planning is also necessary in order to identify, create, analyze and compare scenarios for impact or resolution analysis. The complexity of the constraints, business environment and sophistication drives the need for appropriate advanced planning technology.

Gilmore: Technology can also help take time out of the process, can’t it?

Pandya: Yes, I think technology is critical to manage the S&OP process to reduce latency. As I said previously, technology is a key enabler to orchestrate the S&OP process, align metrics, and manage authority, accountability and responsibility across the functional silos. But it also takes time and latency out of the process. Technology can provides the capability to automate data management processes, provide dashboards for managing the activities within the S&OP process, alerting individuals on failure modes, and integration to multiple planning and execution systems. With technology, the S&OP process cycle times can be reduced to make the process continuous – in contrast to the existing snapshot-driven monthly or quarterly processes in which more often than not, decisions are made on outdated information leading to decisions that may not be executable.

Gilmore: I also think sometimes companies think even supporting technologies for S&OP is something you can just buy in a box, but that’s not quite right, is it?

Pandya:  It’s clear achieving S&OP excellence is a journey that involves continuous process innovation across the organization. Any technology or solution supporting the S&OP process needs to have the capability to mature with the process with rapid time to value, ROI and minimal disruptions to existing technology infrastructure. For example, as with quite a few companies out there, one could use excel to support the S&OP process to begin with. However, limitations of information latency, consistency, synchronization, planning and optimization, and process management will stunt the maturity of the process and at some point either the process will break down, people will burn out, or the company will need to build  or buy supporting technology to drive the process.

From an industry perspective, across industries and even across enterprises within an industry, a one-size-fits-all approach cannot be adopted for S&OP solutions. No matter what the industry, from a solution perspective, enabling an S&OP process requires flexibility – in planning, optimization and performance management and process orchestration. I think given the nature of the process, the solution requires the ability to address varying levels of complexity from a data and process management perspective, leveraging existing solutions and tools, and to integrate with multiple systems in a heterogeneous environment.   In order to reach the highest level of excellence, the supporting technology should have the enabling capabilities to support the best practices and the flexibility to support the change in business process at the speed of business with quick ROI and lower TCO. 

Gilmore: Can you provide us any other insights on S&OP that you think many readers may not be aware of?

Pandya: The i2 Supply Chain Leader magazine articles on S&OP best practices. You can find it on our web site.

Agree or disgree with our guest expert's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the web site. Upon request, comments will be posted with the respondents name or company withheld.

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