SCDigest Editorial Staff

SCDigest Says:

The key then becomes to really assess where your company is in its S&OP maturity, its ultimate objectives for the process (world-class or just “good enough”), and its current technology stack. S&OP initiatives are often the catalyst for companies to invest in solid demand and supply planning tools as a foundation to the process. What do you say? Send us your comments here

The following article is an excerpt from the recent Supply Chain Digest Letter On S&OP. For the full article, visit our complete S&OP resource center, including a downloadable copy of the full SCDigest Letter on S&OP: S&OP Resource Center.

S&OP is fundamentally about the development of a process that integrates the core operational functions of a company, and which delivers a unified plan across supply and demand that meets financial and strategic objectives.

Could S&OP be achieved with little technology support? In a sense, yes - but probably not very effectively. In fact, the surge of interest in Sales and Operations Planning is clearly one of the factors underlying the strong sales of supply chain software over the past two years. Companies trying to manage S&OP on a “spreadsheet” foundation simply find the process can’t scale, and is subject to significant and damaging information disconnects and confusion.

One of the keys to a successful S&OP process is it being built on a foundation of accurate, believable information, and with that the migration to a fact-based decision-making culture. It is hard to achieve either goal without a strong level of technology support.

The Basics: Supply and Demand Planning

S&OP initiatives are perhaps the largest single driver today in the adoption of robust demand planning software applications. While these applications typically deliver a wide set of advanced features and capabilities, at the most basic level, demand planning software provides two critical capabilities to support the S&OP process:

• Development of baseline statistical forecasts that are used as the starting point for the process
• Workflow tools that drive and in a sense institutionalize the forecasting process, requiring that input from various groups and levels be acquired in the appropriate sequence and time frames. With the introduction of demand planning software based on Service Oriented Architecture (SOA), and a steady overall increase in configurability, companies can in general build the demand planning process within the tool that meets their specific requirements.

Following upon support for demand planning, tools that optimize supply planning then also become a critical foundation of S&OP. Without such tools, it is a much more difficult task to really understand how the supply organization can deliver against the demand plan – and to well understand the constraints that need either to be resolved or considered in revising the baseline forecast.

Collaboration Tools

Most companies agree that achieving consistent input on demand from sales, channels and customers is critical to a highly effective S&OP process. Technology can make a significant difference in achieving that goal.

Many supply chain software vendors now offer web-based applications that provide strong support for collaborative forecasting processes. This can range from relatively simple tools that are very easy to deploy and use to those that provide technology support for rigorous processes such as Collaborative Planning, Forecasting and Replenishment (CPFR). 

In some cases, these capabilities may be built into the demand planning application, in others it will be a separate model. In either case, companies should look for the same type of flexible workflow capabilities that are part of most of today’s better demand planning tools. “Collaboration” internally and externally usually involves different processes, however, and so supporting tools should be evaluated in that light.

Network Optimization Software

Because S&OP is heavily strategic in nature, and because of the increasing need for dynamic, flexible supply chain networks, a small but rapidly growing number of companies are finding significant value in incorporating input from supply chain network planning and optimization tools as a critical component of the process.

Network planning tools provide tremendous value in allowing companies under different forecasts scenarios to understand such issues as:

• What its supply chain network design would or should look like?
• For the given forecast, what actions should be taken to improve the supply chain performance?
• What would be the trade offs between cost and customer service?
• How the plan would impact overall supply chain costs and hence profitability?
• How to optimally plan new product introductions and end-of-line strategies?

The fundamental question to be answered: What are the right inventory targets for multi-tier supply networks based on supply and demand variability?

Workbenches and Analytics

The S&OP process requires understanding and balancing of a wide variety of inputs and trade-offs.

To do this effectively requires participants both in the “pre-S&OP” meeting and executives in the final S&OP meeting to be able to easily visualize this information, and understand the impact of various alternatives.

In the end, every company uses an S&OP “workbench” of some type. Some use a tool created internally using spreadsheets. Spreadsheet-based tools have many well-known challenges, from data synchronization issues to either having too little data or being too large and complex for decision-makers to navigate.

As you would expect, an increasing number of supply chain software companies have also develop package workbenches that are meant to specifically support S&OP processes and analysis.

What is important to consider in looking at a vendor’s tools is to understand how they will be used at different stages of the process. Support for very detailed analysis may be required for the pre-S&OP process, whereas a very different set of visualization and analytic tools are needed for the executives participating in the final S&OP meeting.

Summary

Technology can’t deliver S&OP, but evidence and case studies indicate it is hard to reach successful levels of S&OP without the right software tools.

The reality is there will almost always be multiple software applications and vendors involved in the process: ERP, production systems, supply and demand planning, logistics systems, etc. There may be a few companies that have it all from one single vendor, but not many.

The key then becomes to really assess where your company is in its S&OP maturity, its ultimate objectives for the process (world-class or just “good enough”), and its current technology stack. S&OP initiatives are often the catalyst for companies to invest in solid demand and supply planning tools as a foundation to the process.

Finding the right tool to consolidate data from multiple sources and to truly power - not hinder - analysis and decision-making becomes critical. The good news is that the ability of these workbench tools to integrate data from multiple sources is getting better and better.

Remember also, however, that no one will get the technology support exactly right from the start. It’s important to set the expectations with executives that this will be a learning process for the organization, and it will take time to fully understand all the data and analysis that will be required.