There has been considerable press focused on the importance of process related to Sales and Operations Planning (S&OP). In fact, some authorities have suggested it is 90% process only 10% tools. While I don’t subscribe to that ratio, I think only the foolhardy would ignore technology altogether.
Having been certified as a Lean / Six Sigma Expert, I tend to look at all elements of an activity in terms of waste and opportunities for improvements. Over the past 10 years I have worked with more than 30 major fortune 500 companies and many of those have relied on less than formal systems for the collection, aggregation, and analysis of the information used in the S&OP process.
Tools like Excel and stand alone databases are fraught with limitations that typically hinder data integrity, the timely exchange of information and truly effective collaboration, let alone rapid and effective “what-if” analysis. With the combination of increased demand volatility, rapid new product introductions, and dramatic extensions to the supply chain due to outsourcing, the need for better tools to support immediate visibility, rapid simulation, and multi-tier collaboration has never been greater. Without these tools, the quality and speed of the S&OP process is compromised, greatly decreasing its effectiveness and therefore its value.
In a recent presentation by Dr. Larry Lapide (Research Director of the Demand Management Solutions Group) he described a S&OP maturity model with 4 distinct stages. Several things stand out that describe the transformation from early stages to the most mature model.
- The ability to quickly perform S&OP on demand based on significant changes in the demand or supply environment
- The ability to collaboratively exchange data and achieve consensus / alignment on the plans with all parties including extended supply chain participants
- An advanced S&OP workbench that supports simulations and the rapid evaluation of plan options against key measures of performance
There should be little doubt that these ends require a degree of sophisticated technology. This does not suggest that I don’t believe that process isn’t also a critical factor in S&OP success, but rather, there are limits to the improvement gains possible without some investment in technology. Also, if your business is relying on ad-hoc tools like Excel to support this business critical activity, I’d argue that you probably have an unacceptable degree of risk in the integrity and timeliness of the entire process.
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Tags: Sales & operations planning (S&OP), Supply chain risk management
Posted in Sales & operations planning (S&OP)
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I agree with you Kerry that technology still seems to be a significant barrier to the S&OP Process. Perhaps companies have underestimated the importance of having the right tools to support the process. Or they have worked so long with Excel that they dont know that there is anything better!
Simple answer is both S&OP process and tools help the average guy or gal doing the job reconcile data and process are a great investment for almost any business, of any size, in almost any industry that involves a product. In our experience, the goal should be time reduction (cycle time reduction) to plan, replan and deal with uncertainties that can impact the balance sheet and or income statement.
Software tools should NOT change the process or REMOVE people and or central experts, but rather save them time and allow more roles in the organization to use and benefit. These tools should incapsulate the old Excel approach, possibly use Excel as the working surface but coordinate data, results, plans, execution data for an enterprise and or for the extended outsourced enterprise.
Big software firms want to use the S&OP monikor to repurpose the overly complex, human removing, buzz word compliant stuff that supposedly provides magic returns. I guess it’s the weakness of today’s corp buyers. It makes us / me cringe but having spent some time with venture firms, big software, Booz Allen managing these processes…. know the game and know the revenue model and it is not changing – unfortunately.
Fortunately, there are other options…