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The answer to that question has certainly evolved over the years, and while there are still some holdouts, most will now agree that technology is indeed required. Whether its objective should be to support the process or help define the process remains a healthy debate.
Fundamentally, the more complex the organization and the more mature the process, the greater the need for technology. So what technologies are today’s supply chain teams using to support the critical S&OP process? Amazingly, it seems most organizations are running their process with spreadsheets.
It never ceases to surprise me when I hear how many enterprises entrust a mission-critical task to the desktop spreadsheet software Excel®. On the other hand, the fact that so many turn to Excel is proof that despite the plentitude of systems (or perhaps because of it), existing ERP and legacy planning apps are not meeting the requirements for S&OP processes regardless of where that process is positioned on the maturity curve.
Consider the Supply Chain Insights report, Research in Review (Nov 2014), that states:
“Many companies have five to 30 Enterprise Resource Planning systems and two to three supply chain planning systems. In addition, companies will have two to five S&OP processes working independently.”
This demonstrates an enormous level of complexity, from both a process and data perspective.
Sales and Operations Planning (S&OP) has been around for a long time. It’s been called “old hat” and “the new kid on the block.” Both are true. And despite having been around for decades, S&OP continues to gain momentum and grow in maturity.
Most of us in the supply chain industry have a conceptual and common understanding of what S&OP represents, however the variety of ways in which S&OP is executed demonstrates that it can mean very different things to different organizations.
A typical/traditional Sales and Operations Planning (S&OP) process is primarily:
Mainly focused on satisfying revenue and margin goals
Aimed at attempting to meet a forecast for a discrete planning horizon, usually 6-24 months
Sequential and involves isolated planning activities consolidated at a high level and then pushed up to management for approval, and pushed down to manufacturing for execution
And most experts agree that S&OP has four ingredients:
People: the cross-functional teams involved
Process: the way you make decisions and manage meetings
Information: the data from your demand and supply chain
Technology: the systems that support planning and decision-making
Not everyone agrees on the correct proportions of these ingredients, but everyone agrees that S&OP needs all four. Knowing exactly what is required for each of these areas, and potentially most importantly, finding the right balance between them is the key to effective and efficient planning cycles that drive maximized value for the enterprise.
As I was presenting at the European Supply Chain and Logistics Summit last week, the overriding memory I’ll take away was the number of people that were nodding and pointing at the screen when I talked about how unplanned supply chain events that occur need to be addressed immediately and that they cannot wait to be included as part of a new S&OP cycle.
Traditionally, an S&OP cycle is a process geared towards taking a medium/long-term forecast, balancing with aggregate level resources and generating questions/answers to establish preventative action. Usually it’s seen as a monthly process that follows this cycle:
Collate actual data and perform performance analysis
Gartner recently published their Magic Quadrant for Sales and Operations Planning Systems of Differentiation and we take great pride in the fact that Kinaxis has been placed in the Leaders quadrant and is situated highest on the Ability to Execute axis.
Gartner defines a sales and operations planning (S&OP) System of Differentiation (SOD) as a software solution that supports a Stage 4 or higher-maturity S&OP process. According to the report, Leaders demonstrate “Leaders have a strong vision for their S&OP SOD capabilities. They recognize the role they will need to play in enabling the move toward multienterprise horizontal planning allied with vertical integration that links strategy to operations and execution. They are focused on developing analytics to support end-to-end profitability trade-offs and configurable supply chain design and configuration capability.”1
In this regard, we believe we truly out-execute other vendors in the space. Our proficiency in consistently delivering a quality solution and service to our customers is foundational to our value.
Given the configurability of RapidResponse®, it is an ideal solution to take companies through the various stages of S&OP maturity. Our goal is to both enable quick initial success and help our customers advance their S&OP processes from early stages through to Stage 4 (and beyond) over time by leveraging the full capabilities of our solution.
The following guest blog commentary is contributed by Bob Ferrari, Founder and Executive Editor of the Supply Chain Matters blog and Managing Director of the Ferrari Consulting and Research Group LLC.
We often context and plan supply chain transformation initiatives under the three-pronged perspectives of People, Process and Technology enablers. I would urge transformation teams to seriously consider a fourth component, that being Information, including the velocity, context and clarity of information. While some may be of the mistaken belief that the element of Information is solely the perspective of IT, it is rather a jointly-owned, cross-functional element of transformation.
Across various industry supply chains, a lot of executive level visionary thought and leadership energy is becoming focused on supply chain transformation efforts, namely moving the needle towards more agile or resilient supply chain response capabilities. The reasons are many and varied. Today’s clock speed of rapid and continuous business change requires that industry supply chains be more agile and able to anticipate changes in customer, product, or fulfillment segment needs, quicker than competitors. The complexity and sheer speed of events occurring across the global supply chain implies an exceptions-based focus, allowing advanced technology to monitor and oversee day-to-day customer focused fulfillment. Having a bold vision to the end-state capabilities required across the value-chain is essential. With the increasing demands of online and omni-channel customer fulfillment, the end-state is often defined as the supply chain being more predictive and exceptions-driven in terms of response.
Many of today’s industry supply chain and sales and operations planning (S&OP) teams however, find themselves drowning in too much data while lacking in important insights. Hence transformation efforts can start on the wrong footing.
End-to-end visibility is key to the success of any supply chain today, and especially to Schneider Electric. Huillet says the company needs to be able to monitor product and data from the customer all the way back to the supplier.
Quick, tell me everything you know about supply chain! Okay, maybe not everything you know. I’m pretty sure that would take years with the experience some of you have. Maybe more like the CliffsNotes version. Why? Well, I’m new to the supply chain industry and need to get up to speed in a hurry. I’ve just joined the Kinaxis team as the social media and public relations manager, filling in for the next 14 months, and while I’ve got a great handle on the functions of my role, doing it in the supply chain context is something entirely new for me.
I have to admit that up until recently (pretty much the day before my first interview) I hadn’t really given much thought to supply chains. Sure, I had a basic idea of what they were. Oxford Dictionaries defines a supply chain as “the sequence of processes involved in the production and distribution of a commodity,” but as I’ve quickly come to realize, that short little sentence doesn’t begin to scratch the surface of the vast and oftentimes perplexing concepts that encompass supply chain management.
Even with an established Sales and Operations Planning (S&OP) process, if you’re neglecting forecast accuracy measurement and reporting you’re missing a critical piece of the puzzle for demand management success. Yes, it’s often a difficult, time-consuming and complex endeavor, but not doing it limits the prospects for success for the entire process.
While calculating forecast accuracy is important, it’s not enough. You also need measurement and accuracy reports to determine the effectiveness of the entire demand management process.
There are three main components of a demand management measurement tool and process:
Decide the method to calculate forecast accuracy
Determine how to calculate and eliminate any forecast bias in the process
Manage all necessary data to evaluate the effectiveness of the demand management process
Once these components are in place, it’s time to move on to determining added value in the forecast.