In this blog, I will take this further and elaborate on how S&OP can be complemented with S&OE to make supply chain truly digital. Before this, lets delve into the basics and the constraints of the existing S&OP process in dealing with supply chain dynamism.
With numerous global market forces in play and increasing market complexity, the supply chain can no longer be considered a siloed, linear model with an absolute focus on moving goods from manufacturers to customers. Companies are having to adapt their traditional norms to suit new customer demands and expectations. For decades, this functional model has been tweaked to streamline and provide better delivery performance to the global customers either by increasing their supplier base or moving closer to the customer.
Organizations are now faced with uncertainties in the growth and dynamics of the market. Shrinking product life cycles and growing market segmentation in a global market, requires the organizations to be prepared and respond quickly to the changes.
S&OP: A foundation for supply chain planning
Sales & Operations Planning(S&OP), a more than 40-year-old decision-making process, has delivered companies around the world many valuable business improvements by aligning strategic plans of all product lines with the organization’s long-term goals. S&OP analyses the consumer demand trends and matches them with the supply-demand backed by their supply resources. It also has the objectives of improving forecasting accuracy, decreasing costs, and deepening the view of capacity throughout the supply chain. S&OP planning is imperative for the success of new products launch and also bringing great value in terms of aptly pricing the new products. In today’s increasingly global business world, market demands, quick turnaround of products/ services and constantly changing consumer preferences are exerting tremendous pressure even on the well- run S&OP process.
While S&OP is important and a widely adopted and understood process, at the core, there isn’t an established business function that deals with supply chain adjustment on a smaller planning horizon. S&OP process lacked the fine details and the granularity leading to constant planning readjustments and revenue leakages in terms of built-up inventory or lost opportunity cost.
Some of the other challenges with the S&OP process include:
- Difficulty in translating Planning to Execution
- Poor visibility of coordinated supply chain
- Lack of integration into operational planning
- The missing What-if, Scenario Management and Simulation
- Inadequate support in balancing demand and supply
- Inadequate support in maintaining on-time delivery rate
S&OE: An emerging paradigm
A new level of organizational planning has emerged in recent years called S&OE (sales and operations execution) which will drive the next generation digital supply chain. S&OE is a process that allows supply chains to execute their strategic S&OP plans by handling the business disruption effectively and turning the supply chain more agile. Where driving the monthly or yearly organizational plans is S&OP’s forte, S&OE drives the weekly demand and softens the impact of supply fluctuations with alternative execution plans. Some of the other advantages of S&OE are:
- Create accurate constraint-based plans quickly
- Optimize inventory and open work orders
- Shorten lead times
- Gain new visibility into production capacity and material usage
- Accommodate customer-demand changes on time
- Simplify allocation planning for equitable inventory distribution
- Choose the right alternate suppliers
Creating a dynamic supply chain plan requires supplementing S&OE with S&OP
To achieve the highest level of supply chain maturity, operations plan should be detailed enough to be executed without much intervention. Building an eco-system where S&OP with S&OE, a single data model which learns the constantly changing supply chain parameters and in turn adjust the plans to be executed would not only help in achieving digitalization but also shifting the planning from people-centric to strategic decision-making group.
By integrating S&OP and S&OE, organization will have access to an accurate, real-time planning data that translates into a realistic plan across different levels in the supply chain. Demand planners can now fine-tune their forecast to match the aggregation that matches their business requirement and also generate accurate attribute level forecasts. All of the operational planning will be underway with enough lead time to have smoother, efficient & sustainable production runs.
You can read more about S&OE and digital supply chain planning over here.
To know more about how you can make your supply chain dynamic by integrating S&OE with S&OP, click here.