Resources Archive - Page 12 of 16

S&OP is even more relevant in today’s business environment where complexity is increasing due to:

– Short delivery time expectations
– Customization – “on size fits all” is long gone, leading to increasing product portfolio complexity
– OMNI channel environments – scattering the demand
– Higher complexity in supplier networks
– Disruptive new players changing the name of the game

The growing complexity suggests that S&OP has an even more critical role to play in the future. The process needs to be sharpened, if to continue contributing to Supply Chain competitiveness. Digitalizing the S&OP process may generate the need of further competitiveness; research shows that the digitalized S&OP process demonstrates stronger performance. The digitalized version is recognized to further increase forecast accuracy, as well as reduced inventory investment and stable/increased service level.

Benefits of a Digital S&OP process approach

A digital S&OP process creates benefits regarding integration and collaboration as well as accuracy and speed. Taken together, the digital S&OP process draws the participants’ focus to define resolutions and make decisions for critical exceptions. The digital S&OP frees up participants’ time automating recurring tasks of data collection, scrubbing and analysis. Human invention is limited to and leveraged where it beats automation.

The digital S&OP can advance integration enhancing collaboration internally and externally

Internal data integration; making details of the unified data source available to all

Securing that no parallel truth and related suboptimization exits

External integration: extending available data sources to include information up- and/ or downstream the supply chain

Forward integration – forecast data collaboration with customers
Backwards integration – constrain data collaboration with suppliers

The digital S&OP provide greater accuracy and speed

The greater accuracy is accomplished through applying advance analytics and combining data from multiple sources beyond those of traditional S&OP systems. Example of non-traditional S&OP data is external demand drives such as macroeconomic parameters and weather data. Applying advanced analytics drives quality regarding forecast accuracy, creating a stable planning base. The accuracy is improved over time as the algorithm is trained, learning, and adjusting from comparing discrepancies between plan and reality. Despite the fact that the digital S&OP utilizes many more data sources, data processing time cannot be compared with semi manual analysis made in spread sheets; the digitalized S&OP reduce processing times from days to minutes or hours dependent on data volume and complexity.

The digitalized S&OP is demonstrated to perform stronger than the manual

Manual and digital S&OP processes are evaluated on the same KPIs. Research shows impact of the digital S&OP as stated in below list. NOTE the quantified impacts are in addition to the impact already obtained through conventional S&OP:

10% increase in production capacity
30-50% MAPE (forecast error) improvement
50% reduction in planning time (related to S&OP preparation and operational demand and supply planning)

Digitalizing S&OP will not fix an underperforming S&OP process

Unfortunately, digitalizing the S&OP process is not a short cut to fix existing problems in an underperforming process. Digitalized or not – a successful S&OP process requires its cornerstones to be in place:

Process – solid workflow fundamentals
People – the right governance
Data and analytics – a well-defined, shared data baseline

That being said – S&OP digitalization is not a short cut to excellence. Our conviction is that malfunctioning cornerstones of the process should be addressed before digitalization.

Summary

Digitalizing the S&OP process opens to leverage many more data sources and applying far more complex analytics than what can be achieved in a set of spread sheets. The gains in effectiveness are indisputable, empiric studies conclude that process performance increase. Given the potential which has been experienced when digitalizing the S&OP process, we at Optilon advocate every Supply Chain function to add S&OP digitalization as a prioritized initiative to its development agenda. The digitalized S&OP process responds to the ever-increasing complexity of today’s business environment.

If you would to learn more about our approach to S&OP and Supply Chain planning from an end-to-end perspective, then we invite you to take a closer look at our whitepaper that you can download for free below:

Download here

Are you a current or newly graduated Supply Chain Student? Do you have an interest for Business Development or IT? Maybe you are just new to Supply Chain or interested in Optilon’s business?

Then watch when some of our most talented people from Optilon share their knowledge within their field of business expertise and explain how it can create business benefits.

The session includes:
– Short about Optilon
– Where is Supply Chain Management/Planning heading?
– Where can you get educated and find insights about Supply Chain?
– What is Supply Chain Planning from an “End-to-End” perspective
– How can you digitalize the Sales & Operations Planning Process?
– How can you use AI and Machine Learning to optimize the business?
– How can you model your Supply Chain Network with modern technology?

The event is in English.

Watch the webinar here!

S&OP is like any other business process/ improvement initiative – if it does not produce real business value; why do it? In this post we explore; “What value does S&OP create?” The identified values will be recognized from four perspectives recognizing S&OP as:
– Facilitator: Acting the vehicle to mature the Supply Chain beyond short term operational excellence
– Booster: Amplifies the impact of related business developing initiatives
– KPI driver: Drives forecast accuracy, increasing Customer Service Performance, and decreasing Inventory
– Cultural transformer: Fosters effectiveness and agility

S&OP – a quick refresher on purpose and definition

Before digging into the value S&OP creates, we brush up the general understanding of S&OP (if you want a more thorough refresher; check out our blogpost on The Basics of S&OP).

Supply Chain excellence is generally expressed in maturity models visualized as a ladder or a staircase, where the first step(s) is to get the short term planning in control; with a narrow focus to manage mix and meet service level targets. Climbing the staircase, the scope expands to cost and inventory optimization. However, limiting planning to the short time horizon, there is a threshold to how good you can get. To address and proactively change the preconditions for the short-term planning, the time horizon must be extended to fill the gap between Detailed and Business planning. S&OP fills that gap by planning on a 18-24 months’ horizon.

S&OP amplifies the impact of related business developing initiatives

S&OP provides mid and top management a tool to regularly follow up and track business development initiatives, e.g. New product development, Lean manufacturing and 6Sigma. Business developing initiatives generates business value in themselves. But, best in class S&OP practitioners get more, they leverage the S&OP process as “a control room” for the initiatives amplifying the output between 25-50%[1].

S&OP drives forecast accuracy, increasing Customer Service Performance and decreasing Inventory

S&OP is never implemented in a static environment – generally other initiatives are launched concurrently, making it difficult to exact size S&OP impact on planning performance, customer service, inventory levels (cash flow) and costs. Still, successful practitioners report major S&OP effect[2]:

<90% forecast error decrease
10-40% on-time delivery improvements
12-70% inventory reductions

Theoretically, improvement in forecast accuracy drives impact on Customer Service (on-time delivery) and Inventory Reductions. The classic “Reorder-point formula” constitutes one way to link Forecast accuracy improvements to Customer Service and Inventory level performance; the higher forecast accuracy:

The lower primary stock (average forecast demand * lead-time)
The lower safety stock (demand error * safety coefficient, that depends mostly on the service level)

S&OP fosters effectiveness and agility

The soft sides of S&OP cannot be quantified. However, we believe that soft benefits eventually drive performance of hard KPIs. S&OP is recognized to make people more effective and agile.

The structure of S&OP covers elements which make people more effective:

Cross functional communication – facilitated through “the one set of numbers”/ commonly accepted data and the structure with clear forums, tasks and expectations
Empowerment – as decision-making is pushed down; with clear mandates and guidelines for decision
Clear responsibilities and enforced accountabilities – as recurring agenda items in all S&OP meetings involve; KPIs and action-lists – monitoring and follow up

The S&OP process provides pre-conditions for an agile mindset as it fosters:

A proactive, rational mindset – S&OP establish visibility and data driven decision making departing from “a unified data model”. Allowing to early detect sign of changes in the internal as well as external environment
To take the cross-functional perspective – S&OP connects operating objectives and business strategies
Flexibility in responding to customer requests and business opportunities – S&OP gets rid of suboptimization: establishing shared objectives and extended visibility

Summary

It is indisputable that S&OP creates value, still like any other business initiative – it should be challenged on value creation. Key ingrediencies of S&OP is workflow management, data consolidation and analysis, ingrediencies which could easily transform into time consuming exercises with limited value. To avoid getting stuck in managing necessities of a S&OP (data gathering, process steering, follow up in action items etc) We @Optilon offers a platform to support and steer the S&OP process, allowing the participants to focus on analysis and solutions.

Would you like to learn more about our approach to S&OP and Supply Chain planning from an end-to-end perspective then we invite you to take a closer look at our whitepaper which you can download for free right here:

[1] Dougherty, John and Gray, Christopher. Sales and Operations Planning – Best practices Lessons Learned From Worldwide Companies. Belmont: Partners for Excellence, 2006.

[2] Dougherty, John and Gray, Christopher. Sales and Operations Planning – Best practices Lessons Learned From Worldwide Companies. Belmont: Partners for Excellence, 2006.

Today’s business environment is undergoing changes at ever faster intervals. Leaders of today are constantly challenged, and it requires them to act and stay in control. How can an S&OP process benefit the company?
In this blogpost we will investigate the basics of S&OP; why it is needed, what it is and how the process benefits from technology.

S&OP – why is it needed?

A well-known and recurring challenge among manufacturing companies is to secure that the Business Plan is reflected in execution. There is inevitably a gap between a Business plan made on a yearly/ biyearly cadence from top down data, and Detailed planning, made weekly, from bottom up data and with previously planned and unplanned unknowns known. Moreover, the gap between business plan and detailed planning / execution may be further reinforced by misaligned incentive schemes, local KPI definitions and use of parallel, non-harmonized data sources:

Sales strive to operate with maximum flexibility towards customers and hold possibilities open if possible. Also, they want to be able to offer non-standard solutions
Supply Chain wishes to create productivity through stability and automatization of processes, products, and customer portfolio
Finance wishes to create transparency in processes so the business can create the right bottom-line impact on products and customers, while at the same time bringing down working capital

S&OP is the planning layer bridging the disconnect between Business and Detailed Planning. S&OP when performed right, tear down organizational silos, create pre-conditions for proactive decision making, as well as unite the company around one plan and one target. Typically, S&OP drives performance within Sales, Service, Liquidity (increase) and Cost (decrease).

S&OP – what is it?

S&OP is an exception focused mid-term decision-making process, creating pre-conditions for the short-term planning to be executed in line with the Business Plan. The S&OP process identifies and resolves gaps between Sales Plan and Actual demand, Demand and Supply as well as Supply targets and Actual output. Gaps between plans are identified through the process of making the plans comparable, translating between different Unit of Measures (Monetary vs. Qty vs. Hrs) and aggregation levels (Volume vs. SKU).

In practical terms S&OP is a cyclic, sequential process at its core structured around 4 forums:

Demand review
Supply review
Pre-Executive meeting
Executive meeting

Each forum makes decisions to close identified gaps, as far as their mandate reach. Non-resolved gaps outside the mandate are escalated for final decision in the Executive Review. The sequential aspect of the process means that decisions and feedback from current cycle is fed into the next cycle. A vital part of the process is to follow up on previous actions and track progress through KPI monitoring, to secure that previous decisions have had intended impact and if not finetune the action.

There are two key enablers for S&OP:

Top-management commitment
To reflect the planning environment in a single unified data model that is recognized across the company

S&OP – how technology drives process efficiency and decision quality

The historical disconnect between Business planning and execution is best bridged by a single, up-to-date unified data model. The data model bridges the disconnect between the Business Plan (top-down) and Operational Plan (bottom-up) by creating preconditions to transfer Business strategy down to the shop-floor. Many companies try to set up the data model and drive the S&OP process in non-integrated spreadsheets. However, we believe that S&OP efficiency, impact, and sustainability is best achieved leveraging a fit-for-purpose technical platform; automatizing input data collection, generating a forecast, enabling what-if scenarios and steering workflow.

Would you like to learn more about our approach to Supply Chain planning from an end-to-end perspective, then we encourage you to take a closer look at our whitepaper, which you can download here:

Download now

A little bit of background: There is a technology, people, and process dimension to S&OP – but sometimes the strategic dimension is overlooked.

Henrik Nyman, Supply Chain & AI Expert and Principal lecturer at Arcada University, talks about the importance of understanding strategic intent as a starting point for S&OP, what that means in practice, and how that affects S&OP design and implementation.

Watch the webinar here!