S&OP is playing an increasingly central role in a company’s success. With the advancements in cloud technology and data management systems of recent years, S&OP has transformed, regaining its popularity having just a short time ago begun to be considered as an outdated system. It has now moved from being a system reliant on historical data analysis to a prediction on profiling of customers/consumer needs, and a well-managed S&OP process can often be the defining factor.
The cloud, in particular, has been vital to the resurgence of S&OP. A mature S&OP process must involve a coordinated enterprise and network decision-making capability, which is only really optimized by the Cloud. According to a report on Supply Chain Shaman, 95% of the solution providers now offer hosted solutions and some version of SaaS. The Cloud enables partners across the board to access information in real-time and collaborate to ensure that processes are run efficiently.
However, many organizations are failing to understand which technology they require. Many firms are still powering their S&OP efforts using manual methods, and those that aren’t are often using Excel or multiple Enterprise Resource Planning systems - often between five and 30. When it comes time to drive collaboration and scale in S&OP, there needs to be a unified platform that enables a holistic approach.
Equally though, an even bigger problem is those S&OP leaders who, in their rush to buy the latest technology, fail to spend their money wisely. In a way, there are too many technologies that try to solve S&OP for organizations. Since the way each company is run has so many of its own nuances, a standard off the shelf technology may not meet the goals of that organization. In such a complicated environment, many simply don’t fully understand the technology they really need, taking a ‘ooh shiney’ approach that sees them buy the latest gimmick because some fancy marketing tells them it’s a ‘must have’ - as opposed to trying to understand what’s right for their organization. Such thinking may produce short term results, but in the long term this is likely to cause serious harm.
According to one survey of 131 supply chain executives conducted by Hughenden Consulting alongside the trade organization Eye for Transport, most companies are investing roughly 70% of their S&OP budget on technology. They need to make sure this is being spent wisely We’ve taken a look at 6 of the most common myths around technology in S&OP that should be always be kept in the back of operational leaders’ minds when they are considering where to invest their money.
1. Data analytics tools must be real-time
The key word in ‘Sales and Operations Planning’ is Planning. Big data analytics tools are all the rage for every department, and they are often incredibly useful. When forming a long term plan, however, it is more important to carefully evaluate the events of the next year than it is to try and react to every tiny change in the data, or you risk losing focus.
2. The more complicated, the better
It is not always the case that Excel is not sufficient for your S&OP process. Robert Dietz, Vice President of Supply Chain at Charter Steel, notes that, ‘Many companies believe more complex technology solutions are needed to implement S&OP. Getting the process right is the most important part of an effective S&OP process. (The two most effective S&OP processes I have experienced leveraged MS Excel over existing ERP software.)’
3. S&OP Technology does not need to be perfect
Supply chains are prone to a butterfly effect should one small thing be amiss. If technology is only 70 or 80% right, there is a high chance that it will cause delays that will knock on down the chain and extrapolate out.
4. Integrating with the financial budget is necessary
Financial budgets quickly go out of date, despite moves by many finance functions to introduce rolling forecasts. The S&OP process should never be constrained by the budget as things are constantly changing, budgets often cannot keep up with events, and must adapt to suit S&OP’s needs rather than the other way round.
5. One solution provider is all one company needs
It may seem like a single platform is necessary, and there are many advantages to using one - cost effectiveness, easier communication, etc. However, many organizations have grown exponentially in size over the last decade. They also have many departments, all of whose supply chains have different needs. Supply chain modeling needs to be carefully tailored based on business modeling to drive the value, as a one-size-fits-all approach will often not cut it.
6. S&OP is dead, long live Integrated Business Planning (IBP)
IBP pulls together an organization cross-functionally, enabling it to move faster so it can maximize opportunity and mitigate risk. However, it is a stage in maturity, not the end state, and S&OP is still vital for planning.