Supply chain optimisation technology promises to close the gap in knowledge, collaboration and competitiveness by enhancing the sales and operation planning (S&OP) processes, but not without a few challenges. Jean-Baptiste Clouard, the S&OP product manager at Quintiq, shines a light on the three common blind spots when selecting S&OP technology.
Let’s be honest … S&OP is no cakewalk
Companies need better tools to implement and execute business strategies. Getting buyin and collaboration during the S&OP process is complex and challenging but is rewarding when done well. Delivering a solid, up-to-date S&OP means excessive monitoring, checking, collecting and keeping the process on track. Distractions come in the form of shorter term considerations of the business in the here and now, which may take priority over the longer term decisions to be made by looking 18 months into the future.
The ultimate goal of the standard S&OP process is increased competitiveness. But with competing interests in your own company, and piles of processed and unprocessed information, it is no wonder most organisations find it challenging to implement an S&OP process. Likewise, many find it difficult to keep up with all the data and evolving technologies that could give them the competitive advantage in their S&OP cycle.
Let’s be honest—many S&OP software implementations fail or do not achieve the expected ROI. Why?
1. Scenario-driven optimisation
In an S&OP meeting, you see several stakeholders put forward their hypotheses to solve a specific demand or capacity issue. Working with standard planning software, you would invest time to develop and test those hypotheses using what-if scenarios. However, testing every possibility would be cumbersome and often, the software would not tell you which combinations are optimal.
What does this mean in practice? Imagine that you are the supply chain manager. A key supplier has reduced capacity for the coming year. You are in the S&OP meeting and everyone is suggesting possible solutions:
1. Engage a new, slightly more expensive supplier
2. Use alternative recipes
3. Use pricing strategies to reshape the product demand—minimising demand for that supplier’s product
4. Produce at another plant with similar suppliers nearby
Using legacy S&OP software, you would need to create these scenarios manually to test out each hypothesis. But the software would not be able to tell you that a combination of hypotheses 1, 2 and 3 would yield optimal results and the best ROI, unlocking real benefits.
When choosing the right S&OP software, go beyond asking if the solution can handle what-if scenarios. Identify whether the software can find the optimal combination of all what-if scenarios—a critical difference that will yield significant ROI during the implementation phase.
2. Data maintenance
Another reason why S&OP plans and implementations fail is because of data maintenance. No matter the size of your company, everyone has a lot of data to maintain from multiple sources. It may even be entered manually.
Every month, your team handles the collection, checking and maintenance of all the data such as costs for raw materials, production, transportation and labour, to name a few. As soon as it is generated, data quality starts becoming outdated. If the data is not kept up to date, the S&OP plan will be compromised and eventually, your people and departments will stop following the plan.
The importance of data quality cannot be underestimated. It is a vicious cycle that can become a critical breaking point in an S&OP plan. When the data going into the planning process is inaccurate, adherence will drop.
In any complex planning process, the volume of data is likely to defeat its owners in just a few months, which is well short of the typical 18-month time horizon of the S&OP process. Recently, we have seen a new generation of supply chain management software coming into the market that uses machine learning principles to maintain data. One of the most reliable indicators of data quality is the measurement of adherence to plan—the gap between what you planned and what actually happened. This new technology safeguards against deterioration of data by continuously measuring the gap between planned and actual. As a result, planning teams can benefit from having removed one of the main obstacles to a successful S&OP process.
3. Product design process
A commonly missed opportunity in the S&OP process is optimising the product design process. Looking at the consequences of design decisions and integrating product specifications into the S&OP process is crucial for designing a truly optimal supply chain.
Typically, product design teams do not consider how the product will be developed, produced or shipped. And, vice versa, the supply chain team is not factoring product design decisions into the S&OP process. This means that they could be missing massive optimisation potential.
Production and distribution can be optimised at a much earlier stage with the specifications of the product such as shape, size, weight and packaging. Integrating product design insights with the S&OP process brings a deeper understanding of the consequences of design decisions. By incorporating design decisions into the S&OP process, you are also taking into account all other supply chain constraints—leading to a healthier bottom line.
Early optimisation of design decisions also impacts the quality of feedback. S&OP teams will be able to provide better feedback to product development teams on future products especially when it comes to production, storage and distribution costs. Soon, the next generation of S&OP processes will be able to predict the consequences of design decisions and integrate them into future S&OP plans.
The difference between S&OP’s success and failure
When selecting the right S&OP solution, keep in mind that these three key success factors will help you boost your ROI.
A combination of methods and technologies are required to automate and optimise the S&OP process. By raising the bar for optimisation, data quality and integration with product design, you have the potential to bring significant improvements to your S&OP process. Continue assessing your current processes and the systems you have in place, and keep an eye out for new capabilities that could prove to be the difference between a successful S&OP cycle and a failed one.
Discover benefits, challenges and examples of achieving ROI when implementing an S&OP solution. In the Logisym webinar, Jean Baptiste Clouard discusses the solutions to those challenges and shows best practices that will help you to reap the full benefits from your S&OP process.
About the Author
Since 1997, Quintiq has been solving each of those puzzles using a single supply chain planning & optimisation software platform. Today, approximately 12,000 users in over 80 countries rely on Quintiq software to plan and optimise workforce, logistics and production. Quintiq has headquarters in the Netherlands and the US, and offices around the world. Watch the webinar here: http://download.quintiq.com/full-roi-sop