Collaboration is the key to Leader City – the key to unlocking the hidden wealth in supply chain operations. For that, S&OP is among the most important best practices and processes a company can implement. It can also be a top-down planning process if not defined and implemented properly. What’s wrong with that?
Without the capability to realize the benefits of accurate planning on the day-to-day operating level, much of the benefit of the S&OP process can be unrealized. The S&OP process generates plans. The daily planners and schedulers drive operations execution. They make million-dollar working capital decisions every day. They reconcile daily demand and supply variability and generate the results. If the results are not reconciled to the plans on a daily basis, if the S&OP process is not based upon daily reconciliation, it will be wrong. It will not be in synch. It will not deliver on the potential. It will be better than nothing; but often not a step-change better.
The major constraint to using daily operating results to update the S&OP process (enterprise application) is that most decisions made by the day-to-day planners and schedulers are custom spreadsheets based on tribal knowledge. And, for many companies, there is a gray tsunami of talent about to retire and with them much of the tribal knowledge.
Over past decade or so, we’ve seen new financial applications to support budgeting, tracking and control of daily transactions and financial plans. We’ve seem new customer relationship management applications implemented to automate, track and support sales plans. What we think is needed for S&OP to go to the next level are day-to-day operations planning and scheduling tools that can be integrated with the enterprise planning application and close the loop on S&OP. Companies like Lead Time Technology, Ultriva, ToolsGroup, Steelwedge, DCRA, and others have been developing tools to address the unique operating characteristics that differentiate one plant/operation/machine from another.
These unique configuration requirements inhibit the use of traditional enterprise applications or the development of “standard” applications like finance and CRM, especially when you consider that the characteristics and variables considered by the tools vary daily. But, as many executives are learning, the only way for the potential of S&OP to be truly realized, it must be top to bottom and back up again. The leaders are doing it and outperforming their median competitors with a 2-to-1 or more cost advantage!
In 2013, expect to see heightened growth in day-to-day operations planning, scheduling, and inventory optimization tools. As companies implement S&OP, they quickly find the process incomplete without supporting daily operations. The fact is that plans given to operations on Sunday night or Monday morning are wrong by noon on Monday. And, the rest of the week is a firefight. Unless the S&OP applications consider daily variability, they will consistently be wrong. But, that’s next year’s report.
Keywords: supply chain management, inventory management, inventory control, supply chain planning, supply chain solutions, supply chain management IT, forecasting, demand planning, forecast accuracy, sourcing solutions, demand variability, integrated business planning