Establishing a repeatable supply/demand match is at the core of any successful sales and operations planning (S&OP) initiative, which 68 percent of Best-in-Class companies have by establishing a formal S&OP process. The next step for most companies is moving beyond the fundamentals to a more predictive process, which requires greater insight into demand and a clear understanding of capacity constraints. To improve this insight, the Best-in-Class are also 68 percent more likely to collaborate with the customer at a strategic level and 61 percent more likely to have the ability to precisely measure the required inventory investment needed to achieve different service levels. From a process frequency perspective, 83 percent of the Best-in-Class conduct their S&OP process monthly or more frequently, while All Others are at 73 percent (remaining 80 percent of companies). The performance results indicate that Best-in-Class see superior performance at 93 percent customer service level vs. 79 percent for All Others, have a 35 percent better cash-to-cash cycle, and are 59 percent higher in their forecast accuracy.
The Best-in-Class are 68 percent more likely to evaluate constrained and unconstrained planning scenarios during the supply/demand balancing process, and based on this predictive mindset, they are 58 percent more likely to respond to events in a timely manner. Once companies have scenario planning capabilities in place to model upside and downside possibilities, they can move toward a more prescriptive S&OP process. This requires visibility to the financial impact of the S&OP plan and the ability to drive those results in a specific direction. Best-in-Class companies are 49 percent more likely to integrate said financial planning and budgeting processes within their S&OP initiatives, and are also 53 percent more likely to leverage customer intelligence and demand planning processes to improve business segmentation and drive targeted strategies. Even though they are far ahead of the competition, the Best-in-Class are still at 52 percent adoption in designing targeted strategies. Again, the move towards a more prescriptive process will define the next five to 10 years for the evolution of S&OP.
The S&OP process is already seen as the plan of record, as indicated by the 58-percent adoption rate of the Best-in-Class for an established management exception process. As future technology like Industry 4.0 is adopted, it will increase the speed and frequency of planning cycles. The underlying concept of industry 4.0 is that the future will be characterized by the certainty of information, as opposed to the logic of the past, which has been defined by the uncertainty of information. We will know what the customer will order. More timely and accurate demand signals along with IoT-driven processes will trigger automated planning responses, forcing a faster, more continuous planning cycle. Preparing for this inevitability by having a strong S&OP process is a requirement for future success.
The Outlook
To embrace the supply chain of the future, companies should follow the actions of the Best-in-Class to improve their S&OP performance through stronger capabilities and strategic actions. As planning and execution become accelerated, S&OP will evolve to a more continuous process for managing and updating the plan of record, and the S&OP meeting itself will evolve to a real-time strategic planning model.
