This is a multi-part commentary to help supply chain and IT professionals evaluate the need and selection criteria for technology that will augment sales and operations planning processes. Teams will want to make the right decision to match the S&OP scalability needs of their particular business, andour goal in this series is to provide some helpful insights.
Let us first begin with some grounding. What is a sales and operations planning process, often termed the S&OP process? The Association for Operations Management (APICS) defines this process, in part: “the process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing and financial) into one integrated set of plans.” Many other consultants, including ourselves, quickly add that it can be the best mechanism for synchronizing supply chain cross-functional or cross-business decision making and for involving senior management in key operational decisions. The current rapid adoption and maturity of S&OP processes across multiple industry supply chains is the current testimonial to the acknowledged value of this process for business teams.
The next area of mixed opinion is whether an S&OP process can be implemented or effectively sustained without the support of dedicated technology. Here is where consultants sometimes differ with contrasting views. Certainly, the overall maturity of the process is a consideration since many organizations can get started utilizing automated spreadsheets as a technology tool. However, we at Supply Chain Matters have previously commented that in many of today’s industry supply chains technology augmentation is becoming ever more an important consideration when teams strive to move S&OP to the next iteration. We will briefly explain.
Many industry supply chains today are either highly outsourced for supply, or have key customers and markets spread globally. In industries such as fashion, high tech, consumer electronics and others, brand owners own little of the value chain and rely on a highly outsourced network of product design, component supply and contract manufacturing. Industries such as aerospace and pharmaceutical are now experiencing explosive growth in both global markets and outsourced supply.
Another compelling trend is that the clock speed and volatility of business has increased rather dramatically. The past global recession only added to the acceleration of this phenomenon, where markets can change rather quickly and dramatically in a short period of time. Another consideration, as we often point out in this blog, is that disruptions to business and supply chain activities have also dramatically risen. These disruptions range from the day-to-day operational issues such as inventory shortages, quality snafus or product setbacks, to increased occurrences of disruption events brought about by natural disaster, global terrorism, or geopolitical events. Sourcing, operational disruption or supply re-deployment decisions which were once considered singular exceptional events are now more tactical, and increasingly involve many aspects of S&OP. Teams need to quickly assess what is going on, what are logical options, and where decisions or changes need to be executed.
Within this ‘new normal’ of global based business today, there remains the four classic ‘levers’ for supply chain teams to manage supply chains. They are:
- Improving the overall visibility to what is happening at all levels of the value-chain
- Increasing the speed and accuracy of decision-making concerning inventory, production, capacity and other decisions
- Fostering more agility, flexibility and alignment among supply chain business processes
- Being more innovative and adaptable to changing business conditions and needs
Supply chain teams who are considering whether technology augmentation is a requirement for their current or future S&OP process should context this need within the four levers noted above. Are your value-chain activities outsourced and manifested by constantly changing product demand or supply situations? Do you need to accelerate or improve decision-making across external trading partners, where product complexity, geographic distance or time constraints present challenges? Does the existing S&OP process need to be enhanced toward broader objectives and process participants?
Finally, there is a new consideration that should be evaluated when evaluating technology assistance. In this new global and social-oriented era, more key data is unstructured in nature. What we mean by unstructured is information presented in email exchanges, S&OP related teleconferences or in-person meetings. Other key information can exist on the global web, such as long-term weather or climatic information, or information sourced in external trading partner sources.
If these conditions described above are your challenge, than we recommend you consider some form of advanced technology augmentation. The good news in this area is that new developments in in-memory technology, cloud-computing and business intelligence tools have caused many software vendors to dedicate more development and applications specifically addressed to augmenting S&OP processes.
In our Part Two posting, we will outline some evaluation criteria that teams can utilize when evaluating the adoption of S&OP process related technology.
©Copyright 2011, The Ferrari Consulting and Research Group and Supply Chain Matters Blog.