When this author speaks to audiences regarding the current challenges and sometimes frustrations among multi-industry Sales and Operations Planning (S&OP) teams, I often remind my audience that the longstanding purpose of S&OP is to serve as the mechanism for more-timely decision-making regarding overall business and value-chain planning. That tends to be an important reminder since too many S&OP teams become entrenched and vested in the single number, single plan perspective. A lot of time and energy is spent on chasing or reconciling that “one”, cross-business number of expected supply chain customer fulfillment as opposed to improved methods for more dynamically sensing product demand, more quickly responding to market opportunities, or charting different possible paths to successful business metric performance. The notions of S&OP being a decision-making enabler takes on ever more added perspective for businesses that are directly supporting larger volumes of online customer fulfillment.
Today’s constantly changing and complex sales channel fulfillment requirements require far more dynamic decision-making capabilities. This will include deeper, cross-application information connections to product demand pipelines, augmented with traditional and social media based demand sensing. As noted in a prior commentary reflecting on predictive commerce and machine learning, the implication of increased online product fulfillment is that S&OP planners need to capture and model the various market attributes that shape online demand pretty much at the SKU or “item-level” while filtering out the “noise”.
S&OP teams now have the opportunity to determine how will the customer buy as well as be able to take advantage of demand signals that are being generated closer to point-of-sale or point-of-influence. We further anticipate more-timely information connections with external or outsourced suppliers along with key customers, leveraging cloud-based planning and fulfillment synchronization networks.
At the same time, teams focused on being more demand-centric need to insure that expected business outcomes in revenue, product margins and other performance measures are achieved. In the context of decision-making, that means that teams should consider the effects of any planned customer fulfillment decision on business result outcomes.
Supply chain planning technology provider ToolsGroup recently announced a rather unique simulation based capability that the provider terms as “Instant Replay”, a term chosen to depict what occurs more often in televised sports or a “golf swing analyzer.” During our recent discussion with CEO Joe Shamir, Shamir described this application as allowing S&OP planners to look back at prior demand, inventory, supply and service level events to analyze how past actions added to or subtracted from business goal performance and visually compare three scenarios:
- Actual: what happened within a specific time interval
- Planned: what should have happened, based on the S&OP plan
- Potential: optimized recommendations based on the specific circumstances at the time, without the benefit of hindsight.
S&OP is indeed a process that supports integrated business planning and more informed decision-making. The good news is that technology advancements, simulation and predictive analytics based capabilities are becoming available to allow more dynamic planning and decision-making without the need to be anchored in a “single-number” approach.
Disclosure: ToolsGroup is a current client of the Ferrari Consulting and Research Group.