Digitalizing supply chain is coming fast even though 70% of the companies are still in Maturity Stage 2 and 3, according to Gartner. That means there are 20-30% of companies, the leaders, which are in stage 4 or higher. They are ahead of others for a reason: they can deliver faster at lower cost. If Amazon is planning to deliver in 1 day, imagine what kind of responsiveness is needed from its suppliers. Given thousands of SKUs and products that you might have, it is humanly impossible to respond, at a reasonable cost, without having intelligent systems that can make quick decisions based on current information AND be able to predict the future and prescribe the course of action. The AI/ML technology can receive millions of data points and make decisions and recommend actions in almost real-time. Just like what some financial systems do on the stock market and an autonomous car makes decisions based on sensor input.
To be able to make good decisions in real-time, you would need a Digitalized supply chain. Which means an accurate duplicate of your supply chain in digital form that behaves just like your supply chain, as a cockpit simulator does for an airplane. We call this a Digital Mirror©. A Digital Mirror must have enough detail to show all the complexities of the supply chain including vendor behavior, equipment capacities, substitutes and alternatives, cost and financial information, DC locations and capacities etc. Unfortunately, S&OP systems alone are very poor in replicating the model of the supply chain. In fact, on the supply side, your typical S&OP system in the market is hardly any different from the way spreadsheets perform planning (they both assume fixed manufacturing leadtimes, predefined bottlenecks and bucketed capacities). This is not even close to digitalization!
In order to digitalize, the system needs to have the ability to perform S&OE—Sales & Operation Execution. There is no other way! Digitalization requires the ability to connect with Systems of Differentiation such as PLM, MES and CRM, also have the ability to model the equipment accurately, including set-up times and batching resources, addition of tools and labor constraints. Also, have the ability to pick up real-time signals from MES to respond to changes in real-time, to be able to perform continuous planning based on the events that are on-going, such as late arrival of materials, equipment breakdown, changes in pegging based on the outcome of a process and so on.
The question is therefore, can your today’s S&OP solution extend to this level of digitalization? How accurately can it model the supply chain so that the right decisions are made in real-time? If the answer is no, then the system is not capable of telling you what is happening in this week or month or even quarter, it can only guess what might happen over the next year or two. But even that is a fallacy. Because things change week to week if not day to day. Planning for future is good but it needs to be accurate enough to be relied on. S&OE gives you a close to 100% plan accuracy that can be executed without time-consuming manual adjustments.