What sets planning and execution apart is really the horizon and timing between the time a decision is made and when it is realized. In general, we plan for responsiveness and execute for reliability. The more accurate model of the world we have, the better plans we can make resulting in being more responsive to changes that are not predicted. Unfortunately, most current S&OP planning systems rely too much on human judgement and a very basic model of the supply chain, just like spreadsheets. Lack of accuracy in modeling causes inappropriate reservation of capacity and material resulting in constant fire fighting when it comes to execution. Some say, S&OP gives visibility. With an inaccurate model of the supply chain, this kind of “visibility” is very foggy! To this end, model completeness is crucial for accurate planning. The second and more important factor is the ability to perform predictive planning not just response planning. Predictive planning is capable of predicting potential risks in the supply chain and avoid shortages or redundant inventory. It also ensures that adequate mix of products are made available based on various factors such as weather, region, type of customer, volume of products etc.
Although demand planning is intended to help with future needs of the customers, however, it only identifies the potential needs and requirements but it does not have any knowledge of supply risks and how to avoid the potential problems on the supply side. This is the job of predictive supply planning with model accuracy and appropriate prescriptive algorithms. How accurate is your model of your supply chain? Are you still using bucketed capacities, static leadtimes and pre-defined bottleneck resources? If so, consider moving to predictive planning that deploy S&OE to represent accurate models and close to 100% plan accuracy and seamless execution of plans. This is what digitalization is all about. Learn more about plan accuracy and digitalization and how S&OE can give you accurate and reliable plans HERE.