Let’s face it S&OP is only a visibility tool for long term planning. All the heavy lifting is done by the planners manually trying to make a long-term plan work for actual short-term execution. This maybe a step above spreadsheet planning but it is far from being on a path to digitalization. Digitalization requires an accurate model of the supply chain, it requires data to represent the environment and it depends on specific properties of the objects in the supply chain, i.e. attributes, to describe the behavior of suppliers, properties of parts while processed, equipment, customers, methods of sourcing and transportation etc.
Furthermore, in recent years there has been a lot of talk about machine learning (ML). However, ML algorithms are hungry for data so that they can relate (say) lateness to an attribute of a supplier or to a part number attribute based on long term trends. Unless there is end-to-end pegging capability, this kind of causal analysis would be impossible. S&OP systems perform pegging only at the FG level not at every level in the supply chain, all the way to suppliers and their part#s. To this end, almost all S&OP players use machine learning in their demand planning solutions rather than on the supply side. There are A few who use ML to predict leadtimes! This is not a very effective strategy for two reasons.
- leadtimes depend on product mix. S&OP solutions do not take into account product mix because they do bucketed capacity analysis and fixed leadtimes.
- what the system is trying to learn is the traditional leadtimes. But traditional leadtimes are far from optimal and can be and should be improved!
Learning from sub-optimal leadtimes of the past is not a great learning strategy! How do you improve your leadtimes if you keep repeating your past inefficiencies?
Above, we have stated the limitations of S&OP systems. However, to remove such shortcomings you need to have a pathway to S&OE, or Sales & Operation Execution. The latter requires the ability of the system to model the environment accurately, not just bucketed capacities, fixed leadtimes and pre-define bottleneck resources! S&OE allows you to digitalize your environment from stage 2 and 3 (according to Gartner) to higher stages of maturity and finally digitalization. Whether you are already a user of S&OP or not, join many others who have deployed Adexa Digital Blueprint© in order to go to higher levels of maturity in their supply chain operations with a powerful combination of S&OP, S&OE and ML innovations.