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Predict, Not Just Respond

S&OP Systems = Spreadsheet Planning with Lipstick

Spreadsheet planning

S&OP Systems has become very popular over the past few years because it somewhat eases planning through better user interface than traditional spreadsheets, availability of built-in reports and analytics. However, what is inside your typical S&OP system is no better than a spreadsheet logic! It relies on capacity buckets just like spreadsheets, it relies on pre-defined bottleneck resources and it assumes fixed or given product leadtimes. However, both of the latter factors are dependent on product mix and volume which is constantly changing. Furthermore, they run a typical MRP followed by capacity allocation in a sequential manner not parallel! The result is a plan which needs to be manually adjusted and at best 60% right! You might feel that this is a “good enough” plan and that you can make adjustments to make it workable. Indeed, this is what you do with spreadsheets too. However, in both cases whatever plan that is produced as the final outcome would be far inferior to an optimized plan. The reason is that there are millions of variables that need to be considered with material and capacity planning that humans are simply incapable of processing such large amount of data and constraints. Systems can help, but S&OP is not designed for that level of optimization.

Every time you plan you are essentially simulating the future. Much like an airplane cockpit simulator you are trying to see how well your supply chain can handle the bumps and irregularities while executing. Would you settle for 60% accuracy when simulating airplane behavior? Of course, in this case we are not dealing with people’s lives but with the lives of companies and increasing profitability and making sure we deliver on time at lowest cost. Why would you use the technologies of the 60’s? We are at a point where we can form a Digital Mirror© of a supply chain so that close to 100% accuracy can be obtained in planning in addition to an optimal plan making the best use of resources in very complex supply chains. Systems are smart enough to do that for you!

According to Gartner, S&OP can only take you to stage 3 maturity level. In order to go beyond that to highest maturity level, you need to be able to perform S&OE or Sales & Operation Execution. Furthermore, S&OE cannot be separated from S&OP. It needs to be an integral part of S&OP so that depending on the availability of data, one can plan in more and more levels of detail in a unified environment. S&OP may give you a picture of the future, alas not very accurately, however S&OE delivers what you need to do right now, next week, and in this quarter, to ensure your financial goals and customer commitments are met. Click on the link for more information on S&OP and S&OE as well as how AI is enabling digital supply chain.

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