S&OP without S&OE is Spreadsheet Planning, Not Digitalization!

Many companies have or are in process of implementing S&OP solutions aiming to digitalize their supply chains. S&OP is essentially a high-level rough cut and long-term model of the supply chain. Hence, it cannot generate a plan that you can use to execute without manual adjustments. It is not a plan that you can immediately use to respond to changes needed today, this week or this quarter. S&OP solutions provide nice user interfaces and some visibility; but inside, i.e. the supply planning model, is no different than the way spreadsheets work. This means bucketed capacities, fixed leadtimes and pre-defined bottleneck resources.

We all know that based on product mix, leadtimes change, bottlenecks shift and depending on the sequence and product mix bucketed capacity representation of resources can be highly misleading and erroneous.  Planning is really all about making high quality decisions. The quality of decisions coming from S&OP solutions is based on an inaccurate model. To this end, much manual work is needed just to make it work, let alone optimize.

If you are thinking digitalization or digital twin, then this is not quite it! A digital twin is the replica of your supply chain capability. A digital twin changes as your supply chain changes. These changes occur in the model of the supply chain, your policies, your products, markets and operating processes. S&OP model remains stagnant. After a while it reflects an outdated representation that is no longer applicable to the new changes. If a model is not accurate enough, then how can it help you to make the right decisions and optimize your operations? A simple example is how can the system provide accurate Available-To-Promise or Capable-To-Promise if the underlying model is inaccurate and does not know about the true capacity of resources?

S&OE, on the other hand is a true representation of your supply chain. When combined with attribute-based planning it represents an exact model that changes with time as your supply chain changes and new trends develop. Having a true model allows much improved visibility and provides the representation that is needed for algorithmic planning. S&OE planning delivers plans that are accurate enough for immediate execution without much user intervention. That means digitalization! Having both S&OP and S&OE in a unified data model also implies merging planning and execution seamlessly, i.e. vertical and horizontal planning combined. The benefits of this approach are many: optimization of the supply chain, real-time response to events, much shorter planning cycle time, adaptability and resiliency to changes and of course much better service levels at lower inventory cost. Furthermore, the planning team can then engage in much more strategic decisions for the supply chain instead of wasting their time on mundane correction of S&OP-generated plans. For more information on S&OE and how it can help your effort in supply chain digitalization click HERE.

S&OP is spreadsheet planning

Planning is really about making good decisions. The quality of decisions coming from S&OP solutions is poor and suboptimal.