Sales and operations planning (S&OP) systems and processes hold a vital niche with executives as tools to meet corporate objectives forecasting, planning and alignment of supply and demand; but when the plans leave the boardroom, they face the volatility of the modern market.
As customers become more fickle, supply chains more complex and business environments more unpredictable; the reality is that many of the assumptions taken into the planning process are proven wrong as soon as the plan is put into action.
Despite an increase in frequency of the S&OP exercise, companies continue to struggle with how they can deliver to the metrics and plans agreed upon in the S&OP meeting given the constant volatility. As a result, staff throughout the supply and demand chain are faced with unplanned events on a daily basis and must make individual decisions that taken in sum, materially affect company performance.
The real battle is being waged on the front lines, where the amount and pace of change can wreak havoc on operations if not met with nimble and informed action. While many companies invest in S&OP software to develop a better plan, only Response Management drives the ability to deliver results in the face of daily changes inside planning horizons (i.e. order changes, forecast changes, supply disruptions). With a Response Management capability, companies apply a structure and process to responsiveness, empowering daily decision makers with tools for risk tradeoff and response. Response Management solutions feed and support the S&OP process and help companies to stay on target with its end objectives.
New Parameters for S&OP Success: Frequent, Integrated, Collaborative and Responsive
The complexity of modern day distribution channels challenges operations staff to capture and consolidate disparate forecasts from varying systems for a consensus view of demand that is both accurate and complete. And market dynamics are now forcing companies to complete this complex process more often. While S&OP has traditionally followed a monthly cycle, recent studies have highlighted the need for a greater operational focus to S&OP. S&OP teams need to respond dynamically to unanticipated variances in forecasted versus actual sales in order to quickly exploit upside opportunities or react to an unexpected downside. As such, a minimum of weekly forecast updates is quickly becoming the norm.
Traditional "push based" supply chains, driven by statistical forecasts, puts the focus on supply management. Given today's consumer-driven marketplace, companies are adopting demand driven supply chains with "pull based" models that are more customer-focused, which means there is a clear and urgent requirement for tools that facilitate dynamic demand management.
Traditional Solutions Can't Support S&OP on a Daily Basis
For years, companies have invested in both demand planning and supply chain planning systems to drive their S&OP processes. The problem lies in that these point solutions are designed to facilitate the development of separate demand and supply plans, and overall tend to be quite slow, complex and lack the flexibility for ad-hoc analysis of likely scenarios.
In today's volatile environment, integrated demand and supply visibility and analysis is required to allow companies to quickly sense and respond to inevitable misalignments. With traditional solutions -- whether that is ERP, demand planning, or supply chain planning systems -- it is difficult to achieve integrated, up-to-date visibility to demand and supply data, so spreadsheets have become the primary tool to collaborate and gain consensus on the demand plan as well as to do basic supply constraint modeling. Such manual processes and tools lack the necessary scalability, in-depth analytics and required responsiveness to manage an active and complicated S&OP process.
For this reason, companies are turning to Response Management services, which can offer broad, real-time visibility throughout the extended supply and demand chains as well as a more efficient means for collaborative analysis among stakeholders. To fully and continuously reconcile sales forecasts with production plans requires automated integration of demand and supply data across the multi-enterprise supply chain into a single integrated data system with embedded analytics. With this, decision makers can compare multiple supply/demand 'what-if' scenarios against key metrics to drive decisions that best balance S&OP revenue, margin and service goals. Response Management solutions can be leveraged within the S&OP process as a means to provide more accurate and comprehensive data on which to base plans, but equally important, they can then help make continuous adjustments inside of planning cycles in response to daily changes in supply, demand and product. In essence, Response Management enables companies to manage S&OP in real-time.
Global Leaders Adopt Response Management to Power S&OP
The merits of enabling a strategic capacity to respond to change as a means to meeting S&OP objectives within volatile environments, is being proved everyday as global industry leaders adopt Response Management solutions.
One Fortune 100 technology and manufacturing company has used its Response Management system for over 10 years to deliver S&OP data needed to establish its global demand plan as well as to evaluate various supply side options in response to changing forecasts. In addition, the solution has allowed the company to look at inter-site relationships despite the many different ERP systems involved (currently 40 separate sites are integrated).
A leading communications solutions provider designed global S&OP processes specifically based on the use of its Response Management solution that included the evaluation of where best to source demand and evaluate potential inventory repositioning across global sites as well as their subcontractors. The company improved inventory turns from a low single-digit to a high single-digit number and has saved tens of millions on excess and obsolete inventory charges.
Lastly, a multi-billion dollar international manufacturer and marketer of advanced electronic products, leverages its Response Management system to capture and analyze a significant portion of the S&OP input on both the demand and supply side of the equation. Originally, the systems supporting the company's S&OP process were based on Excel worksheets, which could no longer adequately cope with the volume of data or complexity of the functions. Now with reliable data consolidated in one place, they spend significantly less time on data gathering and more time on analysis and decision-making -- which, in the end, is where the business value lies.
Randy Littleson is Vice President of Marketing for Kinaxis which delivers an on-demand Response Management service. Kinaxis RapidResponse combines personal alerting, multi-enterprise visibility, collaborative "what-if" analysis and rapid decision support to empower front-line supply chain staff with tools for risk tradeoff and response to daily changes inside the sales and operations planning horizon. www.kinaxis.com.
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