S&OP: Middle-aged or Never Grown Up?

Stephen DeAngelis

June 26, 2019

Sales and Operations Planning (S&OP) has been around for three decades. In human terms, the process should be entering its golden, middle years of life. Many pundits, however, believe the S&OP process, as originally conceived, needs to change. What’s going on? Jay Jayaraman, Dinesh Natarajan, Mike Romeri and Tom Zych, from OPS Rules, write, “Sales and Operations Planning is a process that has been deployed primarily to align different functions around the best plan they could identify, working together as collaboratively as possible. Many standard and emerging analytic techniques can be employed to supercharge performance and optimize S&OP decision making.”[1] Corporate alignment and planning remain important goals. “Unfortunately,” they note, “the goal of continuous alignment is more of an aspiration than a realizable objective for most organizations.”

 

Lora Cecere (@lcecere), founder and CEO of Supply Chain Insights, believes S&OP is suffering from a Peter Pan complex — it’s never grown up. When reading current case studies focused on S&OP, she notes, “[They] sound the same as the ones heard when I completed S&OP research in 2004. Fifteen years later, I expected more. As an analyst in the space for more than a decade, I struggle [to understand] why we are not making more progress in the adoption of new technologies for an important process like S&OP.”[2] Think back 30 years to around the time the S&OP concept was first developed. The Internet was still in its infancy (it had about 100K hosts connecting roughly a million people), the Macintosh Portable was released (weighing 16 pounds and costing $6500), and Microsoft Excel (a mainstay of S&OP) was just four years old. Fast forward fifteen years to the time period Cecere insists S&OP processes stopped maturing. Web 2.0 emerged and Facebook was just getting started. Since that time, technology has changed rapidly. In the S&OP arena, Cecere laments, “Not much has changed in technology approaches; and most companies, over the last decade, went backwards not forwards on S&OP maturity.”

 

The reasons behind S&OP’s Peter Pan syndrome

 

Although Cecere regrets S&OP processes haven’t kept up with the times, she understands why some companies haven’t progressed. She suggests five specific reasons companies haven’t adopted the latest technologies. They are:

 

1. Business Complexity. Cecere writes, “Companies, [on] average, [have] ten ERP and five Advanced Planning Solutions. Getting to data is a barrier for 60% of business users.” She also notes that global supply chains increase complexity and make modeling more difficult.

 

2. Dependency on Excel. “Due to the shortfalls in the evolution of Advanced Planning,” Cecere writes, “68% of business users use Excel spreadsheets as the primary mechanism for planning. This is especially true for processes dependent on the ERP-based solutions from Infor, Oracle and SAP.” She insists processes based on this 30+ year-old technology foster continued siloed thinking and provide siloed answers.

 

3. Lack of Clarity on Supply Chain Strategy. Cecere explains, “Driving supply chain excellence is a balancing act. Teams continuously balance cost, customer service, asset utilization and inventory. Companies making progress are clear on the definition of supply chain strategy.” Unfortunately, she notes, companies have “no clear definition of supply chain strategy.”

 

4. Resistance to change. “Many organizations are in their second and [third] decades of using advanced planning,” Cecere notes. “A solution well-implemented two decades ago is not equal to the challenge of the business today.” Cecere also notes, as planners leave for different companies or retire, tribal knowledge walks out the door. That can be a problem.

 

5. Hype. There is an old adage that states, “Once bitten, twice shy.” Many companies have been bitten by new technologies that haven’t worked as well as vendors told them they would. Cecere adds, “Terms like ‘connected planning’ and ‘DDMRP’ add to confusion.”

 

Brian Dooley agrees with Cecere that S&OP processes haven’t kept up with the times. “There have been significant advances in both technology and supply chain thinking over the past decade,” he writes.[3] Back in 2006 he laid out the challenges he saw with S&OP processes. They included:

 

  • Sales and Operations activities were not aligned.
  • A lack of communication and a poor understanding of requirements and constraints existed.
  • Different functions were focused on satisfying their own priorities in isolation (i.e., siloed thinking).
  • Decisions were taken in isolation and based on judgmental bias, not fact (i.e., siloed solutions).

 

As a result, Dooley found “excess inventories, expediting, poor order fulfillment, overtime and poor resource utilization [were] a fact of life. Fast forward to present time and Dooley writes, “The majority of organizations I speak to today are still facing some or all of these challenges. My argument back then was that if you could relate to any of these it was because you were not yet fully exploiting the benefits of an effective S&OP process. I still agree with this today.” Like Cecere, Dooley believes S&OP processes have never grown up.

 

What’s the solution?

 

Cecere believes it’s time for S&OP processes to adopt cutting-edge technologies. “Maximize the value of today’s solutions,” she writes. That doesn’t mean buying the first shiny thing you see. “Don’t rush to buy,” Cecere advises. “Let the noise clear. We are the cusp of the redefinition of planning. The combination of cloud, cognitive computing and open source analytics is evolving.” Many analysts suggest the extensive use of pilot programs or proof-of-concept projects. At Enterra Solutions®, we call this a crawl, walk, run approach. Cecere also suggests focusing on the right data along with the right technologies. She explains, “Using new forms of descriptive analytics, help business leaders get access to data. Focus less on traditional reporting and more on helping senior business leaders get to data at the speed of business.” Cognitive technologies are essential if decisions are to be made at the speed of today’s business. Dooley adds, “Technology advances and cloud deployment mean that today advanced analytics and optimization capabilities are available (or should be) to all. We should now be able to do the things we wanted to 13 years ago but could not achieve because we lacked technical capabilities. In today’s VUCA world, scenario and what-if modeling have to be an essential part of any S&OP process.”

 

Like Cecere and Dooley, supply chain trendwatcher Martijn Lofvers (@lofvers) insists, “For many companies, the most important supply chain process, Sales & Operations Planning, appears to be at a standstill.”[4] And like them, he believes enterprises need to adopt cognitive systems if the S&OP process is going to mature. He explains, “The standstill in S&OP and IBP stems from a lack of understanding of the supply chain upstream to suppliers and downstream to customers. Uncertainties about the vendors’ capabilities and production capacity, the effectiveness of promotions and the impact of the weather make sensible planning decisions impossible, which in turn leads to frustration. A specialist, cross-company platform for supply chain visibility — i.e. not provided by the ERP software vendor — provides the necessary insights into the chain. And S&OP software with built-in Machine Learning reveals the impact of promotions and the weather, resulting in better forecasts and an inspired S&OP process.”

 

Concluding thoughts

 

I agree with the experts cited above that it’s time for the S&OP process to grow up. History has continually demonstrated standing still really means you’re falling behind. Cognitive technologies provide the fastest way for the S&OP process to mature. Jean-Baptiste Clouard, Product Manager, Sales & Operations Planning at Quintiq, explains, “In my opinion, S&OP ensures we make the right decisions for the company — at the right moment — by aligning demand and supply, and making sure the company objectives and budget are attained (if not surpassed). … Is machine learning … going to enhance our classical S&OP? The answer is yes!” The late Mary Martin used to famously sing, “If it means I must prepare, to shoulder burdens with a worried air, I’ll never grow up, never grow up, never grow up.” Supply chain planners have been singing those words for too many years. It’s time to grow up and bring S&OP planning into the digital age.

 

Footnotes
[1] Jay Jayaraman, Dinesh Natarajan, Mike Romeri and Tom Zych, “What’s next for S&OP?” OPS Rules Blog, 11 April 2016.
[2] Lora Cecere, “S&OP: Can You Make Decisions at the Speed of Business?Supply Chain Shaman, 18 May 2019.
[3] Brian Dooley, “S&OP – 13 Years On, What Have We Learned and What Has Changed?” AIMMS, 6 May 2019.
[4] Martijn Lofvers, “Standstill in S&OP,” Supply Chain Movement, 3 May 2019.
[5] Jean-Baptiste Clouard, “Is Machine Learning Going To Revolutionize S&OP?Talking Logistics, 26 July 2017.