“Over the last fifteen years,” writes Lora Cecere (@lcecere), founder and CEO of Supply Chain Insights, “Sales and Operations Planning (S&OP) enjoyed a renaissance.”[1] She also hints it’s time to move on. She writes about a unit of DuPont (now acquired by DOW) that, in the early 2000s, was “ahead of [its] time on simulation analysis and cross-functional orchestration.” According to Cecere, the time for simulation analysis and cross-functional orchestration has finally arrived. Evan Quasney, Vice President of Solutions Marketing at Anaplan, seems to be of a like mind. He observes, “Companies today are taking more of a ‘scenario-drive’ approach. Armed with more data than ever before, they’re able to run ‘what-if’ simulations to determine the optimal decision in response to actual market conditions, such as sudden demand shifts or short-term shortages of product.”[2] Quasney’s views motivated Robert J. Bowman, Managing Editor of SupplyChainBrain, to ask him, “Is sales and operations planning obsolete?”[3] His answer, “Not at all. But there’s a need for organizations to take a deeper approach to connected planning, to achieve competitive advantage. Sales and operations planning remains a valuable tool after decades of application; nevertheless, we’re in the ‘post-S&OP’ era.”
A New Planning Approach for the Post-S&OP Era
Quasney insists that the ability to conduct what-if, scenario-driven analysis “is more than a feature that’s ‘nice to have.’ It can serve as a competitive differentiator for companies, at a time when margins are thin and speed in decision-making is crucial.” Enterra’s clients certainly found that to be the case during the height of pandemic when the business landscape was constantly changing. To help them navigate that changing landscape, Enterra® developed the Enterra Global Insights and Decision Superiority System™ that can run hundreds of different scenarios in a very short time to help companies generate the right strategy in a rapidly shifting environment. The System is powered by the Enterra Autonomous Decision Science™ platform — which focuses on helping businesses make the best decisions at computer speed. Cecere insists that decision-making at the speed of today’s business activity is crucial to success. “In 2022,” she explains, “I frequently ask companies to draw their river of demand. The activity is designed to challenge new thinking — to rethink demand as a flow, to identify rocks (barriers), and define process latency (the time to make a decision).”
Cecere also believes that planning is hampered by a lack of alignment. “Over the last decade,” she explains, “companies [have become] less aligned. Inadequate work processes and functional incentives forged crevices between commercial and operations teams. It is fool’s play to think that a simple process like S&OP can close these gaps.” One way to help address this misalignment is through concurrent planning. Concurrent Planning refers to planning by multiple departments simultaneously with consistent objectives. The ultimate goal is having an enterprise-wide planning objective filter down into each department to keep the enterprise in alignment. Even during so-called “normal” times, supply chain planning can be difficult. The stark truth is that planning and optimizations are done in many departments within a business, such as supply, manufacturing, distribution, warehouse, transportation, budget, labor, and so on. Often, departmental planning functions are disconnected from one another and may have conflicting goals.
In order to deconflict goals, companies need to create an objective function — and overarching objective — that balances these goals. Developing an objective function ensures corporate alignment in order to optimize operations and maximize profits. Why is this important? An objective function scores an outcome’s utility so the best outcome can be chosen. For example, manufacturing may be tasked to fill all orders which requires having inventory on-hand in distribution centers. However, distribution centers may be given the conflicting task of minimizing excess inventory space and cost. Without an objective function that spans multiple planning departments, each department’s objective function may conflict with others in often subtle ways. Cognitive solutions — like the Enterra Concurrent Planning Intelligence Solution™ — can help minimize conflicts and create a balanced concurrent plan. Quasney insists, “Companies must break down internal barriers between functional silos, as well those that exist with external partners. The notion of ‘connected planning’ becomes paramount. … It’s about being able to share options with priority channels. That gives you more confidence in decisions about where to move goods around to be more productive.”
Improving Supply Chain Planning
Concurrent planning helps align corporate efforts; however, planning also needs to take place continually. Hank Canitz, Product Marketing Director at Logility, explains, “If you could transport a supply chain professional from 20 years ago to the present day, they would not recognize today’s supply chain operations or the technologies we apply to try to solve supply chain challenges. That is because today’s supply chain operations are faster, more complex and less predictable than ever. … Because forecasts are never perfect, we also need a way to deal with unplanned events. This is where continuous planning becomes essential.”[4] In order to facilitate continuous planning, Cecere suggests companies need to “move from time-phased data to managing demand as a flow.”[5] In order to do this, Cecere explains, companies need to:
• Use market data. “Pilots show that it takes 20-30 market-data indicators to improve the signal. The relative importance of the inputs varies over time and by item.”
• Respond to market latency. “See and respond to market latency by role (measure demand and process latency in the software to help companies make decisions at the speed of the market).”
• Leverage supply variability data. “Measure and use supply variability to drive better outcomes (build a planning master database to feed optimization engines market factors like lead times, conversion rates, and shifts in costs as inputs to supply-side optimization engines in manufacturing, procurement, and transportation.)”
• Manage inventory. “Manage the form and function of inventory (current planning systems manage safety stock but do not allow the user to gain a holistic view of decisions on a procurement buy plan, cycle inventory in manufacturing, and transportation choices on in-transit inventory).”
• Be demand-driven. “Build a demand visibility signal to help understand and see demand shaping versus shifting and the impact of the bullwhip effect by role (most companies shift demand, increasing costs without improving baseline demand). Production planners and marketing leaders need the capability to understand sales based on consumption data based on an understanding of latency and the effectiveness of demand shifting programs.”
Cecere asks, “How do we do this?” Her answer is interesting: “The journey starts with unlearning. The current planning approaches do not allow demand visibility by role, and the processes add to process latency and bullwhip distortion. By mapping individual flows, companies can see the issues in process design and begin the journey to improving planning processes.”
Concluding Thoughts
How important is supply chain planning. Quasney insists, “[Planning] is the lifeblood of an organization.” And, according to McKinsey & Company analysts, “AI and machine learning hold the potential to dramatically improve supply chain performance for consumer packaged goods (CPG) companies. … To capitalize on the true potential from analytics, a better approach is for CPG companies to integrate the entire end-to-end supply chain so that they can run the majority of processes and decisions through real-time, autonomous planning.”[6] Businesses can no longer afford to operate using drawn-out planning processes — the speed of business is too fast and the business landscape changes too frequently. Technologies exist that can help companies succeed in the post-S&OP era. As the McKinsey analysts conclude, “In a complex and volatile environment, CPG manufacturers can no longer rely on the supply chain planning processes of the past.”
Footnotes
[1] Lora Cecere, “How We Stubbed Our Toe in The Evolution of S&OP,” Supply Chain Shaman, 14 February 2022.
[2] Robert J. Bowman, “Watch: Connected Planning in the Post-S&OP Era,” SupplyChainBrain, 24 August 2022.
[3] Ibid.
[4] Hank Canitz, “Periodic Versus Continuous Planning – What’s Needed for Success?” Logility Blog, 27 October 2020.
[5] Lora Cecere, “Navigating The River of Demand,” Supply Chain Shaman, 18 August 2022.
[6] Knut Alicke, K Ganesh, Soumyadeep Ganguly, and Sahil Shinghal, “Autonomous supply chain planning for consumer goods companies,” McKinsey & Company, 2 March 2022.
