There’s a big disconnect taking place in the world of sales and operations planning (S&OP).
There is a vast amount of articles, best practices, books and ironically…blog posts about S&OP, including its transformation to integrated business management led by executive management to drive profitable growth. In contrast, more than 50 percent of inquiries on this topic from various companies have little to do with transforming their existing S&OP to integrated business management.
To clarify, I’m not referring to the initial journey that small or medium size companies need to adopt in order to improve their sales and demand collaboration or operational efficiency. There are tier-one companies with multi-billion dollar revenue and global operations that surprised me when I discovered that they are still inquiring about the traditional and operational purposes of S&OP.
Instead of focusing on the executive sales and operations planning, or now often referred to as integrated business management, many are still struggling to balance demand and supply. This surprised me, as I thought multi-billion dollar companies should already master this capability after investing millions of dollars in ERP and supply chain systems. Through further discussions, I found that the biggest reason for this is because their supply chain planners do not, or cannot, develop feasible plans or respond to supply chain volatility quickly enough by using the existing systems in place – both on the demand management and supply planning perspective. Instead, they rely on extracting data from these systems to spreadsheets, generating reports and manually identifying and resolving potential issues through their custom pivots and macros and then load their manually-developed plans back into their systems.
Try to visualize a multi-billion dollar company with many planners around the world, each with their own spreadsheet. What happens when the planner misses a row, goes on vacation or decides to pursue another career opportunity?
The risk to the business is significant. The manual process takes too much time and relies heavily on the productivity, knowledge and experience of the individual planner. The business is prone to missed opportunities due to slow response time, out-of-stock in one place, excess inventory in another, high manufacturing changeover costs and inability to consistently align operations to the business strategies. Companies that want to be proactive and get ahead instead of playing catch up need to find a way to reduce the business risk of running the business using spreadsheets.
Is implementing an S&OP technology to replace spreadsheets the right thing to do? Perhaps the answer is yes if it will solve the immediate symptoms of the supply chain management problem. At least management has some visibility into operational misalignment to respond to.
Alternatively, should companies just focus on fixing, upgrading or replacing their inadequate supply chain systems before adopting an S&OP technology? This option sounds more solid and sets the right foundation for the business to grow, respond quickly, monitor and fix potential issues before they occur. However, it also requires a little bit more investment and time.
Which is the best path? Perhaps there isn’t an easy answer as it depends on an individual company’s current state, but I’m interested to hear your thoughts. Whether or not you agree with my observations, are you experiencing this particular issue within your company?