The S&OP (Sales & Operations Planning) process started in the 1980s, when sales were connected to material requirement planning (MRP). Four decades down the line, the requirements of industries have changed from a single consensus number to a range (worst, best & expected) for better risk management. According to Gartner, 70 percent of companies are still stuck in reactive and anticipatory phases. In order to provide an end-to-end business visibility solution to business executives, which many now seek; a holistic approach of S&OP is needed in the form of IBP (Integrated Business Planning). This approach requires a seamless cross-functional cooperation with a goal to “maximize profit with optimized resources.”
Then the question arises as to where businesses have been going wrong all of these years in implementing and executing the S&OP process. Is too much supply chain baggage carried out in the process? Are businesses missing out on the technology aspect of integrated planning in the era of digitalization? Are organizations, in hindsight of the S&OP process model, not enforcing accountability? Let us address these questions:
Cross-Functionality: For a long-time, S&OP was seen as something connected solely to supply chains and businesses failed to connect it to a business process. An effective S&OP process requires a close coordination between finance, marketing, product management, and operations, with a high degree of executive involvement. To move an entire organization in the same direction, with interdepartmental synergies, businesses must modify/translate common goals in a form that stakeholders can understand.
Digitalization: Decisions will be as good as the data/information provided on-hand. With the advent of digitalization, collaborating with suppliers & customers; along with the flow of real-time data, will address the complexity, uncertainty, and risk associated with the S&OP process. Thus, businesses will need statistical tools and advanced technological platforms, to present the best possible scenarios of integrated planning through simulation and modeling. With the help of predictive/prescriptive analytical tools, decision-making will be better, smarter and faster.Accountability: S&OP is a process model, thereby organizations are still struggling to measure the success of the process. The quantification of success is quintessential to moving towards continuous improvement. We must define and measure a set of key strategic business metrics (standard) to better understand the impact of S&OP. Forecast accuracy (measured through MAPE, MAD, Bias), inventory turnover, COGS, sales revenue, etc., are some of the metrics that help businesses monitor the health of S&OP, and are vital to running a business as well.
CGN's Solution: Implementing and executing a successful S&OP process requires a high-level change management facilitator, a strategist who understands business needs, and data specialists to work on state-of-the-art digital architectures, delivering maximum ROI - faster. CGN Global, along with its partners, understands the basic requirements, pitfalls, and the steps necessary for success towards digitalization. Digital solutions provide real-time planning, concurrent optimization across supply chain functions, and no touch planning, using machine learning.
CGN Global recently assessed an S&OP process, which was limited to forecasting just 3 months at a time, and with a concentration of only 60% of its product line. CGN’s Fortune 500 client experienced uneven demand, due to a high influx of orders, for technological solutions offerings. To make things more challenging, there was short and intermittent historical sales data available, due to rapid technological evolution in that space, leading to a lack of visibility.
CGN assessed the situation and adopted an integrated business plan approach to work across functional issues. Considering market economic indicators, the team increased demand visibility by employing market basket analysis. Over multiple development phases (since S&OP is not a project), change management played a key role in transforming the processes of the business, including the planning process. As a result, CGN's client saw incredible development in forecast accuracy, from single digits to 65% in the last 18 months. Inventory turnover increased by 33% and the shipping performance was boosted to 98%.
Are you ready to take a step toward success with S&OP 4.0? Listen to what industry experts have to say on incorporating transformation and digital into your supply chain.
 Gartner’s Four-stage S&OP mode