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Digitalizing the S&OP process untaps further potential

S&OP is even more relevant in today’s business environment where complexity is increasing due to:

- Short delivery time expectations
- Customization – “on size fits all” is long gone, leading to increasing product portfolio complexity
- OMNI channel environments – scattering the demand
- Higher complexity in supplier networks
- Disruptive new players changing the name of the game

The growing complexity suggests that S&OP has an even more critical role to play in the future. The process needs to be sharpened, if to continue contributing to Supply Chain competitiveness. Digitalizing the S&OP process may generate the need of further competitiveness; research shows that the digitalized S&OP process demonstrates stronger performance. The digitalized version is recognized to further increase forecast accuracy, as well as reduced inventory investment and stable/increased service level.

Benefits of a Digital S&OP process approach

A digital S&OP process creates benefits regarding integration and collaboration as well as accuracy and speed. Taken together, the digital S&OP process draws the participants’ focus to define resolutions and make decisions for critical exceptions. The digital S&OP frees up participants’ time automating recurring tasks of data collection, scrubbing and analysis. Human invention is limited to and leveraged where it beats automation.

The digital S&OP can advance integration enhancing collaboration internally and externally

Internal data integration; making details of the unified data source available to all

  • Securing that no parallel truth and related suboptimization exits

External integration: extending available data sources to include information up- and/ or downstream the supply chain

  • Forward integration – forecast data collaboration with customers
  • Backwards integration – constrain data collaboration with suppliers

The digital S&OP provide greater accuracy and speed

The greater accuracy is accomplished through applying advance analytics and combining data from multiple sources beyond those of traditional S&OP systems. Example of non-traditional S&OP data is external demand drives such as macroeconomic parameters and weather data. Applying advanced analytics drives quality regarding forecast accuracy, creating a stable planning base. The accuracy is improved over time as the algorithm is trained, learning, and adjusting from comparing discrepancies between plan and reality. Despite the fact that the digital S&OP utilizes many more data sources, data processing time cannot be compared with semi manual analysis made in spread sheets; the digitalized S&OP reduce processing times from days to minutes or hours dependent on data volume and complexity.

 

The digitalized S&OP is demonstrated to perform stronger than the manual

Manual and digital S&OP processes are evaluated on the same KPIs. Research shows impact of the digital S&OP as stated in below list. NOTE the quantified impacts are in addition to the impact already obtained through conventional S&OP:

  • 10% increase in production capacity
  • 30-50% MAPE (forecast error) improvement
  • 50% reduction in planning time (related to S&OP preparation and operational demand and supply planning)

Digitalizing S&OP will not fix an underperforming S&OP process

Unfortunately, digitalizing the S&OP process is not a short cut to fix existing problems in an underperforming process. Digitalized or not – a successful S&OP process requires its cornerstones to be in place:

  • Process – solid workflow fundamentals
  • People – the right governance
  • Data and analytics – a well-defined, shared data baseline

That being said – S&OP digitalization is not a short cut to excellence. Our conviction is that malfunctioning cornerstones of the process should be addressed before digitalization.

Summary

Digitalizing the S&OP process opens to leverage many more data sources and applying far more complex analytics than what can be achieved in a set of spread sheets. The gains in effectiveness are indisputable, empiric studies conclude that process performance increase. Given the potential which has been experienced when digitalizing the S&OP process, we  at Optilon advocate every Supply Chain function to add S&OP digitalization as a prioritized initiative to its development agenda. The digitalized S&OP process responds to the ever-increasing complexity of today’s business environment.

If you would to learn more about our approach to S&OP and Supply Chain planning from an end-to-end perspective, then we invite you to take a closer look at our whitepaper that you can download for free below: 

Download here Learn more about end to end supply chain planning here

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