S&OP: Where's the technology? Right here!

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Seldom do we get the opportunity to compare 2 opposing views in as timely a fashion as the opportunity provided by the First Thing Monday blog by Kevin O’Marah (Group Vice President of Supply Chain Research for Gartner) titled “Sales and Operations Planning: Where’s the technology?” (free subscription required) and the blog I posted last week titled “S&OP needs to evolve: Here’s how” in which I make reference to work by Andrew McAfee from MIT’s Sloan School of Management.  I believe our goals are very similar, but our perspectives on how to get there are vastly different. Let’s start with the similarities as a way of building a bridge.  Kevin writes that

Good S&OP does a lot more than just reconcile mismatching supply and demand. It allows the business to make conscious trade-offs between customers, financial plans and physical reality.

We are in absolute agreement.  S&OP must mature from being a unit based activity localized in operations to a business-driven activity crossing many functions in the organization, particularly Finance, Marketing, Sales, Engineering, and Operations.  In addition I want to pick up on Kevin’s use of the term ‘physical reality’, which to me connotes the idea of ‘feasibility’. According to the Free Online Dictionary, ‘feasible’ is defined as fea•si•ble (f  z -b l) adj.

  • Capable of being accomplished or brought about; possible: a feasible plan..
  • Used or dealt with successfully; suitable: feasible new sources of energy.
  • Logical; likely: a feasible explanation.

In other words, a feasible plan is risk adjusted to include constraints, which in turn implies a level of depth to the analysis of options/scenarios that goes beyond high level ‘volume’ planning because constraints come in many forms particularly financial, plant capacity, and component supply availability.  In other words, physical reality.  And only by testing plans against constraints can one determine if they are ‘Capable of being accomplished or brought about; possible.’ Where we disagree is when Kevin makes the statement that:

Perhaps this is why the best often do it with nothing more sophisticated than a rigorous process and a raft of spreadsheets.

Wow. Really?  Maybe in very early stages of S&OP maturity.  I agree about the rigorous process. But a spreadsheet-based approach does not offer proactive analysis, cannot integrate across the business, suffers from poor data integrity and consequently delivers weak reporting. All of this happens alongside the customary issue that spreadsheets, especially a raft of spreadsheets, are notoriously difficult to maintain.  How does one have a rigorous process in today’s multi-tier, multi-national, multi-enterprise, outsourced supply chain without at least rudimentary technology support beyond “a raft of spreadsheets”?  How does one capture and consolidate assumptions made about business drivers and market conditions?  Beyond very high level and possibly trivial statements, that is.  How does one test alternative risk strategies?  Or timing of new product introductions?  I’m referring here to feasible plans, not ‘finger in the air’ wishes. But don’t take my word for it.  Read the article titled “Sales and Operations Planning Maturity: What Does It Take to Get and Stay There?” published on Nov 1, 2010 by Jane Barrett and Micheal Uskert of Gartner (paid subscription required).  In the article they make the 3 statements below (my highlights) about the role of technology in moving from stage 2 to through stage 3 maturity in their 4-stage S&OP maturity model.

  1. While technology alone will not be the key to maturing the S&OP process, it plays a critical role. To get from Stage 2 to Stage 3 requires good, clean, credible planning and metrics data and a "single version of the truth." So there is a need for underlying technology and systems to support this. Typical Stage 2 tools are statistical forecasting, supply chain planning and inventory optimization. Foundational elements are data quality, master data management (MDM) and the necessary integration.
  2. As the culture matures toward Stage 3 and there is more transparency and business owner participation, the process must be supported by the ability to make decisions faster through timely information, and more efficiently through exception and alert-based workflows. Typically, technology is required for this. In Stage 3, the dialogue shifts to what-if and scenario analysis, and to advance these capabilities and get into Stage 4 requires analytics and modeling tools. The term "rapid planning," as well as the tools to support it, is emerging as a requirement to get through Stage 3.
  3. Two companies we spoke to said that they focused on the process, not the technology, and now the lack of technology is holding them back from getting beyond early Stage 3. But what got them into Stage 3 was all about change management and the critical cultural shift.

From the description of the key capabilities above I doubt that Jane and Michael had spreadsheets in mind when writing this article. And I think a raft of spreadsheets exacerbates rather than alleviates the problem.

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