The endless debate: Is S&OP about technology?

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I recently saw twitter post which linked to an article by Steve Banker at Logistics Viewpoints titled “S&OP is not about Technology. Wrong!”.  This position clearly aligns with my thinking about the place of technology in S&OP.  There was once a time when everyone believed that S&OP could be done in Excel.  In fact, some S&OP guru’s still believe that S&OP can and should be a process that is detached from the planning and execution system.  Proof is starting to accumulate that this thinking is clearly misguided. Ok, sure…if you are a small manufacturer with a simple supply chain (wait…is there such a thing as a simple supply chain???), you can probably get away with doing S&OP in Excel.  Heck, you are probably doing your detailed planning in Excel anyway.  But once your business grows to any size of consequence, you will need more than basic tools to be effective in S&OP. Steve raises three key points in his post describing why a manufacturer needs technology to achieve a robust S&OP process;

  1. A strong S&OP process requires collaboration.  This requires that all parties need to be able to see and modify a common set of data.  Not an easy process to manage with basic tools like Excel.
  2. You need to be able to see potential misalignments between the plan and defined goals.  When those misalignments exist, you must be able to try different resolutions like promotions, while ensuring that you have the manufacturing ability to back it up.  This means being able to identify and resolve issues at the mix level even when planning at the volume level.
  3. Your supply chain operates in units, but your executives operates in dollars.  Your S&OP tool must be able to easily move from units to dollars and dollars to units.

I’ll add to this by saying that having managed an Excel based S&OP processes in a past life, S&OP cycle time is another reason why advanced technology is required.  It typically took two weeks to pull together an S&OP plan (which actually wasn’t too bad.  I’ve talked to one company where it took 6 WEEKS to put together the MONTHLY S&OP plan.)  Traditional S&OP tools simply don’t allow you to react fast enough when you need an S&OP level decision very quickly. Now, don’t get me wrong.  I’ll never say that technology alone will make for a robust S&OP process.  I’ve written on this before in my post Is Excel the right tool for S&OP. In it, I identified the three pillars of S&OP;  Process,  Executive Commitment and Effective S&OP tools.  An S&OP project that ignores any of these pillars will fail. The best tools without process will not work.  The best tools and the best process without executive commitment will result in great answers that are ignored. An effective process and executive commitment without proper tools will result in sub-optimal performance and frustration amongst the team.  I’ll say it again.  You need all three elements for effective S&OP;  Process, Executive Commitment and Effective S&OP tools. Your thoughts, as always, are welcome.

Discussions

Jon Kirkegaard
- October 25, 2010 at 12:09pm
Excel or something as universal and as flexible likely cannot leave the S&OP solution and here is why

1. While S&OP is about collaboration and sharing of inputs and obviously output of a plan it is also about individual talents and ability to manipulate time series data analytically of which Excel and its clones are uniquely suited to support

2. What is needed is check in check out coordination of key supply chain execution data and storing and time stamping various plans and plans with interest of specific roles (e.g. materials, logistics, purchasing, contract manufacturing)

3. What is not needed is holly grail software vendors saying "its in there" another closed technology that tries to replicate functionality users are well groomed and trained to use (eg. Exel, and or even various OLAP viewing technologies, databases of choice by an enterprise etc.)

So is S&OP about technology NO it is about getting it done, using science not hunches or 100's of pemutations and combination of overiding. Wo what is technologies role... I would suggest it is two fold
A. invoke some basic MPS / time phased distribution netting techology... no OR that is to earth shattering or not fully peggable
B. but mostly technology is about TIME COMPRESSION. how to net and re-net and run scenarios based on hunches for improvement or to work around constraints that arise quickly and collaborate with decision makers and get commitments rapidly. Excel plays a key role in this as folks now how to manipulate Excel so if you leverage its functionality but coordinate the data you get time compression and results with lower cost and much less risk

Focus on B is where we at DCRA Inc. have seen tremendous value with little or no risk and good top down / bottom up adoption. Focus on technology may fill up Blogs and get Silicon Valley venture capitalists exited but is NOT the right long term focus to either address the need in your organization or in our case to build a solution company that delivers real value.

Instead we would suggest focusing on clients culture, leverage of their technology (including Excel), injecting basic S&OP training, and using techology but to save them time making money not to replace people or to be smarter then people that know the business. Excel does and likely for most clients forseable future play a key role in this.

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