What is the "right" S&OP tool?

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I came across an interesting post today at SearchManufacturingERP that talked about how to pick a tool to support your S&OP processes.  They raised a number of good points that I thought were worth going a bit deeper on. The first point they make is that for most companies, Excel is not a viable S&OP tool.

  • Anyone who has done extensive work in Excel knows that it is a very powerful tool that works best with smaller data sets.  Companies managing a complex supply chain soon find that they are stretching Excel’s boundaries to the breaking point.
  • Modern S&OP process have a significant “what-if” component to them.  While it is easy to make high level changes to Excel, understanding what the real impact of these changes are, is simply not possible.  Consider a typical S&OP decision…what-if we were to add a promotion for this product line? A simple question, but a complex answer.  Sure, you can change the forecast quantities in Excel, and that can show change to revenue.  But what-if the product line is constrained?  What is the purchasing spend going to be to support this?  A simple Excel model simply cannot support this level of granularity.
  • Excel doesn’t support alerts or lend itself to managing by exception.  Once your S&OP plan is set, you need to monitor performance against it.  Sure, you can see how you’ve performed at the next S&OP meeting, but isn’t that too late?

I’ve gone into some details about how Excel is not the right tool for S&OP (and other things) in other posts, if you are interested, you can find them here; Is Excel the right tool for S&OP How are spreadsheets like cockroaches The endless debate: Is S&OP about technology When spreadsheets go bad So, if Excel is not the right tool for S&OP, what is?  Rather than call out a specific tool, let’s look at some criteria that you need to consider when looking for an S&OP application:

  • I mentioned that Excel is not a good tool for S&OP is because it doesn’t support “what-if” analysis.  This is obviously something you need to look for in any tool for long range planning.  But simply allowing you to hive off a version of the plan and make a change is not enough.  The “what-if” analysis must provide detailed analysis as to what the impact of a given change will be throughout the supply chain.  A key supplier of low level components was just hit by a flood and won’t be shipping parts for six months – what impact will this have on my production?  What-if demand increases on one of my product lines?  What impact does this have on a constrained resource?... on my contract manufacturers?... on my suppliers?  Only a system with full supply chain analytics can address these questions.
  • A related requirement is integration.  If you are going to provide answers to the “what-if” questions above, you will likely need to have detailed information from multiple manufacturing centers around the world. These centers in all likelihood are running a variety of disparate ERP systems, so your tool will need to integrate across all these systems and bring the data in to a single environment.
  • As mentioned earlier, the ability to monitor performance against the plan and report on exceptions is key.  A S&OP plan is good.  A S&OP plan that you monitor and react to when underperforming is truly powerful.

There are several other factors that can play into your selection of a system for S&OP, but I think these are key ones.   What tools are you using for S&OP planning?  Are you evaluating new tools?  What factors are you considering?  Comment back and let us know!

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Additional Resources

  • S&OP frequently asked questions

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