Is Supply Chain Ready for the Next Generation of S&OP?

Adopt a business culture of planning and get on the fast track to S&OP success


“And that’s why you have 80 percent of companies still using Excel for solving their S&OP processes,” said Viswanathan. “Instead of just a volumetric problem of identifying how many units to sell in one’s local market, S&OP became a lot more strategic in identifying which market one should go to, which product to sell in what market and at what price point should it be sold at to make the most amount of profit.”

And as companies continue to look to newer markets—such as China, India, Brazil, Russia and even Vietnam—to expand some component of their business, they must address how S&OP will not only operate in such countries but what factors it will address differently based on regional economic demand and issues.

The maturity level of S&OP usually differs in geographies,” continued Viswanathan. “You will have a very mature S&OP process in North America. But even with our own customers—we have a very large consumer electronics manufacturer who has divisions in the U.S., in Latin America and in China—the maturity levels of the processes are very different. However, the organization wants to rule the demand and look at the forecast at an aggregate level. Certain parts of that organization are more sophisticated—they want to do forecasting, they want to collaborate with their customers. But other parts of the organization don’t have that maturity level yet. So the ability to have multiple S&OP processes work alongside each other to support more of a global S&OP process is very critical.”

But not only is the global scale an important factor in S&OP adoption, supply chains are different based on a business’s strategy as well. For ex., some industry verticals are very much about capacity, such as in the chemicals space; while others deal more with raw materials and lowest cost of labor, such as in retail. As such, there is still question in the industry whether S&OP can be applied to certain market sectors—such as the financial space, which instead of handling tangible product deals with liquidity and stocks and services.

Yet while discussion around such factors is important, it’s not to say that S&OP in a services space cannot be implemented efficiently.

“Applying S&OP to a service-based industry always requires some creativity,” confirmed Kent. “Whether it’s a banking institution or an insurance company or even a hotel, you have to take a look at what are their products. A banking institution has different services which in some instances they may even call product—such as a mortgage product or a lending product. When I work with services companies, I talk to them as if their services are products. And when we have the discussion on how do you apply these to S&OP, I’d say don’t try to follow strictly the rule of the law as if you were a product-based company doing manufacturing. But rather, think of your services as products and allow yourself to apply the best principles to S&OP to your business—to that unique environment.”

Make S&OP part of your business

Whether you are educating yourself on S&OP, at the implementation stage or at the point where IBP and S&OP are concurrent factors in your business’s planning phase—its success is around collaboration that can provide you with the data and visibility you need to grow your business into the future. Errors will happen along the way, but whether you are at the crawl, walk, run or sprint stage, S&OP is one way your business processes can evolve to gain more ROI for your company at the end of the day.

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