For many companies, the most important supply chain process, Sales & Operations Planning (S&OP), appears to be at a standstill. The cross-functional matching of supply and demand and its translation into the financial budget is crucial for producers, wholesalers and retailers. However, recent research among European manufacturers of a wide range of products has shown that S&OP has the lowest performance score among the eleven supply chain processes investigated. And the ambition to improve this over the next five years also scores the lowest.
In the many conversations I have with supply chain directors I also hear a lot of weariness and frustration about their S&OP processes. In the case of a Dutch food manufacturer the periodic consultation process collapsed, despite extensive training, because a few key people had left.
An even more important reason for frustration is the need for software support. After extensive S&OP training, one of the largest Dutch supermarket chains cancelled the live run of the accompanying software from the vendor SAP. In addition to limited support of the software for up to five years, the software itself appears to lack the crucial functionality of weather influences, expiry dates and promotional impact.
A German manufacturer in the pharmaceutical industry is actively implementing Integrated Business Planning (IBP), the more advanced version of S&OP that has financial consequences and scenarios integrated into the process. This company has complained to SAP that the software is unable to process unstructured data, such as qualitative information about plans of suppliers and customers.
The standstill in S&OP and IBP stems from a lack of understanding of the supply chain upstream to suppliers and downstream to customers. Uncertainties about the vendors’ capabilities and production capacity, the effectiveness of promotions and the impact of the weather make sensible planning decisions impossible, which in turn leads to frustration.
A specialist, cross-company platform for supply chain visibility – i.e. not provided by the ERP software vendor – provides the necessary insights into the chain. And S&OP software with built-in Machine Learning reveals the impact of promotions and the weather, resulting in better forecasts and an inspired S&OP process.
Martijn Lofvers, Chief Trendwatcher Supply Chain Media