Planning is probably one of the oldest professions in the world. Just about everything we do requires some form of planning. But what really matters is the quality and accuracy of those plans, especially when it comes to your organization’s supply chain.
Based on my company’s experience of providing supply chain planning solutions to corporations around the world, I’ve found most supply chain professionals are not truly familiar with how today’s digital technology can be used in their supply chains. But before we get into my advice on how to digitalize your supply chain, let’s explore the sales and operation planning, or S&OP.
Challenges With S&OP
Current supply chain planning systems are intended to provide visibility, optimization and collaboration among different entities of the supply chain. One type of solution that has, in more recent years, become popular is S&OP.
I’ve seen through my own company’s S&OP offerings that this approach is intended to bring together demand and supply planning so that companies can match their anticipated demand to their capacity and their suppliers’ capacities. The goal is to improve delivery performance and decrease the cost of operations, including the inventory cost of keeping too much or too little. It is primarily intended for long-term planning and performs a very rough type of capacity analysis.
In order to have an accurate plan, you need to build an accurate model of the supply chain and the timely availability of quality data. Unfortunately, S&OP solutions lack the ability to model the supply chain accurately. To this end, the outcome is a rough long-term plan that isn’t always accurate.
The reason for this lack of accuracy is due to the supply-side logic of almost all S&OP systems being precisely the same as spreadsheet planning. With spreadsheet planning, you assume bucketed capacities, fixed lead times and pre-determined bottleneck resources to come up with a rudimentary plan. This might also explain why it is not easy to put these plans into execution. The resulting plan does not tell you what to do for the day, the week or even the current quarter, let alone tell you what to do when something goes wrong in real time.
Digitalizing The Supply Chain
For some users, the S&OP approach works. But I’ve observed that a number of organizations are choosing to digitalize their supply chains by opting for sales and operation execution systems, or S&OE. Some companies, my own included, offer S&OE and digital mirror services that are capable of modeling your environment, running through many different scenarios and using algorithms to help optimize plans. S&OE provides a roadmap as to what data is needed, how it can be used and how decisions are made at every level of the supply chain.
But if you and your company have a vision of digitalizing your supply chain, there are a few things you should know first:
1. Define your digitalization expectations. First, you must ensure there is a common vision and understanding of what “digitalization” means and what your expectations are. Digitalization is more than just automation and a lights-out factory; it is a way of representing your supply chain in its entirety in a digital form. For this to happen, you need to have the right data at the right time — at all times. You need to have the systems that can understand and interpret data and respond to it and learn from it.
2. Create an open culture. You should also aim to create a culture of acceptance and openness to new ways of running things and making decisions. This starts with the C-level executives to send the right message to the rest of the company. And that message should make it clear that the new approach is how things will be done moving forward. In the absence of that clarity and culture, I’ve found that users tend to be stuck in the status quo.
3. Prepare for challenges along the way. When you take advantage of new technologies, including those that are emerging and could become mainstream in just a few years, remember that you could see challenges in cultural changes. For example, after inventing the Model T, Henry Ford is famously attributed with the saying “If I had asked people what they wanted, they would have said faster horses.” In many cases, your team might not simply understand the technology or see the potential benefits of using them. So, revert back to No. 2.
In the not-so-distant future, I believe we will have autonomous supply chains. And you can get there with the right vision, digitalization and a commitment to executing your plan.