Supply chains large and small are under siege by constant supply chain disruption. Companies find themselves struggling to serve customers, source materials, manage costs, handle supply constraints and shortages and, above all, gain visibility into what’s next.
Thanks to technology, however, the headlines aren’t all bad. The latest generation of sales and operations planning (S&OP) applications are providing better tools for managing supply chains internally. And they’re enabling companies to plan collaboratively beyond the four walls of the enterprise. These new S&OP platforms utilize artificial intelligence (AI) and machine learning (ML) to support better, faster and more inclusive decision-making.
Following are five emerging areas of rapid development in S&OP, underscoring how companies today are using the technology, what they’re getting out of it, and why this new inclusive ecosystem approach to what was once a status process can be transformational.
1. Functional collaboration is essential.
The chaos of the last few years has been unprecedented. But for supply chain, there’s some good news coming out of the current environment. As a corporate function, supply chain is now front and center in the C-suite, no longer a secondary player in the boardroom.
At the same time, the C-suite is morphing to include more parties at the table — a greater cross-functional mix of players from all walks of the organization. Sales, finance, operations, marketing and supply chain are working together more closely than ever, ushering in the development of next-generation S&OP technology platforms.
The C-suite is investing in S&OP platforms that are capable of covering the supply chain end to end — designed, in essence, to work the fragility out of their operations and build in more real-time resiliency. Indeed, all internal and external resources must be coordinated and integrated for a successful aggregate plan.
2. Technology is increasingly in focus.
To operate in this new environment, enterprises now recognize the criticality of having a single data set — one version of the truth, designed with different “views” and supported by AI, ML, scenario planning and analytics, probability analytics and other smart decision and analytics tools.
Decision-making gets smarter when it’s augmented by powerful analytics, ML and AI. As Gartner analyst Amber Salley observed, “With the capabilities we have today, we can solve problems in a matter of seconds. We’ve come a long way.” Now S&OP platforms are hardwired with AI and ML, as well as gamification, pattern-recognition algorithms and scenario-building and assessment capabilities.
The bottom line: Managing with multiple disparate systems cobbled together through data translation layers and application interfaces is no longer sufficient to operate a world-class supply chain. And forget spreadsheets; they’re not integrated databases but rather reside on individual desktops and the like. As one consultant commented, “Why do people keep using them? Because spreadsheets are easy, and everybody knows how to use them.”
3. Process decision points are becoming more frequent.
Planning and process decision points are moving from, at best, a once-a-month schedule to a continuous flow. A set, rigid periodic planning cadence schedule is no longer sufficient.
The process of S&OP is rapidly transforming to a far more dynamic, real-time capability. Early versions of S&OP were about balancing supply and demand on an almost entirely tactical basis and, as noted earlier, reliant on spreadsheets. Spreadsheets were the tools most people used to muscle their way through this onerous tactical process.
Today’s S&OP platforms provide sense-and-respond intelligence analytics on both the supply and demand sides of the equation. As Gartner explains in a framework for designing a supply chain strategy and process matrix, this enables companies to gather data and transactions and plan, forecast, measure, decide, collaborate, design, simulate and execute operations.
These better processes, which consider longer-term, strategic goals as well as shorter-term tactical ones, can be much more focused on generating profitable growth. Advanced S&OP technology also empowers executives to look at the level of risk and take steps mitigate supply chain disruption.
4. Scenario planning is becoming vital.
Today’s S&OP technologies enable effective scenario planning. Companies can “game” different strategic scenarios and, using AI and ML, see how these myriad scenarios will play out in their supply chains. They can operationalize scenarios and aggregate or disaggregate them to see how they might impact performance and profitability throughout the enterprise. This eliminates or greatly reduces the risk factors involved in making strategic business decisions.
Scenario planning creates a proactive means of managing risk and results. Adoption of scenario-based planning moves businesses away from the old paradigm of waiting for something to happen and then responding — hopefully successfully — but always at a cost in the form of lost sales, market share, or business opportunity.
Despite these benefits, scenario planning is still in relative infancy. Gartner reports that supply chain leaders still aren’t sure where to begin developing their scenario-planning capabilities. Only 18% of companies rate as “excellent” their ability to use S&OP for running multiple scenarios to understand trade-offs. This represents a tremendous untapped opportunity.
5. External collaboration is becoming a competitive advantage.
Time was that S&OP was largely an internal cross-functional endeavor. Now, leading companies realize that they can be much more agile, efficient and profitable if they extend close collaboration beyond their four walls, to suppliers and customers. S&OP, in effect, is becoming a toolkit for helping to create and enable this end-to-end ecosystem.
The result is intelligent visibility into multiple tiers of the supply chain, thereby reducing the “surprise” factor and creating more predictive resilience. With the massive uptick in the rate of supply chain disruption, organizations must collaborate with suppliers and customers to tackle supply chain disruption more strategically and predictively.
AI, ML, scenario -planning, pattern recognition and analytics technologies are enabling better supply chain performance across the board and moving supply chains toward a more predictive business model that generates improved financial performance. As McKinsey & Company points out, over time, stronger supplier and customer collaboration can “reinforce an entire supplier ecosystem for greater resilience.”
How Logility Can Help
Headquartered in Atlanta, Logility is a leading supplier of optimized supply chain and retail planning solutions. Using insights gained from hundreds of successful customer implementations, Logility’s supply chain applications enable suppliers, manufacturers, distributors and retailers to collaborate and synchronize their demand management, forecasting, supply and inventory optimization, global sourcing, quality and compliance, product lifecycle management and production operations.