A fresh approach to S&OP

According to industry research, most S&OP users cannot create a consistently achievable S&OP plan. A Supply Chain Insights 2015 survey revealed that only 30 percent of manufacturers are “nearly always” or “most of the time” able to effectively tie S&OP planning to execution. Gartner Research confirms that “The No.1 challenge among manufacturing companies is connecting sales and operations plan (S&OP) to operational plan/execution.”1 A critical gap between S&OP and the operational plan often relegates S&OP to a passive planning exercise, rather than actively connecting to results. In monthly S&OP meetings, managers take strategic decisions such as increasing revenue or adding new products that don’t always translate into operational plans that can be practically executed downstream. This shouldn’t be too surprising because companies usually have separate planning and operations models that do not map to each other. They plan with one and execute with the other, creating a gap that is difficult to bridge. Connecting S&OP to operational planning/execution ToolsGroup’s S&OP employs the same data model at both levels – tactical and operational planning. ToolsGroup creates a single integrated data model with one version of the truth. It is coherent from tactical to operational and at every level in between, continuously synchronized through perfect mapping. Because ToolsGroup employs the same data model at all levels, you get what you plan.

Using optimization to tie S&OP to real-world constraints ToolsGroup’s single model solves another vexing S&OP problem. Firms collaborate and model for S&OP around various levels of aggregation. It’s the only way management can participate efficiently and drive trade-offs in the process. But firms must verify feasibility and optimize S&OP in a detailed model that represents real-world constraints – such as plant level production or distribution center receiving capacities. While sales and finance can stay at a higher level, for optimization and execution “the devil is in the details.” ToolsGroup’s single model supports the S&OP with best-in-class optimization at the level where the constraints are applicable, totally synchronized with higher levels of plan aggregation, where collaboration and decisions are made. Creating market-driven S&OP via “Service Policies” ToolsGroup customers can create “service policies” that define desired go-to-market target customer service levels by product and market segments. By modeling demand and supply chain uncertainty and simulating the impact of inventory on customer service, S&OP teams can define desired target customer service levels by product and market segments. Multi-echelon inventory optimization (MEIO) then translates these service level goals into an optimal inventory mix that absorbs the upstream and downstream supply chain fluctuations, allowing the team to make fact-based Sales, Inventory and Operations Planning (SI&OP) trade-offs.

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