Harnessing the ‘short-term’ for network-enabled S&OP execution
Many businesses that have invested in Sales and Operations Planning (S&OP) have hit a curious issue: they continue to have out of stocks, over stocks or expedites.
Furthermore, they report chasing short-term execution issues even though long-term planning is firing on all cylinders. There is a clear disconnect between their immediate needs and goals, even when focusing on just the next 30 days.
To square this circle, the answer may be an enterprise-centric view of Sales and Operations Execution (S&OE).
S&OE fits within the immediate context of business planning this means the short-term, less than three month horizon, as seen in daily or weekly processes. In contrast, S&OP focuses on balancing demand, supply, risks and opportunities in the longer, 3-to-36-month timeframe.
This is an important distinction. Improving an S&OE process enables the S&OP team to focus on operational and strategic objectives, moving from immediate actions and firefighting to dedicated execution.
S&OE provides a structured, exception management process to address demand and supply imbalances at the right level of the organisation and within the capabilities of the supply network.
Additionally, robust S&OE can allow for the minimization or even elimination of frozen periods, increasing agility and velocity, as it minimizes the impacts from both supply and demand volatility.
S&OE doesn’t eliminate problems but rather seeks to control their effects. When done well, it can even reduce reliance on safety stock or inventory buffers, improving cash flow.
There is however, an issue of scale. Enterprise-centric systems or processes that support weekly or manual updates from trading partners (customers, suppliers or carriers) and enterprise sites (manufacturing operations, distribution centres, retail outlets) may adequately support the monthly S&OP planning cycle and decision making but cause serious issues and complexities within the short term, execution horizon. There is often too much data to handle.
Businesses can address this and make decisions smarter, faster and more effectively by leveraging network thinking, using modern, multi-enterprise business networks or MEBNs. These provide efficient and scalable real-time connectivity, collaboration, and visibility to the entire supply chain ecosystem in a variety of ways:
Real-time data: a scalable exchange and reduced latency
Typical enterprises leverage many different systems to run their supply chains: planning, ERP, PLM, TMS, and WMS. These perpetuate information and process silos, which then demand EDI, portals, spreadsheets, and emails. This disconnected, point-to-point approach creates lag in information sharing and inaccuracy. This negatively impacts service levels, inventory levels and landed costs.
By comparison, MEBNs support the move from linear, point-to-point connections, and the evolution towards highly-connected, efficient digital supply networks.
Single-source of truth: Remove silos between parties and functions
Businesses can’t function on spreadsheets and expect to get the benefit of insights from big data, machine learning and IoT that are needed to run a supply chain smarter and better. Effective and customer-centered S&OE requires that all parties, internally and externally, are working on the same data and have access to a consistent, single truth.
Visibility: Shine light on the supply chain for actionable insights
Real-time connectivity is the digital foundation of visibility – the ability to see status or events, as supply moves through the various stages, across multiple legs, modes and hand-offs.
Combined with intelligence, this drives real-time, predictive ETAs, critical to core S&OE processes.
When a business knows where its supply is – right now - it can estimate arrival time and how best to leverage those materials to support manufacturing operations or customer service.
Collaboration: Eliminate inefficient off platform and disconnected interactions
With 80% of supply chain processes and data occurring outside of any single enterprise, MEBNs provide a platform that allows exceptions to be reviewed and resolved through multi-tier collaboration. All parties can provide input or feedback, which is captured for future reference and leverage.
Intelligence: Enable multi-party optimization, orchestration and distributed intelligence
S&OE, powered by an intelligent MEBN, creates real-time alerts from exceptions only when specific rules are violated, such as a late delivery to a customer, out of stocks or significant overages.
If actual orders and forecasted demand outpace predicted, available supply, users are notified to take action to resolve. Additionally, by leveraging AI/ML within their ecosystem, MEBNs often provide improved delivery estimates or ETA versus static lead-times or milestones.
Though not a panacea, effective Sales & Operations Execution powered by an intelligent multi-enterprise business network has a tremendously positive impact across the enterprise.
Customers are happier, as products are delivered on time and in full. Where needed, estimates around planned deliveries are always up to date and accurate. Customer service has a single source of truth and can locate real-time data around planned supply and deliveries.
End-to-end processes are accelerated and automated, eliminating needless delays due to reviewing emails, looking in ancillary systems or performing off-platform work. When MEBNs provide a network view of inventory and can proactively, in real-time, provide visibility to supply/demand misalignment, assurance of supply is improved.
This means inventory buffers are decreased, improving working capital. Expedites are reduced due to better visibility and collaboration, and overall staff efficiency is increased. This helps enable the business to refocus on revenue generation versus issue resolution.
S&OE, powered by intelligent MEBNs operating AI/ML to identify and resolve predicted issues before they manifest, is the vision that all supply chains should be pursuing to gain competitive advantage.
By Christine Barnhart, Infor