Process planning always trumped technology when it came to mapping out a sales and operations planning (S&OP) strategy,...
but now advances in S&OP platforms coupled with increasing business complexity have elevated the importance of selecting the right S&OP tool for manufacturing.
For the better part of the last decade, the go-to tool for number crunching and for orchestrating S&OP across an organization has been Microsoft Excel spreadsheets. But experts say the increasing complexity of global supply chains, the amount of data that's required for long-term strategic views and the inherent limitations of spreadsheets make Excel ineffective for S&OP best practices. Excel lends itself to individuals working with limited data sets -- a rare scenario in a cross-functional, collaborative process like S&OP. In addition, Excel has limited what-if scenario planning and doesn't support alerts for managing by exception -- two critical components, experts say, of a robust and mature S&OP process.
"Any class A process that combines people, behaviors and processes needs to have software to support it," noted David A. Goddard, principal with Oliver Wight, an education and consulting company with a specialty in S&OP. "The amount of data required to look out over 24 months is far more robust than Excel can handle. It can be done, but it's a huge pain."
What-if analysis is key
Companies diving into S&OP waters are quickly realizing that spreadsheets and manual processes can’t hold up to the cross-functional collaboration, planning and data handling requirements of today's S&OP. In fact, IDC's 2009 vertical-market survey of manufacturing found that S&OP platforms ranked fourth among planned application purchases for 2010 -- right behind inventory planning and optimization, quality management and supply chain planning tools.
Beyond Excel, companies are tapping a variety of tools for basic S&OP. Standard supply chain planning applications such as demand forecasting are fairly common, as are business intelligence tools, which can be configured to serve up dashboards that highlight issues and key performance indicators. According to Simon Ellis, practice director of global supply chain strategies at IDC Manufacturing Insights in Framingham, Mass., sales, marketing, and finance might use different tools, which eventually have to be integrated with the data that is rolled up to create an integrated plan. In addition, most tools at the basic S&OP level lack predefined processes, pre-engineered workflows or recommendation engines that can provide direction in different scenarios, Ellis explained.
Higher up the ladder of functionality are specialized S&OP platforms (sometimes called "pure play" or "best of breed") and traditional ERP suites, which have been broadening their footprints to include S&OP capabilities. Most of these offerings have evolved over the years to include what-if analysis and scenario planning -- which experts say is the key technical advancement that takes S&OP best practices to the next level.
"What-if analysis capabilities have exponentially increased over the last five years," said Lora Cecere, partner and analyst with Altimeter Group, based in San Mateo, Calif. "What-if modeling gets to the ability to look at resiliency, so if something in the world breaks -- if there's a hurricane in New Orleans or a major issue in Japan -- people can come up with alternative plans. They couldn't do this before."
Integration is the other major issue to consider when choosing between ERP and best-of-breed S&OP tools. Given that an effective S&OP process needs to distill data from a variety of business systems -- including ERP, manufacturing requirements planning and demand planning -- an S&OP tool for manufacturing should have a well-established integration architecture. Experts say the niche S&OP providers have evolved their integration architectures fairly well over the last few years, but enterprise platforms might still retain an edge.
"I tend to gravitate to the enterprise platform view as long as the tool is fully functional and you get the pre-integrated capability with other planning systems," Ellis said. On the flip side, pure-play software can offer an edge if it takes a particular industry or vertical focus, offering manufacturers a jumpstart with prepackaged S&OP workflows that are well suited to their business, he said.
The analysis comes full circle back to figuring out the right S&OP process, which is the key to choosing the best tool, according to Joshua Greenbaum, principal of Enterprise Applications Consulting, based in Berkeley, Calif. "It makes sense not to buy the software first, but to figure out how to create a value-added process and then apply the software to that,” he said.