15 July 2020 - by Ben Van Lancker
In the past two decades many companies have installed an S&OP process for a better outlook on the tactical planning horizon, allowing them to anticipate supply & demand imbalances and achieving a feasible supply chain plan. S&OP has brought great benefits to those companies bringing different functions together to provide more visibility and realize more stability in the supply chain.
However, today’s supply chain has also become the victim of the fast-paced economy characterized by high competition, high cost pressure, high demanding customers, and lots of short-term fluctuations. Accurate planning has never been so important, and it was never so difficult to execute against the plan. That is where S&OE comes in: the solution to help you to better monitor your plan execution and deal with short term supply disruptions.
Let us start with emphasizing that S&OE is a distinctive process from S&OP. The more familiar S&OP process is typically a monthly process looking out on the 3 to 18 months horizon. However, many companies experience that their S&OP agenda is polluted with short term issue discussions, hence the real anticipation on the long term does not happen. This results in vicious circles where both issues on the long term and on the short term are not managed efficiently. For sure an S&OP meeting is not the right forum to discuss a potential stock out in 3 weeks’ time, nor to validate the impact of that promotion that will start next month. That operational content should be moved to another agenda. Yes indeed, the one of S&OE. S&OE focuses on the 12 weeks horizon, typically on a weekly level and has exactly the purpose of breaking down the S&OP input into the level of operational decision making.
But why would your organization need another planning process? Often organizations struggle with the (lack of) connecting the plan and the execution of the plan. As the execution date approaches, plan variability increases. No matter how robust the plan is, success depends on an organization’s agility to deal with unplanned exceptions. S&OP is – in line with the above definitions – not equipped for this. Economic markets have evolved dramatically over the past couple of years and supply chains had to co-evolve to become more flexible & responsive.
The recent COVID-19 pandemic has painfully shown how supply chains lack that agility. Suddenly pictures went viral about empty shelves all over the world. Commodity products like toilet paper became a scarcity. I bet not a single S&OP plan had anticipated this. S&OP processes create feasible & balanced plans but do not foresee the disruptions caused by actual demand and supply. That is where S&OE comes into play, to deal with unplanned exceptions and mitigate the customer impact.
S&OE facilitates cross-functional (sales, operational and financial) alignment on the operational planning horizon. By bringing those functions together, S&OE tears down the silos in execution and creates a high degree of visibility & transparency within the short-term horizon. S&OE processes enable higher operational responsiveness and optimal operational costs through working towards 3 main objectives:
OBJECTIVE 1: Detecting problems fast – S&OE brings different functions together monitoring demand, orders, supply, and inventory allowing to detect, capture, centralize and review issues in a swift way. Defining a clear escalation path and escalation levels for those issues allows then to discuss them on the right level, empowers the shop floor and brings only the really burning issues to the escalation forum.
OBJECTIVE 2: Solving problems fast – the weekly cadence offers an operational decision-making forum to analyze problems & agree on solutions quickly.
OBJECTIVE 3: Preventing problems – S&OE should have a feedback loop towards S&OP to break through the vicious circle.
Time for a recap why S&OE and S&OP are distinctive but complementary processes:
So, are you ready to discuss S&OE? Bluecrux has extensive experience in institutionalizing S&OP and S&OE processes in organizations in diverse industries leveraging our supply chain expertise and industry knowledge. So, we are ready to discuss how we can support your journey towards S&OE. When, that is up to you to decide. Just get in touch & speak soon!