Every supply chain organization works around a planning time fence that separates strategic planning (S&OP) and operational execution (S&OE). S&OP and S&OE represent two different and very crucial aspects of keeping customer service levels high.
Sales and operations planning (S&OP) is a well understood practice within supply chain. S&OP represents a 3- to 18-month strategic horizon, in which organizations model out plans for entire product families based on demand forecasts.
Sales & operations execution (S&OE) complements S&OP and is an emerging focus area for supply chain organizations.
S&OE has a much more granular 0-12 week tactical horizon, where supply chain teams need to adapt and make last minute changes to ensure specific SKUs aren’t impacted when unplanned exceptions occur within lead time.
Most supply chain variability comes from the frozen zone, with problems such as shortages, disruptions, delays, and product short-falls. Therefore, at the end of the day, no matter how thought-out or robust a plan may be...
...success is ultimately measured by how teams adapt to unplanned exceptions in real time and how teams are able to mitigate customer impact within lead time.
Unfortunately, supply chain IT solutions today don’t reflect this need. For decades, companies have been investing almost entirely on automating processes in their ERP implementations and planning tools, and building advanced visualizations, forecast models and simulations, all to optimize the plan. And that’s left the customer-facing part of supply chain teams scrambling in the execution phase to prevent shortages and missed commitments with nothing but email, spreadsheets, and conference calls—activities that can take over 70% of the supply planning team’s capacity.
Supply chain organizations today operate through extended networks that make matters
very complicated when it comes to making real-time adjustments to plan. Because S&OE is
currently dependent on tribal knowledge, phone calls, and spreadsheets, it can take weeks
of back and forth to align internally and externally on what should be done in order to resolve problems.
What typical discovery and resolution of an unexpected exception today looks like:
Incident filters into an organization through hallway talk, emails from a manager, a fortune cookie, etc. Teams spend several days aligning around priorities and ownership based on the whatever information they have.
External network of suppliers, contract manufacturers, and transportation carriers is contacted to get more context.
Secondary and tertiary impacts could be detected like late shipments or material shortages which you’ve missed because many reports are only issued monthly.
New inventory positions need to be assessed, which can be time consuming, particularly if you have multiple ERP systems; competitors might get to back-up suppliers first, so your new POs might not be honored.
Downstream customer effects need to be assessed and prioritized.
Weeks after the event, customer learns about product shortfalls, often too late for them to adjust their own plans.
Without clearly defined S&OE processes in place, supply chains are stuck with unrealized potential and deflated plans. Because there are really only two things that matter in supply chain:
how fast you find out about a problem & how fast you solve it.
The longer it takes to solve an issue erodes value from your reputation and your bottom line. A well thought-out and rigorous S&OE plan can set you on the path towards using what you know, what you have, and what you’re doing to build the foundation of an autonomous supply chain. Well-executed S&OE closes the feedback loop for S&OP, showing how the plan actually converts into results. This means that over time, your supply chain will get smarter and smarter and your processes can become better at managing deviations from the plan.
Make it easy for teams to capture supply chain incidents
Centralize incidents to facilitate weekly review
Collaborate across teams and partners to quickly resolve
Analyze root cause to prevent future problems
Establishing an S&OE center of excellence can help organizations extinguish fire-fighting while increasing revenue, reducing inventory costs and optimizing productivity. Learn how to jump start your S&OE center of excellence in this handy guide.