Almost three decades ago Sales and Operational Planning (S&OP) burst onto the Supply Chain scene as the latest innovation. When S&OP as a concept emerged in 1987, we didn’t even have the internet, much less the Internet of Things. Printouts at the time were from dot matrix printers, and we could not even conceive of 3D printing. It’s amazing we could even have S&OP meetings considering PowerPoint only came out 3 years later in 1990.

S&OP Process Improvement Is An Illusion For Most Companies

What we see now may be an illusion of progress masked by new terms, and executives believing what they want to believe. The more people speak about something, the more we perceive we know about it, and this phenomenon holds true in Supply Chain (it works great in politics as well). Everyone throws out the terms and buzzwords with few of us knowing much about it or if it does what it says.

The truth is settling in that the vast majority of companies, despite intense efforts, cannot demonstrate any measurable improvements in their company’s performance.

What we do know is that repeated research shows over two-thirds are failing to extract any  value from their S&OP process. Despite the mountain of research on how to develop a mature process and the millions of dollars  spent – the Gartner five step maturity roadmap reveals 68% of organizations are scored at 2.6 or lower – that means they are barely coping with balancing demand and supply. The truth is settling in that the vast majority of companies, despite intense efforts, cannot demonstrate any measurable improvements in their company’s performance.

Possibly the most incriminating report came from the Institute of Business Forecasting (IBF) Global survey (2014). In this study, Dr. Chaman Jain researched 664 North American companies,  471 (71%) of which said they had an established S&OP process. When looking at Days of Inventory, surprisingly there were not only no improvements, but the 471 companies with an S&OP process actually did worse (39 Days of Inventory for companies with S&OP compared to 37 Days of Inventory for all companies). When measuring back orders as a percent of sales and looking at service stock outs, S&OP presented no discernible effect.

If S&OP is having difficulty keeping up with business today, how can it keep pace with the business of tomorrow?

Understanding the Larger S&OP Problem

The bigger question is not whether S&OP is able to add value to Supply Chain today, but whether it will be able to keep up with what is coming. There is no doubt that everything else will continue to evolve around us, including business. All the challenges we face today will be amplified in the future, and we will surely have new people with newer skill sets, new technology and capabilities, and ideally new processes.

Cycles will get shorter, data will be bigger, and collaboration and value may take on a whole new meaning in the enterprises of the future. Although many companies are recognizing the need to become more responsive and flexible, most S&OP processes are not designed to cope well with ambiguity. The leaders in the future will be the ones that can more efficiently see, interpret, and act.  This is what executives will be looking for, a better way of gaining insights into their business that enable them to make better and faster decisions. If S&OP is having difficulty keeping up with business today, how can it keep pace with the business of tomorrow?

The limitations of the S&OP process and the changing business landscape necessitate a broader approach to the planning process. Planning can no longer remain within the realm of Supply Chain alone if it is to have a meaningful impact on the business. The S&OP function should be elevated into a central business planning & execution framework. This framework will help executives deliver a better way of making better decisions on a faster timeline.

Rethink People, Process and Technology

Rethink People: The core should be comprised of people with strong analytics capability and people with business savvy & influence. This creates synergies between the business team members to ask the right questions and analytics team members to find the right answers. Talent is scarce, so organizations should recruit from across the organization and nurture potential candidates.

Rethink Process: Organizations should establish a centralized fully integrated forecasting, business planning, and analytics function to support decision making and a repeatable process to create value, manage risk and coordinate enterprise wide decision making. Consider Business Efficiency Planning (BEP) as part of a continuum of a natural progression towards deeper integration across disparate business functions to facilitate deeper alignment and maximize business value. The path to BEP begins with well-established foundational S&OP processes along with other processes such as PLM & FP&A.

Rethink Technology: Organizations should invest in a technology landscape that includes core applications with embedded capability, open-source analytics engines and self-service tools to consolidate data and provide prescriptive and predictive analytics for all business functions. This may include: customer analytics, consumer insights and/or geospatial analytics in addition to traditional forecasting and supply planning capability.

The first step is simple and any company has at their disposal. Organizations can get quick wins by aligning discrete decision-making process and improving participation and alignment between FP&A and S&OP processes. Developing a strong forecasting team and core data & analytics function to serve each function’s needs and acquiring leadership buy-in to define a roadmap that integrates the foundational processes with the overall business strategy.  Finally build a roadmap to Business Efficiency Planning to align all functional areas to a unified set of assumptions and to enable and coordinate decision making.

[Ed: this article first appeared on the Arkieva.com Blog. You can find the original at this location.]

It used to be that companies competed on price and service. Today, they are competing more on Big Data and technology. In the future, according to research by the Institute of Business Forecasting (IBF), organizations find advantages in their ability turn that data into decisions. In fact, innovators like Apple, Google and Unilever are already leveraging  people, process, data, and technology to make superior business decisions and gain a competitive edge. 

It makes sense, and everyone realizes we are headed toward an era of greater complexity, more competition, and faster change. Innovations will come sooner and cut deeper. The success of a business will increasingly be determined by the business’s ability to react quickly to market forces and make smarter decisions.

In a report titled “Supply Chain 2025: Planning Today for Tomorrow,” by Michael Burkett and John Johnson, research advisory firm Gartner suggested that the business of the future will shift thinking from ‘Big Data’ to ‘Big Answers.’

It is overwhelmingly clear from our survey that Demand Planning of tomorrow will be just an advancement of where we are today.

The Questions We Asked In Our Future Of Demand Planning Survey

In the last part of 2017, we at the Institute of Business Forecasting (IBF) conducted our own research and asked Demand Planning and Forecasting professionals how they saw their field in the future. These questions were designed to gauge how practitioners saw the discipline of Demand Planning in the year 2025 in regard to people, process, and technology. [Ed: this is the third in a series of articles discussing the results – this is the first and second].

For every question, there was a clear bias towards advanced decision-making capabilities. The outlier could be on what business process is used to make those business decisions. So I ask you, given these choices below, what do you think is the key business process that Forecasting and Demand Planning will rely on in the year 2025?

• Advanced Sales & Operations Planning (S&OP) / Integrated Business Planning (IBP): The process for connecting planning in an organization to align operations and strategy with the organization’s financial performance
• Financial Planning and Analysis (FP&A): The process of compiling and analyzing an organization’s long-term financial strategy.
• Product Lifecycle Management (PLM): The process of managing the entire lifecycle of a product from inception, through engineering design and manufacture, to service and disposal of manufactured products.
• Business Efficiency Planning (BEP): The process to align all functional processes to a unified set of assumptions and business objectives to enable and coordinate decision making
• Enterprise Risk Management (ERM): The process of planning, organizing, leading, and controlling the activities of an organization to minimize the effects of risk on an organization’s capital and earnings.
• Demand Driven MRP (DDMRP): Flow of relevant information through the establishment and management of strategically placed decoupling point stock buffers.
• Collaborative Planning and Forecast Replenishment (CPFR): The process that combines the intelligence of multiple external trading partners in the planning and fulfilment of customer demand.
• Event Based or Marketing Driven S&OP: Systematic way to plan customer-centered programs and events and to measure and achieve their goals.

Future Of Demand Planning Survey Results

Of the 200-plus respondents, the results did not look that much different than they may have looked 20 years ago, albeit with a few exceptions. The clear leader, with over 50% of peoples’ first choices, was “Advanced S&OP or IBP”.

I understand not all innovation occurs overnight. Blockchain started over 20 years ago and is only now making the list of buzzwords. Sales and Operations Planning (S&OP) is over 30 years old and is very widely adopted (but is still working out its bugs). Considering also that Collaborative Planning and Forecast Replenishment (which has been around since 1996) was the second vote getter, it is overwhelmingly clear from our survey that Demand Planning of tomorrow will be just a continuation and advancement of where we are today.

When it comes to S&OP, we know we’re missing something but don’t fully understand what that something is yet.

To be fair, this will not be the S&OP of today but a more advanced S&OP process. Chris Turner from StrataBridge has a great observation coming out in an upcoming JBF article referencing this research where he states, “the advanced label is a telling insight into what we don’t know.”  This is true; Advanced S&OP in many ways is a statement that what we are doing now is not fully working, and we know we need some type of new and improved approach in the future. We know we’re missing something, but don’t fully understand what that something is yet.

This is possibly why the third highest ranking in the survey is a relatively new and still somewhat theoretical process. With 10% of people’s first choice and an impressive 1/3 of total first, second and third choices, was Business Efficiency Planning (BEP). BEP even came in above commonly known functional processes like FP&A and Product Lifecyle Management. The driver may simply be that, while all processes strive to be collaborative and decision-focused, we still have gaps and functional silos in our organizations. It could be that there are still fundamental things to get right before we start looking at disruptive technology like Blockchain and Artificial Intelligence.

There is a growing focus on moving away from Supply Chain processes to create a true business process.

The third choice of Business Efficiency Planning (BEP) reveals that there is a growing focus on moving away from Supply Chain or Operations processes to create a true business process. To accomplish this now and in the future, it is not a case of reinventing the wheel or decoupling your supply chain; rather, it is integrating core processes and enabling enterprise decision making and planning using existing people and technology.

The research findings are taken from Institute of Business Forecasting’s (IBF) on-line survey “Future of Demand Planning and Forecasting”, conducted between September 1st 2017 and October 24th 2017. The findings were discussed in the Winter 2017 issue of The Journal of Business Forecasting.