Selecting a new Sales & Operations Planning (S&OP) solution has major implications for a company. A ‘wrong’ or suboptimal choice can have long-lasting consequences for both the implementation project and the business itself. The potential impact, whether positive or negative, is generally substantially greater than any time and money spent on a professional selection process.
You may think that the approach to selecting software has not changed fundamentally. It’s still a matter of evaluating the processes to be supported, redesigning them where necessary, drawing up functional, technical and supplier requirements and comparing them against a database of potential solutions. Nothing new so far, right? So why does this subject receive – and deserve – so much attention?
The complexity and vulnerability of many supply chains has increased significantly in recent decades. At the same time, market demand has become more unpredictable and volatile in many categories, greatly enhanced by COVID-19 in 2020. The credit crisis that may lie ahead will increase the pressure on working capital, thereby placing higher demands on supply chain management.
S&OP processes will have to be adjusted to this new reality. Extrapolating historical sales to generate expected future demand may have been good enough in ‘normal’ times, but this approach does not suffice in the new world. In many supply chains, a similar thing holds true if you only check the expected utilization of your internal bottlenecks: can you be sure that you will always identify the real pain points in the integrated chain?
S&OP will have to focus more on supply chain resilience, flexibility and responsiveness. Analysing more extreme supply and demand scenarios will become routine, just like identifying risks and opportunities in lengthy/international supply chains. Modelling the bullwhip in automotive supply chains is a perfect example: DSM gained tens of millions of euros by perfecting this process in the previous crisis!
More and richer offerings in the market of S&OP software
The choice of S&OP software solutions has likewise grown strongly, and with it the number of vendors that could support an S&OP process in a specific situation. This is a positive development, since you can now find effective solutions for virtually any situation. It also poses additional challenges though; seemingly similar solutions can differ greatly ‘under the hood’, which can affect effectiveness, flexibility, ease of use and thus user acceptance.
More important than the amount of solutions is the rapidly increasing depth of advanced S&OP software. Requirements such as aggregation-disaggregation abilities on products, customers and resources, scenario analysis, multi-horizon planning and S&OP workflows are still important but hardly distinctive. On top of this, there is now a long list of advanced options such as driver-based forecasting, integration of external data, demand sensing, sell-out-based demand planning, advanced scenario & concurrent planning, bandwidth forecasting, advanced analytics, derived digital twins, etc.
Confused? The trick is to distinguish the hollow buzzwords from the technologies that can really add value for your specific situation – and there could be more of them (and with more impact) than you thought!
Consequences for the S&OP software selection approach
The richer market offering has consequences for how to set up an optimal selection process. The traditional way of selecting software means that new and advanced technologies probably won’t even be considered. Although this isn’t likely to result in you making ‘wrong’ choices, you run a significant risk of missing out on important new technologies. That’s a pity, because you may get stuck in the old world for a long time – rectifying it afterwards can be almost impossible, unfortunately.
So how should you set up an optimal selection process? The solution is to apply a combination of ‘demand pull’ (i.e. a selection based on functional and technical requirements) and ‘technology push’ (determining which new technologies could enrich the S&OP process and thus generate real value for the company).
How to keep it fast and effective?
The combination of the changing world, increased requirements and a larger and more in-depth range makes choosing the optimal S&OP solution more important but also more complex than before. While the risk of making a truly bad choice has decreased, the risk of missing out on important new technologies is now bigger than ever. So how can you select the optimal solution quickly and effectively?
Fortunately, we don’t have to discard all the old wisdom. The article “The DNA of S&OP Software” (in our S&OP/IBP Special) describes an approach for making a pre-selection at an early stage in the process, based on a limited number of core criteria. Today, the challenge is to combine this approach with knowledge, inspiration sessions and workshops about new technologies and developments and, above all, to subsequently determine which of them are relevant and feasible for your specific situation.
This dual approach enables you to shorten your selection process without running the risk of getting stuck with functional but outdated software for the coming years. One thing that hasn’t changed is the need for excellent insight into the S&OP software market. In fact, due to the wider range and rapid pace of technological advancement, that insight is now more important than ever!