S&OP is dead...long live S&OP
- Andy Moyes
- Mar 7, 2024
- 3 min read
When I first came across S&OP over 20 years ago, I found it hard to understand why any business would do without it. What senior exec wouldn't want to know what their latest joined-up operational plan is forecast to be for the next 18 to 24 months, know if the business has the ability to supply and above all, if it can be achieved profitably! But S&OP / IBP has had its critics over the years as they don't see it working for them. There have been calls that S&OP has run its course and something different is required to cope with what has become an increasing volatile, uncertain, complex and ambiguous world.
Despite this I see renewed focus on S&OP and it's more mature process IBP. At an S&OP / IBP conference I chaired in Amsterdam in 2023 it was striking to see the number of businesses undergoing supply chain transformation with S&OP / IBP at the centre.
There are two drivers to this:
Geo-political. From 2019 there really has been significant disruption to supply chains as shown by the Global Supply Chain Pressure Index (GSCPI) below. This has been driven by COVID, The EverGiven grounding, Ukraine / Russia war and most recently war in Gaza/Israel which has impacted trade routes through the Red Sea. This disruption has put supply chains in the spotlight not just within business but across the news. As a result organisations have been reviewing their supply chains and end to end planning processes for robustness but to also improve how they can better react when events outside their control happen.
Data source - Federal Reserve Bank of New York (www.newyorkfed.org)
Technology. Digital supply chain transformations are all the rage. It has taken a while but Supply Chain solution providers are accelerating capabilities driven by enhancements and AI that is in use and continues to look promising. Any article describing supply chain trends in 2024 with have AI and digitisation listed. Through 2024, it is thought that 50% of supply chain organisations will invest in applications that support artificial intelligence and advanced analytics capabilities(1). This will certainly support quicker more effective analysis to help support a volatile, uncertain, complex and ambiguous world we live in.
As business look to be better at being able to react to the geopolitical challenges and get excited about new technology available, a renewed focus on S&OP / IBP is welcome. It provides the opportunity to review your planning processes and to consider what is going well and what is not going so well. If you are not doing this I would encourage you to do so. Ask yourself the question:
What makes us think that just investing in technology and going digital will resolve our planning challenges?
For some, it may, if you have a mature process. For most, it will not. To understand why you may consider S&OP to be failing you need to focus on the process and people first. Remember, technology is an enabler and you need to understand what you want it to enable. If you are fortunate enough to have the budget to invest in technology, great, but take time to assess your planning processes along with people's skills, across the end to end supply chain. If you don't, you may find you've invested a lot and are no further forward in delivering an effective S&OP / IBP process.
For those unable to invest in technology, invest in getting the right process in place and having people with the right skills. Technology can follow when you have the budget to invest in it. You will then be better placed to make effective use of the technology available, as you will have skilled people and a clear understanding of your planning processes.
While I am encouraged by the renewed focus in S&OP / IBP, your planning processes will die if you rely on technology alone to improve it. To keep it alive assess and continually improve processes and people skills.
In my next article I will provide my view on why S&OP / IBP fails.
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