How is S&OE Different from S&OP?
Brian Hoey - April 24, 2018
It’s long been an open question in the world of business: which is a bigger hurdle, planning or execution? As the global supply chain has become more sophisticated, however, we’ve gotten a wealth of evidence that for the majority of companies, execution is the more frequent stumbling block. In an informal poll a few years ago, Dick Ruhe at Blanchard found that 76% of the more than 300 respondents said that the most common experience at their company was "good planning and poor execution" (compared to just 4% who said "good planning and good execution", 8% who said "bad planning and bad execution", and 13% who said "bad planning and good execution"). Though these statistics don’t speak to supply chain management in particular, they do give an accurate sense of how difficult it can be to put even a well-conceived business or production plan into action.
Recent Consumer Goods reports have echoed these results, noting that, of companies polled, more than 90% reported a gap between planning and execution; among all the various strategic initiatives undertaken by these same companies, only 56% were labeled as successful. As a supply chain manager or a transport planner, it’s no doubt easy to see why this might be the case. Even shorter-term operational plans are made on a monthly or quarterly basis, and the fast pace of global supply chain events virtually ensures that some disruption will occur in that time span. When that happens, many businesses lack the agility, the flexibility, and the intra-operational visibility to make adjustments and stay on track.
The heart of this issue has historically been that there was no established business function that dealt with the daily and weekly supply chain adjustments that are necessary to maintaining mid- to long-term plans. While Sales & Operations Planning (S&OP) covered monthly roadmaps, there was no planning function that operated at a finer level of granularity.
Enter Sales & Operations Execution
Thankfully, a new level of organizational planning has emerged in recent years, which Gartner has termed Sales & Operations Execution (S&OE). Where S&OP drives monthly or quarterly organizational plans, S&OE’s purview is the daily and weekly demand and supply fluctuations that are inherent in the execution of any tactical plan. By monitoring real-time demand data and making adjustments to ordering strategies, inventory usage, and transport plans accordingly, S&OE adds value in the form of increased flexibility on a daily and weekly basis. Often, this takes the form of preventing overreactions to small disruptions, rather than the radically changing course each time the demand dial moves. In this way, it aids S&OP functionality by shepherding plans and initiatives through their various phases.
The Next Big Thing
We at the flexis blog have frequently touted the value of Sales & Operations Execution for the creation of a lean supply chain, and we’re certainly not the only ones who think that this new approach to disruption management will become increasingly necessary to supply chain success. Some of you may be wondering, “if this function is so powerful, why has it not emerged until just now?” The short answer is that S&OE is only made possible by the rise of Industry 4.0 systems. Because successful execution requires real-time information and a high degree of visibility, businesses must adopt a mindset of widespread connectivity and transparency, connecting disparate supply chain touchpoints into a cohesive value chain that promotes cyber-physical systems and tears down information silos. Before the era of Industry 4.0, when planners often had to use pen and paper or Excel spreadsheets to create operational roadmaps, this level of information visibility and supply stream integration was virtually impossible to achieve.
For companies that can provide their execution processes with real-time information, Sales & Operations Execution can not only reduce volatility and add value to traditional S&OP workflows, it can also pave the way for advanced analytics integration by centralizing mission critical data, meaning that companies can benefit from:
- More accurate demand forecasts
- Suggested workflow improvements across the supply stream
- Automatic scheduling of maintenance downtime and inventory replenishment orders.
Even without big data analytics, real-time demand information can have a huge impact on supply chain logistics. It can enable planners not just to reroute transport plans that have been disrupted, but to optimize freight usage and capitalize on real-time price information. By the same token, inventory usage can be made more efficient and cost effective by the knowledge that the potential for disruptive shortfalls is being closely monitored. By closing the gap between planning and execution in this way, businesses stand to gain a significant competitive advantage in a world where best laid plans often go awry.