How S&OE Enhances Supply Chain Management
Nick Ostdick - March 21, 2017
It was the Scottish poet Robert Burns who said it best: “The best laid plans of mice and men often go awry.” This sentiment is perhaps no more true than in today’s global, complex automotive supply chain where demand planning and production programs often shift and change depending on a wide range of variables and elements - everything from the availability of component parts to labor to facility capacity and job scheduling.
But to cut the complexity of mid and long-term planning and supply chain management, planners and managers have a relatively new tool at their disposal: sales and operations execution (S&OE). Coined in the last few years by supply chain industry publication Gartner, S&OE acts as a demand planning supplement or safety net to detect the possibility of bottlenecks or breakdowns in larger-scale planning platforms. This in turn allows planners and managers to create and deploy solutions to these disruptions to enhance each touchpoint of a company’s overall value chain.
While S&OE may be a relatively new concept in global supply chain management, its value has already been realized across nearly every aspect of the automotive production landscape. But even so, much is still misunderstood or unrealized about the value of S&OE in executing short-term planning and production decisions and as a crucial check on long-term planning by allowing for real-time modifications in the short and even mid-term. In order to fully understand how S&OE enhances supply chain management, we’ll examine what exactly S&OE means in several different contexts, as well as the benefits for planners and managers in optimizing supply chain management practices.
S&OP in the automotive supply chain is well-understood and realized concept for planners and managers in terms of monthly or bi-monthly production planning based primarily on part families. If you think about supply chain planning as a camera, S&OP is the mid-range zoom feature where planners and managers are able to glimpse into the mid-term future to assess production capabilities, demand for products, inventory levels, and facility allocation capacity. On the other hand, annual planning operates on a yearly basis and acts more like a long-range zoom on the camera for planners and managers to execute long-term planning actions on a macro-scale.
Where S&OE comes in is something of a ultra-zoom feature on the camera for close inspection of weekly supply chain planning practices which can also be a key indicator as to the viability of S&OP or annual planning. Essentially, S&OE functions as a quick, short-term snapshot of the overall supply chain situation for planners and managers to make vital course corrections on a weekly basis to better create long-term strategies. In addition, whereas S&OP and annual planning often deal in forecasting, simulations, and other hypothetical supply and production scenarios, S&OE tracks actual demand and production metrics in real-time for a more accurate picture of the demand and production stages.
By monitoring actual demand and production data via real line items and data, S&OE provides planners and managers an early warning system that helps ensure smooth production cycles in the mid and long-term. This also allows planners and managers to avoid costly bottlenecks or production breakdowns in the mid-range future by combatting issues today that could snowball tomorrow and beyond.
Benefits of S&OE in the supply chain
Now that we understand how S&OE functions as a safety check in terms of demand planning and production cycles, we can examine the benefits for OEMs and other automotive manufacturers in leveraging S&OE strategy as a part of a robust, efficient sales and operations planning platform. Because the automotive supply chain is such a variant industry with complex partner networks across the globe, S&OE allows planners and managers to cut through this complexity by:
Encouraging optimized responses to supply chain volatility. For planners and managers, supply chain agility is a top concern when evaluating overall supply chain management. However, in today’s fast-paced production landscape, micro-agility, or the ability to respond to sudden disruptions on a daily basis, has emerged a pressing issue in leveraging effective, lean supply chain principles. Late shipments, forecast errors, and other small-scale disruptions can be mitigated via S&OE through improved scheduling and delivery reliability, reduction in raw materials overages or shortages, or fewer instances of rescheduled or reallocated production programs to meet customer demands.
Increasing visibility across the supply chain. Because S&OE provides a window into the weekly supply chain situation, planners and managers can essentially work backwards or forwards in the demand planning process to increase visibility across the supply stream on a number of levels, be it daily, weekly, monthly, or even yearly. This structure elevates the supply chain and makes it easy for individuals across the value chain to expose weaknesses or inefficiencies at any stage of the process, which in turn makes supply chain streamlining and optimization a much easier and effective end result to achieve.
Allowing for advanced analytics. We discussed before on this blog about the value of advanced analytics in fostering lean supply chain management strategies and putting mountains of data and reporting to good use for more effective, accurate planning. Because advanced analytics operate primarily in real-time and provide planners and managers with an immediate window into supply and production cycles, S&OE functions in perfect harmony with advanced analytics in giving OEMs an outlet for massive amounts of real-time data and metrics. Essentially, advanced analytics is the gasoline for short-term planning and modifications to production programs while S&OE is the car that requires the fuel.