S&OP and S&OE: A Symbiotic Relationship
Jessie MacAlpine - November 08, 2016
Logistics planning today is just like firefighting: planners need to constantly identify and put out fires that pop up throughout the planning and execution process. This is especially true in recent years, with ongoing, unprecedented events like the pandemic disrupting global supply chains.
One of the main issues with modern S&OP is the day-to-day gap created when planning is conducted with monthly granularity. S&OE can then be used to fill-in-the gaps, managing production, shipping, and equipment in the day-to-day to ensure the S&OP strategy is successfully executed. However, there remains a gap between the planning and execution processes, and this gap is only being further exacerbated by ongoing supply chain issues.
To achieve true supply chain resiliency, companies need their S&OP and S&OE to operate in a unified environment that allows the synchronization of operations as they are planned and executed. Addressing the gap between planning and execution can then help companies identify and fix problems sooner, saving them time and money in the long run.
Many Companies Remain Disappointed by their Current S&OP Strategy
A recent Consumer Goods report found that—unsurprisingly—satisfaction with S&OP processes is decreasing as the world become more volatile. The study found that only 35% of surveyed companies report their S&OP strategy is effective and only 65% have seen an increase in their S&OP efficacy over the past three years.
Consistent with this finding, McKinsey surveyed 60 senior supply-chain executives and found that 93% of companies are planning to increase resiliency across their supply chain and 90% plan to increase talent in-house to facilitate digital supply chain management. So, companies know they need to invest in their S&OP strategy, and embrace digital transformation, if they plan to remain competitive in today’s production environment.
Now, this investment usually comes in the form of AI-driven data analytics. Companies can take advantage of their own data to improve the crosstalk and harmony between their S&OP and S&OE strategies. With software solutions, companies are making it easier to align the planning and execution processes for even the largest scale enterprises.
Collaborative Planning Ecosystem
As part of a collaborative S&OP process, both the Production and Logistics teams can be informed by the sales planning and forecasting to adjust execution when needed. With increased collaboration, companies can prevent the waste and inefficiency that plague fragmented operations. Although the ultimate goal of S&OE should be to align monthly planning with daily execution, the process is not always straightforward. By integrating S&OP and S&OE and adopting a collaborative S&OP strategy, companies can achieve:
The Four Benefits of Integrating S&OP and S&OE
1. Reduce Waste
With proper integration of S&OP and S&OE, inventory can be better optimized to reduce waste and lost product.
2. Improve On-Time Delivery
S&OE can help companies grow their customer satisfaction by improving on-time delivery and providing better estimates at point-of-sale.
3. Meet Financial Goals
A harmonious S&OP and S&OE strategy can help to align budget and financial goals across a company to increase working capital and improve flexibility in the supply chain.
4. Minimize Re-Schedules
S&OE can support proactive supply chain management to reduce production reschedules, expedite certain raw materials, and optimize outbound transportation
flexis Solutions Support S&OP and S&OE Integration
In today’s modern production environment, S&OE is required for a successful S&OP strategy. With integration of S&OP and S&OE, companies can transition their supply chain management from a reactive process to a proactive process. AI-driven advanced analytics solutions from flexis increase data visibility to support both short-term execution and long-term planning. flexis solutions facilitate the alignment of S&OP and S&OE to support a lean supply chain and a resilient production environment.
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