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The Supply Chain Management Blog covers the latest in SCM strategy, technology, and innovation.

Is S&OP as Obsolete a Name as MRP II?

S&OP (Sales and Operations Planning) has been around for years as an essential enabler for customer centric supply chains and a key tool for strategic execution. But many firms are wary of implementing S&OP fearing long and painful cross functional transformations that will need strong executive sponsorship for success.

Is the supply-and-demand legacy associated with S&OP keeping supply chain practioners from enlisting executive support to fully realise its benefits? Perhaps we should be talking about executive concerns instead of mid-level manger concerns?

S&OP deliverables play key a role to achieve a better customer experience and hence drive revenue growth. On Time In Full Delivery is an important metric influencing the customer experience. But an inability to deliver can cause an even greater and negative impact. Hence an effective, efficient and low cost supply chain is the key to great customer experience and therefore to maintain and grow revenue (whether you are delivering A380s or meals in a restaurant).

True customer experience means performing to high standards at each stage of the customer experience lifecycle. Studies (Global Insights on Succeeding in Customer Experience Era) suggest firms lose up to 20% of possible revenue due to poor customer experiences.

There are many trends in today’s world of commerce that are making it hard to deliver great customer experiences. Increased customer expectation of high service levels (Roll Royce’s power-by-the-hour model), the effects of Digital Transformation (Capgemini study on companies beyond Silicon Valley e.g. Asian Paints and the fragmentation of delivery channels (Hitachi’s study on UK Retailers) all complicate the task.

  • More customer segments and products (even mass consumerisation through 3D Printing) make delivering the right product at the right time more difficult.
  • More nodes in supply chains increase the difficulty of managing these complex network.
  • With the explosion in data and connectivity, customers are able to see issues further up the supply chain are more aware of delays in delivering products or services –decreasing their satisfaction.

The pressure to provide product and service availability is increasing and will create pressures on profitability managed well. Of course each customer segment will have its own SLA (Service Level Agreement) on availability. Availability of products and services to different customer segments balanced with their priorities is what S&OP really provides. So why so much effort is required to get executive buy in?

  • Is it time to change the name of S&OP to “Availability and Profitability Plan”? Doesn’t this better get across the idea that S&OP buys you a better customer experience with guaranteed profitability?
  • Shouldn’t S&OP be sold as a core process similar to budgeting or quarterly financial close? Firms need to move beyond supply and demand balancing and need to install Integrated Business Planning at the heart of business strategy and tactical execution.
  • Perhaps the departments responsible for customer experience, the Sales & Marketing teams, should own this process rather than Supply Chain?

Maybe there are other names that will communicate the importance of this process to senior executives. The executive buy-in is already there if they can see the linkage to the customer’s experience. The question should be about why not….. and then how.

-Vikram Singla, Supply Chain Apps Leader, UK

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