As businesses worldwide seek to improve the agility and resiliency of supply chains, the time has come to ditch manual processes wherever possible. Nearly 75% of manufacturing and distribution executives reported in a survey conducted by Supply Chain Dive's studioID and West Monroe that Microsoft Excel contributed to their sales and operations planning (S&OP) processes.
Surviving the next significant supply chain disruption will require a level of flexibility that organizations can't achieve with complex spreadsheet formulas alone. The inherently reactive nature of manual processes makes it too challenging to keep pace with shifting market trends and disruptive events.
Becoming Proactive Instead of Reactive
Building technologically-enabled S&OP capabilities has become essential as supply chain organizations pursue digital transformation to ensure better agility and resiliency in the face of constant change. To access more predictive capabilities in a volatile global supply chain environment, business leaders need to streamline S&OP through more advanced automation.
"If you don't measure, you can't manage," said Tim Vadney, senior principal at West Monroe."You need a clear understanding of what your supply picture looks like versus your demand picture. If you get those two elements and the KPIs to understand what's happening on both sides of the coin, then you're able to react to changing market conditions much more quickly."
It's important to note that virtually all small- and medium-sized enterprises will primarily rely on spreadsheets and paper-based processes for S&OP until they reach a certain level of maturity. Then, as organizations grow, the inefficiencies begin to reach a tipping point.
"Manually running S&OP is fine for businesses of a certain complexity," said Brian Pacula, director at West Monroe. "But at some point, it becomes very high-effort and arduous to maintain the spreadsheet, make sure the data is accurate and try to get real-time data entered into it. At that point, people usually look for more automated solutions that have been purposely built for S&OP process support."
Once sales and operations planning outgrows the spreadsheet, most businesses turn to enterprise resource planning (ERP) and demand planning and forecasting solutions to begin automating specific data inputs for S&OP. According to the survey, 51% of respondents use ERP in their S&OP processes, while 60% use demand planning and forecasting technology.
"First, you want to focus on getting the right data sets and data feeds into the appropriate solution," Pacula said. "For smaller businesses, that might mean getting an ERP first. A lot of the core data you feed into an S&OP process will at first come from the ERP itself. Then after a certain level, that data comes from a more supply-chain specific solution that does some type of demand or supply planning. Solutions for larger organizations will have those functions built in, whereas medium enterprises may need to bolt on a demand planning system. Then you can get into advanced S&OP where you take all these real-time data feeds and present and prescribe all the steps that you should be taking going forward."
A structured S&OP process with sufficient automation capabilities helps improve resiliency by identifying where risk will come from and providing more time to react and make decisions. This extra time provides significant benefits beyond the capabilities of a managed process.
"You just gain more time to react and be proactive instead of making very last-minute decisions," Vadney said. "Better automation practices in S&OP should enable higher inventory turns, lower inventory carrying costs, reduced out-of-stocks with an equivalent increase in sales, reduced intercompany inventory transfer costs and lower inbound and outbound logistics costs."
As businesses expand, they will eventually outgrow the capabilities of Google Sheets or Excel for S&OP. However, that doesn't make these desktop applications useless.
"You want to try to remove Excel further upstream where the master data and feeder data are coming from," Pacula said. "But there are a lot of different individuals you have to interact with from different parts of the supply chain, and almost everyone understands how to use Excel."
Though Excel and similar programs eventually lose effectiveness as a processing tool, they remain a convenient communication tool. Given their prevalence in supply chain operations over the past several decades, programs like Excel or Google Sheets provide a ubiquitous method for cross-function communication and collaboration.
"You use Excel for report dissemination," Vadney said. "It's a lot easier for people to play with data when they see it in Excel instead of generating PDFs from a system or trying to get everybody in the same room or on the same Zoom call to look at dashboards or reports. Spreadsheet technology just can't be the fundamental base upon which everything is built after you've reached a certain size. You'll outgrow it pretty quickly—in most cases, when you've reached $50 or $75 million in revenue or have more than one distribution or manufacturing locations."
Manufacturers, distributors and other industrial organizations will need to conduct an internal analysis to determine what level of automation they require in their sales and operations planning process. In the current supply chain environment, companies with well-structured S&OP processes have an opportunity to elevate themselves above competitors through access to relevant data that drives informed decision-making.