Agility in the supply chain is the ability to recalibrate the plan while maintaining comparable cost, quality and customer service. According to research by Supply Chain Insights, 85% of supply chains have experienced a disruption and 90% are grappling with skyrocketing costs and supply volatility. The ability to address these issues to maximize opportunities and profitability grows as supply chain management increases in agility. Getting there is reliant on the maturity of sales and operations planning (S&OP) processes.
Maturity in S&OP processes depends upon developing the ability to drive a response quickly within the supply chain when an event impacts demand or supply. While many supply chain executives may define agility as the ability to shorten cycle times, they’re overlooking the possibility that they may just be empowering their teams to do the wrong thing faster. Responsiveness must be based on decisions made with insights derived from cross-functional alignment and integrated data.
Efficiency must lead to effectiveness. In a poll of 66 supply chain executives conducted by Supply Chain Insights, 89% of them rated agility as highly important, but only 27% of them said their companies had achieved it. This is the gap that needs to be closed to enable supply chains the ability to minimize impacts from disruption and volatility.
S&OP Maturity Is an Evolution
Because S&OP encompasses many disciplines across a company, it takes time to increase agility. As your S&OP maturity evolves through each stage, there are three questions to answer:
- What is the goal? It’s imperative to get stakeholders to agree. Goals will also change as maturity increases. For example, a recent Supply Chain Insights survey found these goals in place for supply chain executives in regards to maturity:
- How do you measure it? Measurements must direct improvements to performance. Focus on the metrics that matter, such as revenue profitability, cash-to-cash inventory turns, and customer fulfillment.
- What defines success? Balance must be achieved for S&OP so that the plan can be connected with execution.
Answering these three questions can become extremely challenging when you consider that companies, on average, have four S&OP processes, not just one.
Agility Requires the Components of S&OP to Work Together
To get to the answers, companies must focus first on the definition of S&OP. The “S” in S&OP, Sales, is really about focusing on the market drivers that shape demand. To get to these insights, companies need to build the technology and process capabilities that enable supply chain executives to look at the design of the trade-offs in the value chain in order to conduct “what-if” analysis. The “&” in S&OP is about designing the value chain to optimize tradeoffs, minimize risk, balancing cycles and orchestrating demand. This, in turn, allows the “OP” or operations part of the planning to put those tradeoffs into practice with more informed decisions about the most effective means to make, source and deliver. The combination of all three of the components of S&OP enables the improvement of the organization’s capability to increase agility, as well as to improve alignment.
As agility increases, supply chain executives will also be able to gauge higher results for the five qualitative factors that help assess your organization’s success in closing the variance between forecast and actual equilibrium between demand and supply. If you’d like to learn more about whether your S&OP process delivers agility, watch this webinar with Lora Cecere of Supply Chain Insights.