Your S&OP Analytics: Crystal Ball or Ball and Chain?


The following Steelwedge blog guest posting is submitted by Bob Ferrari, Managing Director, The Ferrari Consulting and Research Group, and Founder, Supply Chain Matters blog.

bob-ferrari

This week, I had the opportunity to be the featured guest speaker for the ongoing Steelwedge Software 2013 Monthly Webinar series. My topic was considering the use of predictive analytics capabilities to supplement the decision-making capabilities of the S&OP process.

In the webinar, I provided four important takeaways for our audience:

  • S&OP needs to move toward more timely decisions and better prediction of events and business outcomes.
  • The converging forces in business management. Supply chain and IT are aligning toward greater awareness and support for more predictive decision-making capabilities.
  • Leveraging the combination of predictive analytics and constraint modeling capabilities for S&OP can provide positive outcomes for your business.
  • Of all the factors, understand and plan for the need for augmented individual and team skills to be able to leverage these capabilities.

During our webinar, we conducted some live polling of the audience. Many of the audience members reinforced a desire for their S&OP teams to become more predictive to business outcomes, but at the same time, are just beginning to become educated on predictive tools and their use.

We received a number of insightful audience questions, some of which we briefly addressed, but unfortunately we ran out of time to respond to all of them. In this blog posting, I will respond to these questions.

Q: What questions should I be able to answer with advanced analytics that I couldn’t answer without it?

Response: A sampling of the type of questions that advanced analytics can potentially answer are:

  • Defining the most appropriate segmentation of the supply chain(s)
  • Determining most profitable product and/or customer segments and how to best respond to customer needs for these segments.
  • Incorporating both near real-time structured as well as unstructured planning and fulfillment related data and information into a set of alternatives for the S&OP to consider in a response plan.
  • Determining the best possible time to seek either additional fixed or variable production capacity.

More importantly, innovators in these capabilities describe the ability of an analytics equipped team to serve as “the honest broker” in determining what is and what is not feasible in the context of given financial, operational or service goals. These capabilities further allow the S&OP team the ability to more clearly assess quantifiable impacts of various decisions.

Q: What skills should we be investing in for our team to insure better analytic insight?

Response: Dr. Chris Caplice, Executive Director of MIT’s Center for Transportation and Logistics recently published highlights of a discussion among 13 leading-edge supply chain organizations regarding their experiences with developing in-house analytics capabilities. Some of these organizations had well developed teams while others were in the process of building teams. Some of the key insights summarized were:

  • Having a proper balance of well-rounded technical and business skills.
  • Fluency in the language of business and the ability to effectively communicate cross-functionally-crunching the numbers is but one part of the job
  • Ability to sell concepts and services to internal groups
  • Knowing specifically how questions should be asked- asking the right questions and framing the right context

I would also hasten to add an intimate knowledge of the firm’s supply chain and its capabilities.

Q: What is the benefit of advanced analytics for planning over a BI tool?

Response: In my view, today’s BI tools can alert S&OP team members to potential problems but the former tools tended to restrict the ability to dig deeper into both root cause and potential means to resolve an unplanned event, shortfall or disruption. Advanced analytics adds supplemental capabilities to dig much deeper into the data, determine the exact sources of a problem, and simulate various possible response options in the context of stated business, financial margin or customer service goals. During his portion of the webinar, Ed Lewis of Steelwedge provided us a demonstration of this capability.

Q: Is there a trap in following analytics without the visibility of how the metrics are determined/calculated?

Response: This is an insightful question and I’m pleased that it was asked.  In the initial deployments of advanced supply planning systems (APS) many of the initial implementations were stymied because both planners and operational teams did not fully understand the data sources and business rules that the metrics and/or plans were derived from. This fueled the notion of a “black-box” that teams distrusted.

I believe that as a community, we have learned from this experience. Further, we have more robust data drill-down and visualization capabilities that allow teams the ability to explore for themselves how metrics were derived and calculated. In a lot of cases, teams had to rely on IT and database experts to do these types of queries, and the unfortunately lacked intimate knowledge of supply chain and demand fulfillment processes. With analytics, we have the potential for a much more empowered user and analyst.

All of that stated, we tend to know that senior executives will always challenge the assumptions related to a series of potential decisions. Newer analytical capabilities allows even these executives to explore the assumptions and conclusions.

Q: Should we use a 5 step monthly S&OP process if we have advanced analytics with more real time insights for changes?

Response: That is, of course, an individual team choice but I can’t help but conclude that as S&OP teams work on building something similar to the information architecture I described during the webinar, supplemented with more predictive capabilities and insights, the process is bound to accelerate in cycle. I especially believe that when you factor Step #1 Data Gathering and consider elements of Steps 4 & 5, the Pre-Meeting and the Executive meeting, that there is bound to be some time savings and acceleration of the overall process.

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I want to conclude this blog posting by expressing my thanks to both the Steelwedge team, and to the audience, for their positive feedback regarding gaining insights from our session. Let me also reinforce some of my final recommendations:

  • The goal is enhancing S&OP decision making needs, not the capability nor the technologies themselves.
  • Tailor analytics capabilities to help support most important S&OP process priorities. Seriously consider a centralized team to support these capabilities.
  • Begin in small managed scope, learn, and expand.
  • It is critical to strive for high data quality and well understood information taxonomy.
  • This is not about rip and replace of existing legacy backbone systems but rather an insertion of augmented analytics capability.

Best wishes on your initiatives and don’t hesitate to contact me if you need further assistance.

Bob Ferrari