Supply Chain Blog

The Role of Integrated Supply Chain Planning

Posted by Michael Thompson on Thu, Dec 02, 2010

Having met the protagonists, let’s see if S&OP is really necessary.  First, let’s remind ourselves of the players:

REGINALD is CEO of a multinational FMCG company.S&OP debateHe does not believe that S&OP is necessary for his business and expressed his views in a recent annual operational review meeting.  He has asked that the company’s identity remain confidential.

JACEK is the new Head of Supply Chain Development at the same company.  A supply chain development expert, Jacek too believes that S&OP is not always necessary. 

So what is there to debate?

MIKE (yours truly) That’s where I come in. I suspect that Reginald and Jacek have come to a similar conclusion but for totally different reasons. I am the moderator of this debate.  Let’s get started.

MIKE (MODERATOR):Gentlemen, thank you for agreeing to attend this debate. I would like to start with a reminder of the topic.  Is S&OP Really Necessary - the role of Integrated Supply Chain Planning.  Let me start by asking the question “Can companies operate effectively without S&OP?”

REGINALD (CEO): Thank you. Of course they can. There was life and business before S&OP you know. When I first started out in the Sales Department, there was no such thing as S&OP.  There was Sales.  There was Marketing.  And then there was the factory ... And that’s where the problems started.  It didn’t matter what we did, the factory always managed to find an excuse for not producing it ... or producing the wrong thing ... usually lots of the wrong thing ... and then we had to sell it .... the wrong thing that is ....

MIKE (Moderator) Thank you Reginald. Can I invite Jacek to join the discussion.  Jacek.

JACEK (Head SC Dev) Thank you Mike.  S&OP has been around for many, many years.  There is no doubt that it has a value.  Or has had a value.  But times have changed.  And technology has changed.  We now have the technical capability to run most companies very effectively without S&OP.

REGINALD (CEO) So we all agree.  S&OP is not needed.

MIKE (Moderator) I do not think that you agree for the same reasons.  Jacek, please can you explain why companies can run very effectively without S&OP.

JACEK (Head SC Dev) It’s all about sound supply chain process and integrated ERP systems. I would like to call it  - “Integrated Supply Chain Planning”.

REGINALD (CEO) Oh process and IT is it?  Jacek, you sound like a consultant, not our Head of Supply Chain Development.

MIKE (Moderator) Reginald ...

JACEK (Head SC Dev) Let me explain with an example. Let’s say that a company can sell all that it produces.  Let’s assume that the company only operates in one country, although the same principle applies to above market planning.  Lets also assume that the company has a simple order fulfilment model, a make-to-stock supply chain model.  The company has an effective sales force with good trade contacts and importantly it has stock visibility at the Point of Sale (POS) via trade data exchange from their distribution partners and / or EPOS data.  Let’s assume that they have implemented an integrated ERP system.  Given the above, an effective demand capture process, supported by a sales forecast that does indeed capture trade data (POS or Regional Distribution Centres) and an effective order entry process & system, the supply chain can operate effectively. 

MIKE (Moderator) That’s some example Jacek.

REGINALD (CEO) In an ideal world of course.

JACEK (Head SC Dev) Yes sir but ...

REGINALD (CEO) Please call me Reginald.

JACEK (Head SC Dev) Yes Reginald.  But you, sorry we, already have in place most of what I have described.

REGINALD (CEO) So how can we get an effective supply chain, Jacek?  And what about S&OP?

JACEK (Head SC Dev) Let me start with the first question – how to get an affective supply chain.  It’s all about converting incoming orders into flexible production. Its less about S&OP.

MIKE (Moderator) Gentlemen, that is all we have time for today.  Thank you.

Next time we will deal with supply chain responsiveness & how S&OP can get in the way.

Any thoughts out there?  What is your experience with supply chain effectiveness & S&OP? 

In this series:

  1. What has S&OP ever done for us?
  2. Is S&OP Really Necessary? Integrated Supply Chain Planning
  3. Is S&OP Really Necessary? Forecasting & Supply Chain Responsiveness
  4. What has S&OP ever done for us? A great deal actually...
  5. To S&OP or not to S&OP - That is the question
  6. What has S&OP ever done for us? The role of the CEO

Tagss: Michael Thompson, ERP/SAP, S&OP, Forecasting & Demand Planning, Integrated Business Planning