Part 2 of 6 in the “Rethinking Digital Business Planning” series
The first blog in this series focused on the four key priorities for digital business planning, a comprehensive approach for bringing supply chain planning into the heart of the enterprise for better customer experiences and outcomes.
To review, these key priorities include:
- Demand-driven planning to shift planning to the perspective of the customer with advanced demand signal analytics, automated processes, and alerting to support management by exception
- Improved responsiveness by speeding planning-to-fulfillment cycles with access to a single source of data truth and the ability to execute decisions in real time
- A holistic perspective that incorporates all players in the value chain from internal lines of business to supply network partners to customers
- Strategic agility through access to live data and real-time analytics to drive self-regulating, adaptive planning models that help buffer against variability
This blog, the second in the series, focuses specifically on how digital business planning can help improve sales and operations planning (S&OP) for companies competing in the digital economy.
Problems with the status quo
For mid- to long-term horizons, the recurring S&OP process has long lived at the core of enterprise planning. With traditional S&OP, a company combines inputs from multiple demand sources to arrive at a consensus commitment to its market. The company then matches this consensus demand against its ability to deliver on the commitment.
To arrive at this consensus, the S&OP process involves planners and a wide range of different business groups throughout the organization making cross-functional collaboration critical. Throughout the process, groups consider the many dimensions of each potential action until arriving at a financially attractive, technically feasible, strategically aligned plan that is proposed for management approval and implementation. The plan is a living plan, revised and approved for each planning cycle as business conditions change.
One problem with traditional approaches to S&OP is that planning cycles are increasingly compressed, making it difficult for planners to keep pace with the process. Another is the fact that customers today are increasingly specific about their requirements. To meet this demand, S&OP needs to move from an exclusive focus on matching demand to available capacity toward the flexibility to meet increasingly variable requirements in a way that still drives business profitability.
The digital business planning approach
Digital business planning aims to streamline the S&OP process with real-time data visibility and technical capabilities that enable companies to improve planning collaboration, increase agility, and speed planning cycle times.
With digital business planning, S&OP becomes a less insular and more holistic process that brings in all planning constituents, both inside and outside the enterprise, in a timely and productive way. The goal is to ensure that existing plans are viable, understand future opportunities, and recalibrate plans quickly wherever necessary.
Key digital economy technologies play a critical role. Starting with the customer, companies access fast and up-to-date demand signals, such as point-of-sales information, social media, and sensors embedded in assets deployed across plants and facilities.
Compared to relatively simple demand-related KPIs, such as last quarter’s sales, these signals can be exceptionally varied. To properly analyze them, leading companies use machine learning algorithms that identify patterns and uncover insights. These same companies also depend on sophisticated simulation tools that can aid decision making by making obvious the consequences of planned actions.
This analysis then needs to make its way to all planning partners, including internal teams such as finance, operations, sales, supply chain, and logistics, as well as extended supply chain partners. Robust cloud-based collaborative platforms can help facilitate the cross-functional approach needed to bring all these players together.
Critical to all of this is aggregated data across the planning process, a single source of truth backed by strong data governance processes. This yields a common understanding of the planning facts, one that can be easily shared with all authorized parties and made visible on a common platform. Instead of scattered spreadsheets and disconnected teams, companies can now have high-performing teams capable of rapidly iterating plans and scenarios to continually meet the demand of customers in the digital economy.
For more information, see the IDC infobrief: Digital Business Planning is at the Heart of Supply Chain Transformation.