How to choose the right S&OP tooling for your organization?

Michel van Buren
Nov 5, 2019, 3:51:39 PM

You can significantly improve your profitability by optimizing your supply chain. The most important tool for that is an effective S&OP solution, so it is wise to choose one carefully. What does the software need to be capable of? What are the most important functionalities for your company? What kind of implementation partner do you require? And out of all the different options, how can you identify the solution that will add the most short-term and also long-term value for your organization? This 5-step plan guides you through the selection process to ensure you choose the right tooling for you.

S&OP: What does it mean?

Sales & Operations Planning (S&OP) can be the source of some confusion because its definition is not set in stone. Some ERP vendors offer ‘S&OP modules’ that provide little more than basic forecasting and planning functionality. Besides that, there are several terms that are closely linked to S&OP, such as Advanced Planning System (APS) and Integrated Business Planning (IBP). So for reasons of clarity, let’s first establish the core functionalities of an S&OP solution. Supply chain expert Lora Cecere refers to the following three components:

  1. The possibility for optimal supply chain planning that connects supply, demand and inventory
  2. A dashboard for the advanced visualization and improvement of the performance figures
  3. The possibility of generating business analytics to show the impact of supply chain decisions on the financial results.

So how can you take a step-by-step approach to choosing the S&OP solution that suits your situation?

Step 1: What do you need?

Forecasting and planning are the top priority for most companies getting started with S&OP. Nevertheless, it is wise to make sure that the solution you choose facilitates the addition of other functionalities at a later stage. For example, most demand forecasting and supply planning modules work with volumes. However, it is interesting to be able to translate volumes into value too in order to see the impact on the bottom line. Some S&OP software also includes a scenario planning option, for instance. So when choosing your initial solution, check that it can be extended with such functionalities.

Step 2: Determine which phase you are in

Thinking about which phase of S&OP maturity your organization is in gives you a good idea of your current priorities. Looking ahead to future phases can help you to see which functionalities might be important later on.

  1. Pre-S&OP: You use simple tools such as Excel for planning purposes and there is no formal planning meeting with Sales, Marketing and Finance.
    Your priority should be to develop a simple demand forecasting process utilizing the existing tools.
  2. S&OP: You have a demand forecasting process in place but do not yet use specialized tooling.
    Your priority should be to choose a specialized demand management module that also allows input from disciplines such as Sales. When making your choice, it is important to also consider which functionalities you might want to add in the future. You can then check whether your intended supplier is able to provide those modules. 
  3. S&OP Advanced: Your demand planning is under control and you’re now keen to link it to supply planning and inventory management.
    Add modules for supply planning and inventory management. This will translate your demand forecasting into effective and efficient manufacturing, inventory and distribution. Working with ‘what-if’ scenarios will enable you to rapidly adapt your planning to changing circumstances. Your S&OP partner can help you to define the functionalities and set up the modules.
  4. Integrated Business Planning (IBP): Demand, supply and inventory are interconnected and you now want to link volume to value to gain insight into the financial impact.
    Add a financial module that factors in the costs, revenue and capital requirement. This will enable you to calculate the financial impact of various supply chain decisions. The financial values are also used in scenario planning; you can see at a glance how decisions will affect the overall performance under different circumstances.
  5. IBP Plus: You have streamlined your supply chain planning and it is linked to financial performance. You are now looking for more ways to boost your sales performance. You want to involve the whole supply chain, i.e. suppliers and customers as well.
    Better supply chain visibility gives you the possibility to improve your sales results through targeted marketing. Collaboration with suppliers and customers makes you even more responsive to customer needs. Advanced planning options enable you to take decisive action in the face of market changes. Work together with your S&OP partner to decide which tools to use, e.g. demand sensing, demand shaping, multi-echelon inventory optimization (MEIO) or leading indicator forecasting, and set up the process accordingly.

Step 3: Choose the right kind of vendor

Once you know which phase you are in and where your priorities lie, you can start comparing the various vendors. Bear the following aspects in mind:

  • If you want a real S&OP solution, choose a specialist
    Lots of ERP vendors claim to offer S&OP, but ERP is actually very different so it will always be suboptimal for S&OP purposes. In fact, ERP and S&OP are complementary. Read more about why ERP and S&OP are a match made in heaven.
  • Choose a modular system
    We all know how frustrating, lengthy and expensive ERP implementation projects can be. You want to avoid that. Thankfully, the latest S&OP solutions are modular, so you can add functionalities step by step. This ensures that you see results quickly, that the changes are more gradual for people and that you can spread the investment.
  • Select a proactive implementation partner
    The role of S&OP is to interconnect various departments, business processes and existing systems, so you want your S&OP solution to be seamlessly aligned with that. To achieve that, you need a partner who not only supplies the software but also coordinates the implementation, integrates the relevant systems and trains your employees. The partner needs to have the right technical expertise, of course, but it’s also important that you both click in terms of culture and approach; after all, the success of an implementation largely depends on the people involved!

Step 4: Focus on your processes

Software should first and foremost be a tool for supporting the processes. Your chosen software should also offer you new opportunities to improve your processes.

Collaboration is extremely important – with Sales in demand forecasting, for example, and with Marketing and Finance too in more advanced situations. Therefore, your S&OP software should support that collaboration, making it easier and hence more effective. It could help your Sales colleagues by only requiring them to submit demand forecasts in the case of strongly fluctuating demand rather than for everything. The stakeholder’s user dashboard should only present information that is relevant for that particular stakeholder. This improves both the working atmosphere and the forecasting accuracy, plus it takes up less time too.

That’s why you should also define which processes are important for your organization and which aspects of those processes you want to improve. Those aspects then become key criteria in your selection process.

Step 5: Make your wish list

Finally, you can actually select the software. The possibilities are almost endless. But with so many different functionalities, how can you choose the ones that really matter for your company? That fit with your processes? That really give you a competitive edge in your market? And that add value?

In most selection processes, it helps to draw up a Request For Information (RFI). As a vendor of S&OP solutions, we receive lots of RFIs. We’ve produced a checklist based on the most commonly asked questions in them. This could form a good basis for your own checklist when selecting an S&OP partner. The items on our checklist relate to:

  • Demand planning
  • Inventory optimization
  • Supply planning
  • Product segmentation and customer segmentation
  • Product management
  • Dashboards and reporting
  • Scenario planning
  • Integration with other systems
  • Project management and implementation support

You can use the aspects that are most important for your organization, both now and in the future. By taking this kind of structured approach to comparing potential suppliers, you gain a clear view of the software functionality.

But the second part of the selection process is actually even more important: drawing up a shortlist of vendors and setting up appointments with them. A face-to-face meeting is the only way to discover if you really ‘click’, and if the vendor will not only provide the right software but will also be a valuable partner during both the implementation process and the further development of your supply chain.

How to navigate through the digital IT implementation jungle?


In this recording, we look forward to enlighten you on how to implement S&OP software in your IT landscape. Nick Verstraete, Director of Service Delivery, will talk about the challenges, the fragmented landscape and his vision on IT software selection and implementation.

Nick

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