Success Impaired: Common Pitfalls of S&OP and Supply Chain Planning Technologies...And How To Avoid Them

Executive Summary

Business continuity concept
Author: Kenton Phillips
With over 27 years of experience in strategy, operations, supply chain, digital, aerospace, and advanced technology Kenton has delivered tremendous operations and profitability improvements for a wide range of organizations from Fortune 500 multinationals to private equity and startups.

The need for supply chain flexibility and resiliency has been a popular theme in recent months.  While some companies have made progress toward that goal over the last several years with improvements in Sales & Operations Planning (S&OP) processes and the use of supply chain planning technologies, many of these same companies still lack the full flexibility they envisioned.  But that persistent inability to achieve maximum flexibility and responsiveness amidst rapidly changing circumstances also leads to the inability to achieve perhaps the greatest reward—maximum profitability.

Imagine for a moment if your company had such extensive flexibility, insight, and control of production and supply chain operations that you could respond to actual or anticipated market or supply disruptions in minutes and with a comprehensive, fully feasible plan that accounts for all supply side constraints and customer requirements while delivering the greatest profitability.  What would that mean to your business?  Imagine if you could do this multiple times per week or per day, as needed, rapidly redirecting focus and resources where needed and proving customers more nimble, reliable, and service-minded delivery than your competitors?  What would that mean to your top and bottom lines?

Technology-enabled S&OP/IBP and production planning promises have driven expectations of achieving these visions, but results have often failed to fully deliver.  Some companies have experienced respectable improvements in their supply chain planning process and accompanying business results, while others have struggled with creating real-world, actionable scenarios with reliable operational and financial impact predictions.  Wherever they fall on this spectrum, many companies implementing these processes and supporting technologies have come short of achieving the maximum benefits that quick, flexible, accurate, and holistic supply chain planning can offer.  This applies to most manufacturers, but it especially affects process industry manufacturers.

While the ability to realize these seemingly idealistic visions has been available for at least the last 15-20 years, the S&OP/IBP, supply chain planning, and detailed scheduling technologies used to achieve them are often inadequately designed to deliver those results.  The gap between expectations and reality can be particularly disorienting when some technology reviewers suggest S&OP/IBP technology leaders exist, but those leaders cannot fully deliver with nimble, holistic, and accurate “what-if” scenarios.

This article explores the common misinformation regarding S&OP/IBP and supply chain planning technology and why many projects, even if somewhat beneficial, are also often underwhelming.  The core problem involves the inner workings of these technologies combined with the principles of constraint modeling and optimization, which are inherently intricate and not always intuitive.  In fact, this very complexity is possibly a key reason this issue has persisted for so long.

But leaders can avoid these pitfalls and achieve those maximum operational and financial outcomes by understanding why some supply chain technologies–even by some of the biggest, most ubiquitous vendors–leave significant scenario modeling limitations and profit optimization challenges in their wake while others have fewer problems.  This article comprehensively explores the root causes of these limitations and challenges in multiple chapters (or parts), centering on five key principles.  As it delves into each principle, the aim is to clarify the underlying design concepts, operating implications, and the real-world business impacts they drive and to highlight the extensive overlap and shared benefits with leading technological trends including digital transformation, Industry 4.0, and digital twins.

Five Principles
  1. If a solution cannot adequately model a production/operations environment, then it cannot create realistic scenarios and it cannot optimize those scenarios.
  2. Solver algorithms add an obscure boon or barrier, but true optimization and synchronous solving approaches deliver the best outcomes.
  3. Different industries have different levels of production complexity and therefore require different levels of production modeling capability.
  4. Accurate modeling and optimization capability should be the primary factor driving a detailed scheduling or S&OP/IBP technology purchasing decision for manufacturers.
  5. The entire production operation should be accounted for when selecting detailed scheduling and S&OP/IBP layer technologies.

As a guide to executives and supply chain leaders alike, the last section explores the broad range of social and technical dynamics that cause these underlying problems to manifest into ill-fitting technology choices that limit flexibility, “what-if” scenario modeling, risk analysis, and ultimately, profit potential.   Given the significant opportunity costs that accompany an ill-fitting choice, this last section also outlines five recommendations to help make supply chain planning technology selections that enable your organization to attain that vision of full flexibility and responsiveness and the maximum financial benefits that come with it.

Due its length, this article is published online in multiple parts. Click on the sections below to view other parts of this article, or get the full PDF version immediately by requesting the download link below.


Success Impaired: Series Table of Contents & Navigation

> Next Section: Introduction