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