Sales & Operations Execution: The Missing Link to Supply Chain Digitization
You know you need to digitize your supply chain, and most organizations begin this journey focused on S&OP or planning solutions, despite the fact that service levels miss planning projections 60% of the time, now there's a new strategic lever in Sales & Operations Execution, S&OE that can have immediate impact for any supply chain digitization project.
Don't Be Left Behind. Learn How To Launch A Sales & Operations Execution, S&OE Initiative.
Digitization initiatives are like standards - the nice thing about them is that you have so many to choose from.
But when supply chain organizations take on digitization initiatives, they usually only come in one flavor: investing more in planning solutions, despite the fact that service levels miss planning projections 60% of the time.
Actual Service Level vs S&OP Forecast
Source: 2019 State of S&OE Benchmark Report
What organizations really need is a solution for when things don’t go according to plan.
That’s where S&OE (sales and operations execution) comes in: a set of practices and tools that enable teams to track and resolve unplanned exceptions effectively.
“What organizations really need is a solution for when things don’t go according to plan.”
The best part? There are a few easy to implement practices that will help organizations bridge the gap between plan and reality so teams spend less time fire-fighting and more time streamlining workflows across multiple functions:
- Start tracking and socializing exceptions so that organizations have an idea of what is the current state of their supply chain execution engine.
- Create a cross-functional team that will own the tracking and help drive resolution of these exceptions.
- Enforce a daily, weekly, and monthly cadence of meetings to triage exceptions, analyze trends, and find opportunities for improvement.
- These best practices will help establish a structured S&OE process that will enable organizations to increase efficiency and lay the foundation for a truly digitized supply chain.
Your Digitization Efforts Have Been Focused on the Wrong Thing
We live in a world where consumers expect products at the click of a button, and businesses expect their partners to operate at an accelerated clock speed.
Today, more and more companies are budgeting for a new addition to their executive team: a digitization leader who can define strategies and find technologies to help their business keep pace with ever-rising customer expectations.
As Amazon continues to enchant customers with the promise of one-hour delivery, they are creating a market that is defined by impatience rather than brand loyalty.
In order to adjust to this competitive landscape, companies have been investing heavily in front-of-the-house technologies to promote seamless customer engagement. However, they have yet to fully tap into the potential of the back-end engine that makes and moves products around the world: the supply chain.
The financial health of businesses is directly - and profoundly - tied to the effectiveness of their supply chains. A small improvement in efficiency (e.g. less production waste across hundreds of factories) that provides just $.01 of reduced cost per unit could change the entire cost structure for a company. At the same time, more effective downstream operations (e.g better allocated inventory between global warehouses) can minimize stockouts and maintain high customer satisfaction levels, directly impacting top-line revenue.
“Finding and implementing the right technologies that can bridge all these entities and track the necessary information has been the enigma of the last decade.”
To any Chief Supply Chain Officer, this latent business potential in today’s sprawling supply chains is not news. They certainly haven’t been sitting around twiddling their thumbs, whistling showtunes, and waiting for Amazon to come eat their lunch. The problem is that supply chain operations are extremely complex in that they span dozens of teams and up to tens of thousands of external partners.
Therefore, finding and implementing the right technologies that can bridge all these entities and track the necessary information has been the enigma of the last decade.
Fortunately, the solution is less about specific technologies and more about acknowledging that the industry has been overly focused on just half the problem.
S&OE: the Key Step Towards Achieving Supply Chain Digitization
Every supply chain organization works around a planning time fence that separates operational planning and operational execution - between the “liquid” zone, where companies place purchase requisitions and planned orders based on demand forecasts, and the “frozen” zone where they need to fulfill purchase and sales orders within lead time. The former is what is known as S&OP (sales and operations planning). The latter is S&OE (sales and operations execution).
S&OP represents a 3- to 18-month strategic horizon, in which organizations model out plans for entire product families. S&OE complements this with a much more granular 0-12 week tactical horizon, where supply chain teams need to adapt the plan to match reality.
“Success is ultimately measured by how quickly and efficiently teams react to unplanned exceptions.”
Interestingly, supply chain IT solutions today don’t have an answer for this executional reality. For decades, companies have been investing almost entirely on automating processes in their ERP implementations and planning tools, and building advanced visualizations, forecast models and simulations, all to optimize the plan. And that’s left the customer-facing part of supply chain teams scrambling in the execution phase to prevent shortages and missed commitments with nothing but email, spreadsheets, and conference calls. And while supply chain teams are extremely good at fire-fighting last minute exceptions, these heroics are extremely costly and time-consuming.
The success of platforms like Salesforce, Workday, and ServiceNow point to the importance of incorporating a centralized system to help teams orient around a single source of truth and track resolution workflows so they can quickly respond to issues and repeat behaviors that proved efficient.
By nature, supply chains span dozens of teams and partner networks, and therefore, have led executives to believe they need to gather endless amounts of data before they can start honing repeatable processes.
S&OE Best Practices You Can Start Today
Beginning your digital S&OE journey is not as daunting as it seems.
In fact, there are a few things organizations can implement today that will have distinct and quick results like reducing stockouts, increasing efficiency, and improving customer satisfaction all while setting the foundation for a digital supply chain.
Step 1 - Start Tracking to a Single Source of Truth
A straightforward way to begin laying a foundation for digitizing S&OE processes is to start tracking exceptions and making that information more visible. Currently, unplanned exceptions filter into an organization through all kinds of channels and are hot-potatoed around via emails and spreadsheets. What’s needed is centralized incident tracking so these exceptions don’t fall between the cracks.
Rather than trying to automate processes across the organization all at once, the most effective digital transformation efforts start by simply documenting the current state and understanding what is working and what could work better. By systematically tracking how long each sequential exception takes to get resolved and what it took to resolve it, the supply chain will start to learn what additional information it needs, what techniques produce the best results, and what areas need the most attention. To ensure successful adoption, teams should have a weekly meeting where they discuss, prioritize, and align on the most important incidents to tackle, and what expertise and resources need to be allocated to drive resolution.
Step 2 - Foster Collaboration
Supply chains are like a grown-up (and ridiculously expensive) game of Telephone. You have a massive organization and information can’t move through the cumbersome structure of your expansive supply chain without getting distorted and delayed. As a result, you’re spending tens of millions on avoidable problems, while generating unhappy customers and angry executives. Every major supply chain issue impacts multiple functions and teams. However, supply chains today are measured and managed in functional silos: procurement has one set of KPIs, manufacturing has another, and logistics has a third. Projects and initiatives that require coordination across these functions historically fail because there is an absence of clear accountability and a lack of information sharing. These organizational silos undermine alignment and inflate the time between problem and resolution.
The solution is a virtual center of excellence that doesn’t focus on one function of the supply chain, but execution problems that span every function (e.g. inventory, sourcing, manufacturing, and logistics). This team will create and publish incidents as they arise, assemble cross-functional teams (e.g. by bringing together key people from logistics and planning to reduce route lead-times), assign owners to drive to the end-to-end objective, push third party partners to collaborate, and essentially connect the dots of your operation between external and internal teams. When the sales, inventory, planning, manufacturing, and logistics teams work together on solving issues, company costs decrease while revenues and customer satisfaction increases dramatically.
Step 3 - Start Your S&OE Drumbeat
In order to instill these practices into the DNA of the organization, it is crucial to set up a monthly S&OE drumbeat. The drumbeat is the operating cadence used by teams to derive insights from S&OE. The purpose of the drumbeat is to put in place the right operating model that will drive incident resolution, continuous learnings, and overall process improvement.
Tracking incidents, fostering collaboration, and following up with a monthly review will create closed feedback loop can help you iterate on processes while identifying the highest value-tocost improvement opportunities. This approach enables you to unlock bursts of value without the false expectation that you must wait for your data to be perfect before you can attack the current S&OE problem.
Small Steps, Big Impact: The Key to Achieving Supply Chain Digitization
S&OE has gone undefined because the amount of information needed to make good decisions in supply chain is overwhelming, and it has been difficult to parse out where to even begin. And while planning technologies are still very important to a wellfunctioning supply chain, only operationalized S&OE can have an immediate impact on costs, production efficiency, and the availability of product that drives revenue.
Fortunately, getting your supply chain organization on the right track for supply chain automation is very much within your reach. Because true innovation doesn’t mean “all at once” - it just means: take the right steps at the right time.
Coincidentally, innovation leaders have the opportunity to help their supply chain teams make sense of the noise. By finding tools that will support executional best practices and taking measures to instill these behaviors into the DNA of your company, you will lay the foundation for a supply chain that can take on a future of ever growing partner networks and customer expectations.
About Elementum
Elementum is the company behind the first cloud-native supply chain automation platform. In an age where instant gratification is the new norm and customer expectations are continuing to grow exponentially, successful operations need to adapt faster than ever to unplanned exceptions. Elementum’s platform centralizes information and communication to drive rapid resolution of incidents, enable cross-ecosystem execution, and ensure products are available at the right time, place, quantity, and cost.
See How Elementum Can Be Tailored For Your Business
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2019 Supply Chain Industry Sales & Operations Execution Benchmark Report
In this Sales & Operations Execution, S&OE, Benchmark Report you will learn the differences between Sales & Operations Planning, S&OP, and S&OE benchmarks and how they can lead your business to success. Download Now!
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In this how-to guide, we look at why many organizations have done the hard work of optimizing their sales and operations planning (S&OP) functions, but they haven’t closely examined their sales and operations execution (S&OE) capabilities. Download Now!
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