A new report from Nucleus Research, Value Drivers of Single Model S&OP, concludes that the historical disconnect between planning and execution in Sales and Operations Planning (S&OP) is best bridged by a single unified data model that allows companies to continuously synchronize their strategic, tactical and execution plans.
In addition, “supply chain modeling” has become the highest priority in Gartner’s Market Ranking of S&OP Capabilities, displacing “collaboration support with internal stakeholders”.
And finally Lora Cecere, CEO of Supply Chain Insights, has stated that unified modeling can bridge the divide between commercial and operational teams through a common language and objectives, and visibility into trade-offs to balance decision-making. This enables both sides to advocate their interests—yet make decisions based on the best overall outcomes for the company.
We’ve been promoting a single unified model approach for some time, and we see these analyst endorsements as a positive trend. Its needed because S&OP has promised to square planning and operations, but in reality there is still a disconnect—between tactical plans modeled on aggregate sales numbers, and operational plans that thrive on detailed data at the daily SKU-location level. The longer-term plans don't translate well into the execution plans—which themselves don't translate back up to the financial planning. That’s because companies typically have separate planning and operational models. The plan is conceived in one and executed with the other, creating a gap.
Nucleus found that, "Customers are better able to match production plans with operational execution with solutions that have a single data model… (and)…robust scenario generators that share logic across optimization engines." A single, unified data model depicts the immediate financial impact of plan changes. With a single version of the truth, planners can model scenarios for S&OP meetings, so stakeholders from sourcing, manufacturing, logistics, sales, and finance can assess the options and trade-offs. This, Nucleus says, cancels out the "push-pull of different departments that are typically siloed in their decision making." When each department offers up its own business reality, it's a painstaking and time-consuming process to reconcile the data. With a single data model, organizations don't have to sift through various spreadsheets to develop the operational plan.
A single unified model connects demand and supply in one place. Companies can calculate the demand plan, project their inventory requirements, and compare scenarios to calculate the best balance of constraints and trade-offs. For each scenario, planners have visibility down to the SKU-location level, to evaluate capacity and stocking needs. This detailed plan can then be presented to executive management for review.
Uniting planning and operations in one model also enables companies to reconcile customer constraints with their own high-level decisions and performance metrics. It also ensures that “demand planners cannot generate and deliver a plan that is impossible based on supply constraint," the report said.
It looks like a single unified model covering both planning and execution is here to stay.
Click below to read the new Nucleus report on employing a single model for Sales and Operations Planning: