S&OE, More Than Your First Alert and Response in Supply Chain

Let’s say you plan your vacation to drive from LA to San Francisco on a certain date, weeks or even months ahead. How accurate is this plan? Especially if you are not looking at all your constraints such as children having school during the planned period, or your boss may ask you to stay in the office on those days or someone in the family getting sick. This kind of rough planning is equivalent to S&OP planning. It is inaccurate and gives you a false sense of confidence. But let’s assume that nothing goes wrong and you start your drive on the day you had planned. Then you run into a traffic jam or flat tire or it starts raining really hard or God forbid brush fire on the planned route. Your first response, as to what can be done or what to do, comes from S&OE. Why, because S&OE has a more accurate model of the world and can figure out all the alternatives and make a quick and optimal decision that can be followed.

However, S&OE is not just for responding and short-term reaction. The fact that S&OE has a much more precise model of the world enables making decisions with much higher quality. Decisions that are optimal enough for execution. In other words, you can produce plans which are more than 98% accurate. You may ask what about getting sick or rain, how do we avoid that? Indeed, that can be taken into account using predictive methods of machine learning. Depending on the time of the year, location and other factors the system can have a high confidence in predicting potential issues that might arise. Contrary to what some think of S&OE as a bridge between S&OP and execution, we feel that it is a continuum of planning to execution. Therefore, based on model accuracy and granularity of data the quality of plans will improve. Hence executable plans are produced resulting in autonomous planning.

S&OE also produces much more accurate financial projections. These include use of more expensive alternate resources, substitute part numbers, expediting needs and lateness costs amongst others. These can all be visible ahead of time not just at the time of execution. S&OP financial projections are at a very high level and do not reflect the reality on the ground. S&OE, however, is capable of projecting much more financial consequences of your operational projections. It can also keep your customers happy, because you will deliver when S&OE says so. No BUTs or IFs! To learn more about S&OE and model accuracy click here.