Companies struggle to find good tools
Many companies who have gone down the sales & operations planning (S&oP) route over the past few years are now on the threshold of the next phase: to make demand and supply planning financially relevant and to implement scenario planning. the question of which tools they can use to support these processes is causing headaches for a lot of them. there are three options: to set to work with excel, to develop one’s own solution or to purchase an off-the-shelf tool. most companies prefer the third option, but it seems to be very difficult to find good tools.
By Marcel te Lindert
Excel is an indispensable tool in sales & operations planning (S&OP), or at least that could be one conclusion based on the statistics. Research conducted among Dutch companies by Capgemini and SAP reveals that three quarters of them use the spreadsheet package for portfolio management and demand planning, which are two key parts of the S&OP process. And when it comes to supply planning, everyone uses Excel – often in combination with ERP and advanced planning systems (APSs). Although all of these are systems that provide a wealth of data, it seems that to gain real insight it is easier to export that data into Excel and set to work with all kinds of pivot tables and formulas.
The Netherlands is far from an exception in terms of Excel use. In fact, in a recent study by Bearingpoint among 168 demand planners in Europe, 43 percent named Excel as their most important planning tool. Meanwhile, according to research by the US firm Supply Chain Insights, a colossal 92 percent of companies utilise Excel in their S&OP process, often in combination with other forecasting, supply planning or business intelligence tools. Lora Cecere, founder and researcher at Supply Chain Insights, is disappointed by that high percentage. “Microsoft tools such as Excel or Access might be fine in the initial phase but they are not suitable for modelling the supply chain and ultimately establishing a successful S&OP process. It’s simply impossible to achieve an effective process for aligning the planning of supply and demand in that way.”
From volume to value
Lamb Weston Meijer implemented S&OP five years ago and took the next step a year ago by integrating the financial planning. As a result, Lamb Weston Meijer (LWM) now looks not only at the volumes but also at the value associated with them. “The Sales department knows the revenue value of its demand forecast and Supply Chain knows the operational costs of meeting that demand. Based on those figures we can forecast our company performance,” says Ton Maltha, Supply Chain Manager at LWM.
The company made a conscious decision to use Excel in this transition. “We were adamant that we didn’t want the integration of the financial planning to be a tooling project. The processes and the people are the most important elements and we’ve already got a solid basis with SAP. If that’s already all in place, you can achieve a lot without even more advanced tools.”
It helps that all five of LWM’s European production facilities are fully managed using SAP so there is no discussion about the accuracy of the data. The data showing the volumes that Sales expects to sell and Supply Chain expects to manufacture is extracted from APO, the SAP planning system. Those figures are converted into revenues and costs in Excel. “In addition to the most probable scenario we also have a high scenario and a low one: what will happen if things go better or worse than expected? For example, this year it’s much more difficult than usual to keep potatoes in storage. So what would be the consequences of reduced supply due to a large number of potatoes with quality issues? We calculate that in Excel and then we reintroduce those findings into our S&OP process,” explains Maltha.
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This article was first published in Supply Chain Movement 21 | Q2 – 2016