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08 Sep Why The Real S&OP Business Case Has Nothing To Do With S&OP

(By Mike Raftery)

It seems lately that the collective supply chain world is all at once evaluating their business cases for the S&OP module of the Integrated Business Planning suite from SAP.  When I have seen these evaluations occur, they usually occur in relation to other S&OP tools (yes shocking, but others do exist).  That is a bit misleading since in today’s business environment, nothing exists in a vacuum.

The best business case to make for S&OP running on IBP is to realize the benefits of the other applications, which can actually drive hard cost savings for a supply chain:

    • Inventory on IBP can save real capital dollars by ensuring the right inventory is kept at the right location.
    • Demand planning can improve forecast accuracy, improving service at a reduced cost.
    • Supply planning can ensure the product is made in the most efficient manner possible, saving labor, raw materials and transportation costs.

All these applications will result in real dollars for a supply chain.  But where does S&OP fit?  Where do you see benefit from better information, stronger workflows and supply projections?  Unfortunately, not in real dollars, at least not directly.  Efficient processes can be quantified in headcount, and nobody wants to sign up for that voluntarily.

The business case for S&OP is realized by turbocharging all the other modules around it.  The inventory plan is better because it can get a sanity check in S&OP against supply.  Demand planning is better because the plan can be checked against financial impact and supply planning is better because they get a faster line of sight to inventory projections.

So if it’s hard to measure the benefits directly, what does that mean for S&OP?  Does it mean that it’s not useful?  Not worth buying?  Not at all.  An application like S&OP with the processes to support it becomes the glue that holds everything together and the turbocharger that makes all other modules perform that much better.  And what is that if not priceless?  (See vendor for actual price list).

If you haven’t already, check out our IBP in 30 minutes series on YouTube.

The War Against Poor Safety Stock Management Part 1
Why IBP Is Hard to Sell (and Buy)