Experienced supply chain executives have likely been involved in multiple implementations of sales and operations planning (S&OP), but few have a process that functions as intended. S&OP success has eluded businesses for more than four decades, despite widespread support and employment of integrated processes.
A new white paper from UT’s Global Supply Chain Institute outlines what true demand and supply integration (DSI) looks like and the issues that contribute to ineffective results such as restricting integration to S&OP. The paper also provides seven best practices that benchmark organizations use to take DSI to an advanced level.
“S&OP is typically a tactical process; it addresses the work that needs to be done to balance demand with supply in the short run and respond to sudden and unexpected changes in demand,” said global DSI expert Mark Moon, one of the authors of Advanced DSI Best Practices and a professor in UT’s Haslam College of Business. “To fulfill DSI’s full potential, organizations need to apply it at a strategic business planning level.”
Most companies focus on a process or organizational structure to cultivate integration, but the institute’s research shows that benchmark companies create the right culture and reward systems to achieve DSI. These 18 companies, spanning consumer packaged goods, food and beverage, equipment, food service, physical distribution, and 3PL services industries, shared the seven key practices.
Senior leadership’s support for DSI as a growth enabler is a critical best practice, leading to a culture where the process is constantly assessed and mastery can be sustained through personnel changes and marketplace upheavals. Benchmark companies also demonstrate excellence in both demand planning and supply planning independently. They do this by devoting digital technology resources to improving the quality and productivity of DSI and recognizing the data produced through the DSI process as business intelligence.
HAVI, an advanced supply chain analytics service provider, sponsored the paper and provided a case study using DSI data to identify gaps between demand forecasts and goals. Analytics helped create a more objective view of the market in a best-practices company.
“Effective demand and supply integration (DSI) hinges on the right balance of process, participation and analytics, and when done well, is a vital driver in meeting and exceeding business objectives,” said Eric Pfeiffer, senior director of supply chain management, HAVI.
The paper also conveys five more basic practices that must be present in an organization before companies can leverage DSI at a benchmark level—all disciplines working towards a single goal instead of simply optimizing their function; basing demand plans on unconstrained demand and supply plans on demonstrated capacity; leadership owning the DSI push; DSI influencing business decisions; and the DSI process including results assessment and plan development.
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