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ENABLING TECHNOLOGY
By Larry Lapide
(This is an ongoing column in needed to support the S&OP process. one starts to improve a business process.
The Journal, which is intended to However, often, without technology, a
give a brief view on a potential THE NEED FOR business process like S&OP is
topic of interest to practitioners of TECHNOLOGY cumbersome and can’t support the scale
needed to achieve all its benefits. In that
business forecasting. Suggestions
First and foremost, one needs to case, technology becomes necessary, but
on topics that you would like to see recognize that software technology itself not sufficient. Often, the process is
covered should be sent via email to is not very useful. It becomes useful when dealing with a large complex set of needs
llapide@mit.edu) that require a level of automation and
computational sophistication that goes
beyond what can be achieved with manual
T
his column represents the second processes merely supported by computer
of a three-part series covering the spreadsheets.
Sales and Operations Planning
(S&OP) process. As discussed in Part I, Take, for example, the planning needs
S&OP has been receiving a lot of of a typical Fortune 500 multinational
attention for the past couple of years. manufacturing company. Its S&OP
There are a number of industry-wide process may need to develop weekly plans
studies in the area. 6 to 18 months out for the following
supply-demand elements:
Companies are recognizing its value
in improving the tactical and operational l Customer demand in terms
planning to prepare the supply chain for ofStock-Keeping-Units (SKUs) at a
meeting anticipated customer demand. variety of shipping locations (i.e.,
S&OP appears to be driving supply chain SKULs). Given that products might
benefits such as better meeting customer be shipped from 25 or more plants
demand while at the same time resulting LARRY LAPIDE and distribution centers from
in reduced inventories and minimized around the world, it is not incon-
supply chain operating costs. Dr. Lapide is a Research Director at ceivable to have to develop weekly
MIT’s Center for Transportation and demand plans for over 100 thou-
Logistics where he manages its Supply sand SKULs over a 50-week time
In addition, an indicator of a longer Chain 2020 Project focused on supply frame — or 5 million planning
term interest in the S&OP process is the chain management of the future. He elements.
fact that, according to AMR Research, has extensive business experience in l Finished goods inventory replenish-
companies have spent over $12 billion in industry, consulting, and research, and ment requirements for 25 or more
supply chain planning application has a broad range of forecasting shipping locations would also result
software over the last 6 years. Yet, while experiences. He was a forecaster in in millions of numbers of planning
spending significant sums of money on industry for many years, has led elements.
S&OP-related software, they are not forecasting-related consulting projects l Production plans/schedules with
seeing the benefits they expected because for clients across a variety of industries, the corresponding component and
many did not change the process to fully and has taught forecasting in a college material needs of 15 or more plants
leverage the enabling technology. setting. In addition, for 7 years he was a would also require millions of
leading market analyst in the research numbers of planning elements.
Hence, the rationale for this column is of forecasting and supply chain
to see what kind of enabling technology is software. Given that there might be a total of