The year is 1991. Nirvana just released Nevermind, Baywatch is the hottest show on TV, and it’s your job to gather data to begin the next month’s S&OP cycle. As part of the S&OP process, you need to find the data you need, sort it out, and start the very manual process of figuring out what it all means.
Jump ahead 30 years and now data is fed in almost real time and we collect it in data repositories and lakes and store it in the cloud. We glean insight into future demand from this data with minimal effort and it feeds every function with the press of a button.
Traditionally, data gathering was recognized as the first step in the monthly S&OP cycle. I still see many textbooks and consultant diagrams express this as a formalized, first process step. Today, in the real world, however, data gathering is no longer a formalized process step in S&OP but rather a part of every function and process within the organization.
In recent IBF surveys, less than 3% reported using some formalized data gathering step. A larger percentage did report components such as statistical forecasting, baseline plans, month end close, report building, or other data related efforts. As far as a physical data gathering is concerned, it is a relic – a throwback to outdated technology and processes.
This is not to diminish the importance of timely, accurate, and meaningful data in an S&OP process. Data is still the oil of good S&OP. The only difference now is that you don’t need to mine it yourself. We can and should rely on technology, data warehouses, business intelligence and advanced planning systems, and begin to centralize data collection and governance that enable every business process and function.
Even though we may no longer have a formal data gathering step, data is still the starting point for our S&OP cycle each and every month.
S&OP Still Runs On Snapshots Of Data
Even though data today is dynamic and fluid and being updated in almost real time, for planning and S&OP we need static snapshots for comparisons and continuity. In the accounting world, a monthly closing process in your regular accounting procedures ensures that your numbers are reliable, stable, and accurate. We have a similar responsibility in monthly S&OP planning.
It would be next to impossible to track performance if numbers bounce around when new information is reported, or someone incorporates past information that wasn’t recorded in a timely fashion. Closing the books each month for S&OP and the data used for comparison should be done consistently and with discipline.
Whether it is a financial close or capturing inventory dollars or orders, there needs to be a beginning and end of every period we operate in.
We need to have a consensus-derived number that drives the process. While the forecast may be updated weekly or even daily, our plans need to be a snapshot of one of those forecasts in a monthly bucket. We are not blind to the uncertainties surrounding that static number, but plan for them at a strategic and tactical level.
How Should We Approach Data In 2021?
With data becoming part of every aspect of our S&OP process, it is easy to become complacent about it. Even though we may not call data a formalized step, it still needs to be part of the S&OP culture that supports data-driven decision making. We need to use data to help drive evidence-based decisions instead of those built on gut feel.
Data-driven S&OP processes recognize that the insights and recommendations that the data holds can help them make stronger, more informed decisions that move the company in the right direction. As they get results, they can look back and see which strategies led to the best outcomes to improve decision making going forward.
To Makes Decisions In Future, You need To Collect Data Now
Becoming data-driven involves more than technology and using the data you have. A solid S&OP process should continue to look at other data sources and insights that may provide additional information. Even if you may not be using the data today, consider what is available and what you can collect and store for later use.
As you continue your S&OP journey, you may find new uses for the data you currently hold or that new technology can extract value from previously untapped data streams. If you want to use data to drive decision making in future, you need to be collecting it now.
There is no question we are dealing with more data in a greater variety of formats, and it is coming at us faster than ever. With the onslaught of big data and the need to covert this data into insights, we require processes and techniques to manage not only the data we have now, but the data that is yet to come.
Inside the S&OP process we use this data to help build each step of the process and glean insights to make better decisions along the way. While we are no longer calling for a formal data gathering step, for a successful S&OP we are calling for a company to have in place a centralized data governance, collection and analysis process to help advance to the next level of S&OP.
For more insight into forecasting and planning best practices, join me at IBF’s Business Forecasting, Planning & S&OP Conference in Orlando, held from October 19-22 at the Wyndham Orlando Resort. The biggest and best event of it’s kind, it’s your opportunity to learn best practices in S&OP, demand planning and forecasting, and network and socialize in a fantastic setting. See here for details.