Within SAP, there are many ways to implement a Sales and Operations Planning (S&OP) process (cobbling together components). I can think of four and with the new release of SAP’s new S&OP product, I think that we now have five.
With the release of their new S&OP Hana product, it is an exciting time for SAP; and, I think a tipping point for the S&OP market. Let me explain…
This is SAP’s third attempt to launch a S&OP solution. As Hans Thalbauer, SVP Line of Business Solutions, presents the keynote for tomorrow morning’s session, the question for many attendees in the audience is “Will the third time be the charm?” They will question, “Will this S&OP release actually work?’
No one really knows the final answer. The product is early in its testing (Beta testing with five pilot customers) and I expect it to be expensive (although there is no official pricing). However, I like some of the product’s features and SAP is working hard to make is successful:
- Hosted Solution. It is SAP’s first off-premise, hosted supply chain application, and it was developed on the much touted HANA platform.
- What-if Analysis. The business promise is quick visualization of the supply chain for executive review and the use of what-if analysis using the HANA engine for parallel processing. The technology is one of two S&OP platforms (Kinaxis and Steelwedge) in the market with a specially architected data model just for S&OP.
- Collaborative Interface. The solution uses Streamworks to promote discussion of workgroups in the development of the S&OP process. While it is one of the first products to use an enteprise social collaboration tool, the functionality is very basic and lacks the the deeper functionality of Lithium or Jive, but is a stronger tool than Yammer.
However, as SAP rolls out the product, the positioning needs to be VERY CLEAR. Today, it is not. The presentation at the SAP CVN given to customers was vague and there was no direct answer to the attendees’ questions on how the new solution fits with other SAP products. Even internally within SAP, I sense a debate.
Why is this Interesting?
As supply chains have grown more complex, and outside-in, I think that there is a need for a specially architected solution for S&OP that sits above the traditional Advanced Planning (APS) footprint. I also think that there is a need for a S&OP execution tool to track the prior period’s plan and look at the validity of the assumptions.
Both are important. The need for a data model and supply chain visualization for S&OP has grown in importance. My perspective on this requirement has changed dramatically over the last year. With the Merger and Acquisition (M&A) flurry, 65% of companies now have multiple S&OP processes, layered over their multiple APS systems (could be multiple forms of SAP APO). With these multiple S&OP processes, there is a need for demand translation (translation from channel to manufacturing logic and translation across multiple equivalent units). There is also a need for what-if analysis for risk management and balancing of the external supply chain. Today, business users are frustrated with the lack of what-if planning tools and the visualization of the plans to drive action.
We are seeing the creation of a new category of applications for S&OP. For the last fifteen years, S&OP processes were supported by traditional APS solutions. There was a single process and a central planning department. S&OP was simply an extension of this original APS investment. However, for complex supply chains, it is no longer sufficient to morph demand and supply planning solutions for S&OP. The only other S&OP platform designed for S&OP in today’s market is Steelwedge. The SAP S&OP product is now a direct competitor for the Steelwedge product.
The Shaman’s Take
Does this mean that we no longer need SAP APO to support the S&OP process?
The SAP S&OP tool delivers against four principle benefits: what if analysis, visualization of options for the executive S&OP meeting, demand translation and execution tracking of the S&OP plan (e.g. how effective was the S&OP plan for the last period). However, the tool does not have the depth of optimization for manufacturing constraint analysis, determination of inventory strategies or the ability to determine the best constrained forecast. Since more than 95% of manufacturers have constraints, there are few companies that will be able to use this new SAP S&OP technology in place of an APS technology like SAP APO product.
What about inventory optimization? Do we still need an inventory optimization tool to support the S&OP process or is this product’s functionality sufficient?
Yes, companies should continue to use inventory optimization technologies with their S&OP processes. While the new product can be populated with inventory data, it lacks optimization to determine the form and function of inventory in the supply chain.
What about the integration of this product to corporate financials? Is this an Integrated Business Planning product?
SAP is attempting to fill this niche, but for me the jury is still out. The financial integration of this product is new and evolving. I expect for SAP to enrich this over time, but I think that there are still a lot of learnings to happen in this area. I would not recommend SAP’s S&OP product for financial integration of the S&OP process at this time.
I have SAP APO, why do I need this new product for S&OP?
For companies with increasing complexity, this product enables visualization, what if analysis and reporting. All three have been major complaints by SAP users.
So, for SAP, will this third try be a charm? It is too early to tell, but the release is promising. Since I come from the “show me state” I am still waiting to speak to “real companies” driving value before I give it a definitive thumbs up. Today’s pilots and testing of the product while promising, are not a full-scale test.
The ideal adopter is a SAP client with strong analytical skills and S&OP maturity. It needs more testing, but it is promising. The third try just might be a charm, but until the SHAMAN talks to a real customer gaining real value, she is holding her charm bracelet in her hand.
What do you think? Any experience with SAP HANA S&OP to share with the readers?