APPLYING SIMULATION TO S&OP PROCESS
Inputs from previous meetings can provide important information regarding the adjustments to be made to the model and, above all, regarding the scenarios that management wishes to test in the future.
The collection of hypotheses and alternatives is in fact fundamental to create different scenarios with the available model and provide the next meeting with the projections necessary to make correct decisions.
All useful data for feeding the model are collected, organized and inserted into it. Obviously if the simulation model is already interfaced with the main company databases (such as sales, stocks, production orders, etc.) this phase is carried out (almost) automatically, constituting a high time saving.
In this phase it is also necessary to collect data useful for the creation of alternative scenarios that must be discussed in the meeting.
Any expected changes to this plan can be used to create further scenarios, to be combined with those previously identified (for example, there may be two sales plans conditioned on whether or not an important contract with a customer is renewed).
In this phase the simulation model plays an important role in facilitating production, inventory, purchasing and transport planning.
As with traditional planning tools, the model allows you to allocate demand (derived from the previous sales plan) to the different nodes of the supply chain and derive the related cascade requirements.
Model is used to develop all the different scenarios that have emerged during the previous phases and test their joint feasibility.
Once all the different scenarios have been simulated, the results obtained are consolidated to provide management with a synthetic but holistic vision of the performances.
In this last step decision makers analyze the data previously processed by the model and validate or modify the sales and production plans.
Striking the right balance between users and model
The introduction of interactions between decision makers and the simulation model is a delicate issue, as it introduces an organizational change in the way in which decisions are analyzed and selected: it is important that those who participate in the decisions recognize the model as a tool of credible support, to be used to validate or not ideas regarding the business.
The credibility of the model is therefore fundamental for its correct use; a model that is not very credible or realistic will be subject to criticism regarding its adherence to the decision-making situation and will be abandoned over time.
If on the one hand the model must be “accepted” by the actors in the decision-making process, on the other hand it must not replace or limit the behavior of decision makers. A situation in which the model alone “makes the decisions” simply because it analyzes them in a purely objective manner is unthinkable.
As already mentioned, the model must constitute a valid support for decisions thanks to the possibility of evaluating the systemic effects of certain choices, however it is not able to capture the less rational and objective aspects linked to each decision which are equally critical for their success.
Therefore, the figure of the human decision-maker must always be the protagonist in all decision-making areas, both because he is able to generate ideas and alternatives and because he takes responsibility for decisions (it is in fact unthinkable to entrust the responsibility of a choice to the model itself) .
Conclusions
It clearly emerges that the model supporting S&OP, if correctly implemented and used, can positively overturn some typical activities of S&OP cycles. For this to happen, however, it is necessary to introduce a new way of working in the company that involves interaction with the digital component of the model: this integration is often not easy and therefore must be appropriately facilitated by a change management plan that is able to adequately train the people involved and encourage them to use the model.
Finally, it should be highlighted that the model supporting S&OP, thanks to the possibility of developing alternative scenarios, constitutes a valid tool for carrying out analyzes of investments inherent to the supply chain considered.
In fact, the model allows, through scenarios, to quickly evaluate changes in company performance and guide management towards more informed choices that are not limited to the economic-financial aspect alone.
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