- The Idea Behind DSI
- How DSI Is Different from S&OP
- Signals that Demand and Supply Are Not Effectively Integrated
- The Ideal Picture of Demand Supply Integration
- DSI Across the Supply Chain
- Typical DSI Aberrations
- DSI Principles
- Critical Components of DSI
- Characteristics of Successful DSI Implementations
- DSI Summary
How DSI Is Different from S&OP
Many authors have, over the last 20+ years, written about Sales and Operations Planning (S&OP), and to some, the earlier description of DSI might sound like little more than a rebranding of S&OP. Unfortunately, S&OP has a bit of a “bad name,” thanks to ineffective process implementation. In our observation of dozens of S&OP implementations, we’ve seen several common implementation problems that have contributed to a sense of frustration with the effectiveness of these processes.
First, S&OP processes are often tactical in nature. They often focus on balancing demand with supply in the short run, and turn into exercises in flexing the supply chain, either up or down, to respond to sudden and unexpected changes in demand. The planning horizon often fails to extend beyond the current fiscal quarter. With such a tactical focus, the firm can miss out on the chance to make strategic decisions about both supply capability and demand generation that extend further into the future, which can position the firm to be pro-active about pursuing market opportunities.
Second, S&OP process implementation is often initiated, and managed, by a firm’s supply chain organization. In our experience, these business-planning processes are put into place because supply chain executives are “blamed” for failure to meet customer demand in a cost-effective way. Inventory piles up, expediting costs grow out of control, and fill rates decline, causing attention to be focused on the supply chain organization, which immediately points at the “poor forecasts” that come out of sales and marketing. The CEO gets excited, S&OP is hailed as the way to get demand and supply in balance, and the senior supply chain executive is tasked with putting this process in place. Where the disconnect often takes place, however, is with lack of engagement from the sales and marketing functions in the organization—the owners of customers and the drivers of demand. Nothing can make S&OP processes fail any faster than having sales and marketing be non-participants. In more than one company we’ve worked with, people describe S&OP as “&OP”—meaning that “Sales” is not involved.
Third, the very name “Sales and Operations Planning” carries with it a tactical aura. As argued in an upcoming section, many more functions besides Sales and Operations must be involved in order for effective business planning to take place. Without engagement from marketing, logistics, procurement, and particularly finance and senior leadership, these attempts at integrated business planning are doomed to being highly tactical and ultimately disappointing.
Thus, although the goals of S&OP are not incompatible with the goals of DSI, the execution of S&OP often falls short. Perhaps a new branding campaign is indeed needed, because in many companies, S&OP carries with it the baggage of failed implementations. Demand/Supply Integration is an alternative label and a new opportunity to achieve integrated, strategic business planning.