The sales and operations (S&OP) process focus on coordinating the diverse areas of a business, from demand forecasting to manufacturing capacity; supply chain management to inventory availability, to responsibly meet customer demand. The conventional process used in sales and operations planning involved the use of Excel sheets and paper binders to create (S&OP) plans came with its flaws.
For the reams of binders still in use in some manufacturing facilities today, the susceptibility of physical records to disintegration and loss means historical sales data can be lost. While for the use of Excel sheets, human error and the complexities of analyzing years of historical data to forecast demand has led to inaccuracies. These flaws are why as much as 40% of manufacturers struggle to fulfill customer orders.
To eliminate the accuracy and data integrity problem that came with developing S&OP plans using conventional methods, a paradigm shift was needed. This paradigm shift brought the use of sales and operations planning software to the forefront. Today, the S&OP process has become more agile as these software accurately stores data, analyzes collected data against a manufacturers capacity to plan for both short and long term customer demands.
Although the use of planning software has helped enhance the planning process, its use still comes with a peculiar set of challenges. According to Forbes, a lack of organization alignment between sales and operations teams and business stakeholders is one of the major issues S&OP software has been unable to breach.
It is a fact across manufacturing circles that if you ask each department how much inventory is needed for a production cycle, the answers you will receive will vary widely. For example, the accounting department will provide a number based on financial valuation while sales will push for higher numbers to meet ‘expected’ demand. Thus, a force for driving collaboration across every stakeholder in manufacturing facilities is needed for S&OP planning.
Enter the Digital Twin.
A digital twin refers to a digital replica of physical entities and the processes or systems around them. It provides a representation of both the assets and the dynamics of the operations that occur around them. In the case of S&OP planning, this means it creates a digital representation of the machines within a shop floor, the machine capacity, utilization rate etc. while taking into consideration available inventory and supply chain complexities.
Use Cases of the Digital Twin in Sales and Operations Planning
The digital twin provides insight and visibility into diverse aspects of the S&OP process. To understand how it accomplishes this task, breaking the application of a digital twin into three categories will help. These categories are: at the organizational level and the facility level.
At the organizational level, the digital twin serves as an end-to-end reference model that provides insight into every aspect of a manufacturer’s operations. This includes factory scheduling, machine capacity within specific time-frames, material flow, shelf-space availability, and how demand affects these important parameters. With this knowledge, decision makers will gain visibility into how specific decisions will impact every department and the production cycle.
The capacity to introduce constraints such as reduced or increased demand into a digital twin and see its effect provides manufacturers with the ability to link strategic plans to operational and tactical plans. Take for example a toy manufacturer creating its master production plans for December, during that period an increase in demand is generally expected. If available data from past Decembers buttress this fact, then the digital twin can be used to determine the effect of this increase on the facilities available capacity.
From the digital twin simulations using historical data, decision-makers will see how available assets and inventory will fare against increased demand within specific time durations. This analysis will then determine if more machines should be added to the shop floor or the supply chain diversified to get in more materials.
In a situation where a reduction in demand is expected, a digital twin can help with deciding on how to go about reducing production capacity and the available inventory to reduce material waste. It can also serve as the catalyst for inspiring the sales team to enhance their efforts in increasing demand.
At the facility level, the digital twin helps with refining scheduling and inventory management challenges. With a digital twin, facility managers can view the effects of underutilized machines on the entire production cycle and pinpoint the challenges causing this underutilization. If the challenges are due to inadequate scheduling of operations, an optimized schedule can then be created to ensure the facility functions at its optimal capacity.
The 5 Ways to Integrate the Digital Twin in Your Sales and Operations Planning
The organizational and facility-wide insights the digital twin provides a solution to a major challenge manufacturing organization face with planning which is the lack of organizational alignment. With visibility into cause and effect, the different teams or department within an enterprise are more likely to be on the same page when developing S&OP plans. You can take advantage of the insights a digital twin provides by integrating it into the following processes:
- Long –term planning: Digital twin technology provides a reliable foundation for manufacturers to create flexible long-term plans that take into consideration expected future constraints. These plans can include increasing the production capacity of a facility through infrastructure building or a layout redesign.
- Short-term planning: The uncertainty in customer demands and the need to avoid material waste means an S&OP plan must take into consideration fluctuating demand. A digital twin provides insight into the effects of varying demands on production operations and other interconnected processes in real-time. This visibility helps with creating flexible plans that benefit the organization.
- Capacity Planning: Capacity planning involves determining the production capacity a manufacturer needs to meet changing demands. The digital twin helps manufacturers understand their capacity and develop functional capacity plans that drive revenue growth.
- Inventory Planning: Integrating a digital twin into your inventory planning, management, and optimization plans provide a measure of certainty when dealing in an uncertain environment. With a digital twin, manufacturers can determine the number of raw materials needed to meet available demand and ensure the amount isn’t exceeded or not met. This ability is especially useful to the food and beverage industry or manufacturers of products with shorter shelf-life.
Conclusion
The digital twin serves as a single source of truth for both the conventional process and digital processes to S&OP. This is because it integrates the data collected from excel sheets, binders, planning software, IoT devices, and other industrial data capture solutions to create an accurate digital representation of the entire manufacturing process. Thus, a digital twin of your facilities will enhance the master production plans, S&OP plans, and every other initiative that ensures your facility runs at its optimal capacity.
You can learn more about how a digital twin can help your organization develop accurate strategic plans by requesting a live demonstration of the capabilities of Simio’s digital twin technology.