S&OP and AI: technology helps, but humans decide

Thou shalt… make choices

Does your S&OP process feel like a chore, in which you keep looking at the same figures without anything happening? Then something has definitely gone wrong.

Before we zoom in on the role of AI within S&OP, it is essential to first have a clear understanding of S&OP’s intended purpose. The five steps in the S&OP process (product review, demand review, supply review, financial consolidation and management review) are not about perfecting plans or holding well-organized meetings. Instead, this structure is about making – and subsequently executing – medium to long-term decisions that guide the business and determine its success. These decisions ensure a shared vision of what lies ahead, creating direction, consistency and focus. We may never lose sight of that goal.

This brings us straight to the heart of the matter: decision-making. The aim of S&OP is not to identify a number of best possible scenarios and gaze at them with satisfaction. The aim is to make choices, communicate them clearly and ensure that everyone understands and adheres to them. Without explicit decision-making, S&OP loses its value.

Interplay of elements

But how are effective decisions actually reached? In practice, it is an interplay of five elements: ambition, reality, modelling, confident preparation, and risk. Together, they determine the quality of the final decision. And this is where it becomes clear that decision-making within S&OP is essentially a behavioural science issue rather than just an information science one. That insight is crucial to understanding where AI has enormous added value – and also where it does not.

Let’s look at these elements one by one. Ambition, or in other words strategy, is pre-eminently a human endeavour. Setting stretched targets, making strategic choices and determining the direction of the business should never be left to AI. These are the management team’s responsibilities. Human judgement is especially indispensable when it comes to the broader, more complex company mission. This ambition is also reflected in your S&OP process, because that is where it is realized.