Moving Beyond the Traditional Through Supply Chain Planning & Optimization

Analyst Insight: Just about everyone involved in supply chain today realizes the importance of effective planning. Planning is becoming more connected with execution thanks to advances in technologies and processes, and it can be done in near real time with trading partners. This offers several potential benefits for cost reduction, service improvements and risk mitigation. However, beyond these advances in traditional supply chain planning are other planning topics that must not be overlooked. – Gene Tyndall, EVP Global Solutions, Tompkins International

Moving Beyond the Traditional Through Supply Chain Planning & Optimization

The first aspect of planning to consider is an operations strategy. Each company must decide what its operational capabilities need to be in order to enable its business strategies. Unless the business strategy and operational capabilities are closely aligned, there is a high risk of not being able to attain strategic targets for costs, services, inventories and customer experiences. The new multichannel world is challenging both B2B and B2C companies to keep up with customer demands and competitors. It’s all about operations strategies and capabilities. 

As plans are formulated to meet required capabilities, the company’s supply chains need to be assessed, including logistics networks and the four flows of goods, information, cash and work. This helps to decide which areas need to be upgraded, changed or improved. Enabling new capabilities can be complex, depending on how well the supply chains perform today and how they have been planned for tomorrow. These assessments are not periodic, but rather are nearly continuous in today’s rapidly changing markets. Continuous planning is required in order to achieve continuous improvement.

While sales and operations planning (S&OP) is considered to be somewhat traditional, most companies struggle with its effectiveness. Matching supply with demand is much more challenging than expected, no matter the industry or products. Certain leading companies are moving into integrated business planning (IBP) in which all units of the business are involved in deciding not only what the “single number forecast” should be, but also what amounts should be ordered and where those items should be located. As demand volatility continues to aggravate planners, more management attention and commitment to a disciplined process and schedule is necessary. It is critical to plan down to every 15 minutes, which will help align supply to demand. Beyond the traditional short-term S&OP (i.e., the next few weeks), smart planning also looks out over the next six months and beyond.

Planning for risk mitigation is another “beyond the norm” topic. All supply chain planners need to be involved in considering possible risks to their supply chains and planning for contingencies from unexpected events (e.g., weather, labor actions, sociopolitical events, human errors and computer-based errors). And there is one more “beyond planning” topic that is worth mentioning: the planning of change. Virtually no new initiative is ever adopted as planned, on time and on budget because of the natural resistance to change. While change management has received more attention recently, it is not planned well enough to ensure the effective adoption of the new process, new technology, or new policies of the business.

                                                 The Outlook

In 2014, expect to see these and other non-traditional planning topics receiving more attention and investment. No amount of traditional supply chain planning processes and tools will substitute for these critical needs. The lead times for these topics are too long for near real-time planning, tight integration with execution, or short-term financial impact. However, their financial and operational impacts and influences are evident in companies where these topics are ignored or poorly performed. Supply chain leaders are addressing these planning topics more and more for business benefit.

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