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Stalled Today? Prepare for Change with Supply Chain Planning, Optimization

Analyst Insight: Buckle your seat belts. Supply chain planning, a mature and stagnant technology market, is changing. This change will not be gradual; instead, it is the redefinition of planning platforms. The value proposition is large; but not as large as the change management hurdles. To prepare, we have to learn, unlearn and prepare to relearn a new language and way of thinking. - Lora Cecere, CEO and Founder, Supply Chain Insights

Stalled Today? Prepare for Change with Supply Chain Planning, Optimization

Today, the average company has more than 150 systems. There is not one but many solutions for supply chain planning. The satisfaction level with planning is low. It is much higher with supply chain execution software (transportation and warehouse management).

Despite years of spending, and promises, the hard reality is nine out of ten companies are stuck on improving operating margin and inventory turns. The second tough reality is that most of the planning today in the organization is still being done through spreadsheets. As supply chains grow more complex, there is a slow realization that the supply chain cannot be effectively modeled through spreadsheets; and that there needs to be a better way.

Most are also learning, albeit the hard way, that many of the principles fundamental to the definition of supply chain planning in the last decade are actually detrimental to corporate performance. Examples include:

Supply Chain Planning Tightly Integrated to Enterprise Resource Planning: In the 1990s, a vision of the tightly integrated enterprise evolved where supply chain planning would be tightly integrated to supply chain planning. Many of these concepts were implemented in the enterprise resource planning platforms. While this architecture drove speed in planning, only 11 percent of companies are currently satisfied with their "what-if analysis" and only 24 percent of companies can "easily get to cost data for supply chain planning." The systems are inflexible.

 Inside-out Planning: The current definition of advanced planning systems (APS) was developed in the 1990s when oil was 1/3 the cost that it is today, supply chains were shorter and the technology vendors were constrained by 64 bit in-memory models. New planning solutions are emerging that combine optimization with cognitive learning, in-memory analytics with visualization, and concurrent planning that enables a common model for strategic, tactical and operational plans.

 Need for Supply Chain Strategy: In the evolution of current planning processes, most companies believed that they needed to start with process, but as they try to build and synchronize supply chain functions end to end, they quickly realize that they need to align functional outcomes based on a definitive strategy. Today, less than 5 percent have defined the strategy to the level that is needed to ensure that planning has an aligned outcome cross-functionally. This work is ongoing with one in three companies greater than $5bn in revenue having a supply chain center of excellence and one in two of these succeeding. Companies need to start with strategy, and then align technologies to drive the right process. Without this approach, projects end in frustration.

To traverse the change, and take advantage of the advantages of the new systems companies need to learn from the past, to unlearn the conventional definitions of planning to embrace new possibilities. Shortly, the supply chain planning definitions of the 1990s will be a dinosaur.

                                              The Outlook

This change will not happen overnight, but the momentum is growing and new supply chain planning solutions are emerging. The market is returning to best-of-breed solutions. The new names may seem unfamiliar, but there is a new cast of solution technology vendors emerging, including AIMMS, Enterra Solutions, LLamasoft, Quintiq, SAS, Solvoyo, and Terra Technology. ... all are taking supply chain planning to a new and different level.

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