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Decades after the introduction of supply chain planning technology, very few companies have mastered the art and science of supply chain planning – only about 10 percent are in the very early stages of maturity with a highly integrated supply chain environment, top-down and bottom-up oriented. Two-thirds of respondents said they were only moderately integrated in terms of planning processes and technologies. Clearly, there are many opportunities in supply chain planning for better leveraging technology and integrating into the business.
Opportunities for Significant Improvement
Fifty percent of the respondents identified forecast accuracy, sales and operations planning, integration of supply chain planning and execution, and integration of supply chain planning technology across the company as significant areas of potential improvement.
A major theme of the study was the desire for great visibility throughout the supply chain. A majority of respondents (53 percent) said more granular, real-time supply chain visibility would significantly improve planning processes, and more than one-third said visibility would modestly improve planning. The ability to achieve better visibility usually comes from internal execution systems, as well as from planning and execution with trading partners. In the end, high levels of near real-time visibility will cause operational planning and execution to merge into a single dynamic process.
Investing in Improvements to Supply Chain Planning
When it comes to supply chain planning team skill sets vs. needs of the business, very few companies – just 7 percent – see their skill sets as not well suited for demands. On the other hand, just one in six study participants believe their skill sets are well suited for the business’ needs. This begs the question: how much training are companies conducting to close this gap? Clearly, many companies need to be more proactive in closing their planning skills gaps. Closing this gap will enable more effective and efficient planning, which could further streamline operations over the subsequent year.
Participants also pointed to a number of technological challenges. Nearly half (45 percent) of participants cited the inability to model processes and data well enough as a top issue. Digitally modeling a supply chain or process is often at the core of a planning application. This is a challenge, as every sector and company is different, and therefore hard to handle in packaged solutions.
Another opportunity for better supply chain planning can be found in the tools used when planning. Despite the wealth of packaged software out there, many companies still rely on homegrown tools – 45 percent rely either extensively on homegrown tools or have more than one in-house developed application, despite a historical track record that shows in-house supply chain projects generally have much higher failure rates than packaged software deployments. Respondents indicated either they had special needs not well accommodated by packaged tools, or they believe they could save money by going in-house. Companies should conduct detailed cost/benefit analyses of maintaining in-house developed applications versus using packaged solutions. Additionally, many respondents (44 percent) do not believe they are not using all the capabilities offered by their software application, presenting a considerable opportunity for companies to evaluate their current solution and maximize on it by providing the necessary training or pieces/modules required by the software.
On the integration front, there will be tighter integration of planning and execution, with much shorter feedback cycles into planning, and ultimately a blurring of operational planning and execution. The majority of participants (67 percent) say they are at medium level of integration, with 13 percent at a high level of integration. A majority of companies believe supply chain planning software will improve substantially in coming years with much tighter integration and with execution playing an important role in that evolution – an important vision to keep in mind, given that aggressive adopters of supply chain planning technology perform better than the mainstream or laggards. The more aggressive a company is in its use of technology, the lower the average score (and the more effective its supply chain planning).
In summary, the study presented us with opportunities in five main focus areas:
• Sales and Operating Planning (S&OP): After all these years, improving S&OP remains a major opportunity. Few companies even today are highly satisfied with their S&OP processes. As improving S&OP is almost totally within a company’s own control, this should be a high priority, and companies should avoid settling for “just good enough”.
• Integration: Integrating planning and execution is a key current focus area. Several data points indicated that making tighter connections between supply chain planning and execution is an important priority for companies today.
• Investment: Most respondents expect strong levels of investment in planning technology. Even after two strong years of upgrades or new systems coming out of the recession, respondents overall indicated more investment was coming in planning processes and technology.
• Flexibility: Companies aren’t highly satisfied with current planning systems. They see the need for a better fit with business needs and more flexibility in modeling. It is a tough job for vendors to support the detailed needs of many industries.
• Visibility: The best opportunity to improve planning may be through enhanced visibility. Companies recognize the role supply chain visibility can play in improving planning results. Visibility generally comes from execution, not planning systems. Companies need to work to clearly link improved visibility with better decision-making.
Four notable trends are forming in the supply chain planning technology and processes. First, there will be a transition from S&OP to integrated business planning, which will bring with it two additional trends: moving toward more real-time planning environment, and increasing task automation. Last, there will be a marrying of supply chain planning and analytics, for increased visibility and better data for decision-making. These trends should converge to make supply chain planning a more deeply integrated process, both in terms of technology and across the business. By taking advantage of these trends, supply chain professionals can overcome some of the hurdles and challenges highlighted by the benchmarking study.
Source: Cognizant Technology Solutions
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