The environment in which chief supply chain officers find themselves has changed significantly in recent years, but most organizations have failed to adjust their approach to planning. 

The fundamentals of supply chain planning have been around a long time. They were designed in a way that makes the process the focal point for decisions — whether through strategic planning, sales and operations planning (S&OP), or sales and operations execution (S&OE).

According to Gartner’s 2022 Supply Chain Planning Business Case survey, few companies initiate the planning process as a purpose-built initiative, relying instead on fixed, cyclic planning to make decisions. This approach doesn’t fully address the level of demand, supply variability and complexity facing today’s supply chains. A new planning concept is needed.

Supply chains today need a model that aligns with the demands being placed on their organization. In response, forward-thinking supply chains are turning to decision-centric planning (DCP) for business decision-making.

Being decision-centric means that processes are designed to create the best possible outcome for the business, involving decision-makers and other stakeholders. DCP requires a rethink of traditional supply chain planning. Organizations must get better at taking advantage of available data, as well as advanced algorithms and other aspects of modern technologies that promise to make them more flexible and adaptable to change.

Ideally, DCP should be supported by modern, supply chain planning technology that enables the following four capabilities:

Continuous monitoring. In order to make decisions in a timelier manner, companies must be able to quickly detect when an event occurs that requires them to act. A triggering event can be anything that has the potential to disrupt planning and requires replanning, as opposed to cyclic or batch planning that occurs at a regular frequency.

Event impact assessment. When a change in demand or supply occurs, companies must be able to assess its impact. That will guide them in deciding which process to initiate, and which people to involve. Factors to consider in the evaluation include the decision category affected, the impact radius on the supply chain, and performance targets affected by the event in question.

Impact-driven decisions. Next, consideration must be given to whether or not a change is needed — and if so, when. Companies need to weigh business policies, rules, targets and thresholds to guide their decisions about when to take action. Based on an assessment of the decision’s urgency, they might need to initiate a process immediately — or, if the urgency level is lower, wait until a new, formal process cycle starts.

A decision-driven composable process. To increase decision-making agility and speed, processes must become more flexible as well as more frequent. This requires breaking down larger processes such as S&OP and S&OE into smaller pieces, so that new processes can be constructed. Most of these processes created on the fly will only have a lifetime equal to that of the specific decision.

Traditional cyclic planning has played an important role in helping companies in the early stages of maturity to create processes that are leaner, faster, standardized and less resource-heavy. But the ultimate goal is even more ambitious.

In today’s volatile environment, companies need planning concepts powered by strong technology support and focused on decisions. By using the concept of DCP, supply chains can become more resistant to volatility and changing conditions.

Pia Orup Lund is senior director analyst with the Gartner Supply Chain Practice.