What Does World-Class Supply Chain Planning Look Like?
Omnichannel customers, increased product customization, and the emergence of non-traditional competitors all demonstrate that the old methods of brute force execution and elbow grease will no longer suffice when creating a supply chain.
Relying on a “can-do” spirit is not enough—businesses must excel at operational planning across multiple dimensions to not just win, but to remain competitive. If they don’t, they’ll pay the price with a higher cost structure, stranded capital, and defecting customers.
And here’s the catch: Despite its criticality, most companies are very poor at supply chain planning. In any given industry, only a small fraction would be referred to as leading-edge planners. Bad data, disconnected systems, a lack of human talent, and siloed functions all conspire to make effective planning a very hard target to hit.
But despite its complexity, there is a recipe for deploying a set of world-class supply chain planning capabilities. Our experience has distilled that recipe into four key attributes that when properly implemented and consistently executed, can lead to competitive advantage.
Planning Capabilities Must be Reflective of Your Competitive Strategy
Competitive strategy commonly optimizes one of three go-to-market themes: customer intimacy (CI), operational effectiveness (OE), or product leadership (PL). Regardless of yours, the elements of that strategy should be the foundation of your planning capabilities and provide the basis for designing the associated tools, metrics, business logic, and technologies.
For example, if indeed you are pursuing a high-touch, CI-style strategy, your planning toolset must focus on maximizing customer service levels at the expense of all other trade-offs. To do otherwise would misalign the organization.
Planning Capabilities Must Be Integrated Both Vertically and Horizontally
Vertically integrated planning means that you have an aligned, connected stack of technical and functional components that stretches from your strategy layer down to your lowest transactional layer. This ensures strategic alignment in the organization.
Horizontally integrated planning means that you have the right engagement models in place with both customers and suppliers, to collect their data and turn that into proactive event management in both demand and supply planning.
The effectiveness of supply chain planning is only as strong as it weakest link. As such, driving the full value out of a planning infrastructure is only achievable if it’s fully integrated top-to-bottom in the enterprise (vertically), and across the ecosystem with suppliers and customers (horizontally).
Planning Capabilities Must Be IoT Enabled and Digitally Powered
IoT enabled means that the proper infrastructure is in place to collect low-level data from across the ecosystem to drive your planning capabilities. This means that sensors and tags are in place at the transaction level; gateway and edge devices are collecting and analyzing data from every nook and cranny of your network; a connectivity platform is unifying disparate streams of data from various devices; and a secure cloud is storing and making the data available for analysis.
Digitally enabled means that the collected data is presented to a powerful set of analytic tools with rich functionality for analysis, simulation, and optimization. Your digital planning tools can evaluate millions of options in a short time frame and push those newly optimized plans back out to a federated network of planning hubs for execution. Clearly this is not your father’s planning infrastructure anymore; to win in the Industry 4.0 marketplace, you must radically evolve your toolset.
Planning Capabilities Must Be Supported by an Ownership and Governance Program
The pace of change has quickened—technology, products, customers, and industries are all rapidly evolving. The “clockspeed” across industries has clearly sped up, indicating that your planning infrastructure must also evolve to match the ebbs and flows of your business. That is only possible if there is clear and agreed-upon ownership structure of the planning infrastructure by senior leadership. For example, the sales leader should own and maintain the processes and data that comprise demand planning programs.
One of the worst outcomes a company can face is to invest time and money into refreshing their planning infrastructure only to discover that a scant 18 months later, the toolset no longer reflects leading practices or is not meeting key business requirements.
And finally, the governance of planning is critical because it defines critical policies: (a) the organization ownership of the capabilities we just discussed; (b) the actions required to evolve and maintain the capabilities as the business evolves; and (c) the performance management strategy that assesses how well your capabilities are performing. A weakness in any of these three elements will dilute your planning investments and weaken the competitive advantage you could be reaping.