Strategic Supply Chain Planning

Supply Chain Planning is the part of the end-to-end Supply Chain Management (SCM) with the potential...

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Posted by Dave Food on Aug 1, 2018 9:41:19 AM
Dave Food

Supply Chain Planning is the part of the end-to-end Supply Chain Management (SCM) with the potential to provide market differentiation for companies. The specific processes to be followed are Supply chain network design, demand forecasting, inventory optimisation, supply planning, and S&OP.

Strategic Supply Chain Planning

The Chief Supply Chain Officer (CSCO) has emerged as a key stakeholder in the company to make supply chain transformation happens; his principal role is to provide a way for the supply chain to earn a place in the boardroom and drive strategies decision making. The need to reduce operating costs is still top-of-mind to focus on improving the supply chain planning process and to optimise end-to-end inventory based on customer service levels, in order to stay competitive within the industry.

Using Strategic Supply Chain Planning concepts to achieve corporate goals requires a combination of strategic actions, organizational capabilities, and enabling technologies. Strategic actions provide direct insight into respondent companies’ overall strategy and dispositions. It has to be noted that Best-in-Class, Industry Average, and Laggard companies have generally prioritised the same strategic actions; however, this does not mean that their organisational capabilities are the same.

The top two actions that companies are taking are demand management and inventory management. There has been an increase in intermittent demand; the main reason for the increase is the proliferation of multiple channels for sales as well as the growth in geographic sales regions, making forecasting demand difficult.

The general impression is that companies do have an excellent handle on how to come up with a target customer service level and the impact of service on reducing inventory. However, they do not calculate the cost implied in doing so. Increasing service levels and meeting it comes with a price – increased inventory. The goal of supply chain planning processes and associated technologies should be to provide clear visibility to the trade-offs between these two critical parameters – customer service level and inventory. Supply Chain Planning serves as a solution to enable companies to achieve supply and demand goals through greater optimisation of inventory management, forecasting, customer service and finance.

It is important to go slow in S&OP because of culture change needs to permeate through the organisation. Time is most important for the culture change to happen; that is why to go step by step is the most advisable thing to do.

Process, organisation, knowledge, technology, and performance management are characteristics that serve as a guideline for best practices and correlate directly with Best-in-Class performance across the key metrics. Whereas when it comes to more advanced capabilities such as simulation, network design, risk management, Best-in-Class companies do not have a significant advantage over all other companies. The reason is the fact that mastering these process areas is difficult – they involve the need for solution capabilities that go beyond the traditional supply chain.

The top barriers that companies face towards implementing supply chain learning technologies are:

• users are more comfortable with spreadsheets,

• lack of skilled resources within the company,

• applications are too expensive,

• applications are not integrated to ERP, SCM platforms,

• challenging to do what-if analysis users being comfortable with spreadsheets,

.

However, companies think Supply Chain Planning is too strategic to be outsourced. It indicates that the end users are not able to implement powerful technologies; that is why SCP capabilities are often obtained from consultants rather than being institutionalised.

The best approaches to resolve these challenges are a) to create a Chief Supply Chain Officer (CSCO) role with authority to impact significant change. Manufacturing, order fulfilment and procurement into the office of the CSCO ensure that there is a single point of accountability for the entire order-delivery process. b) Create a centralised supply chain organisation or a centre of excellence, with multiple business divisions that provide a single point of accountability for all supply chain issue. c) Focus on a high-level reporting designed for executives (mapping between operational supply chain metrics and financial ones, and allow drill-down capabilities into lower-level parameters. Continually monitoring the actual performance of the plan and ensuring that course corrections are made based on real events.

Benefits include:

 Increased forecast accuracy and lowered days of supply, while simultaneously improving customer service levels.

 Reduction and realign safety stock,

 Ability to manage demand and lead time variability.

 Collaboration between sales, marketing and operations, as well as with trading partners is improved, besides,

 Internal and external cooperation is enhanced while continuing to deliver the highest levels of service to their customers.

Supply Chain Planning is a function that does not need very tight integration with ERP due to its usage pattern. SC solutions are often used daily, weekly or in some cases, monthly, and the answers do not require a real-time transaction back-bone. The users of the settlement are also different from the typical ERP users, and the architecture is also very different from ERP.

In today’s dynamic business climate, it is not only sufficient to have a strongly documented “normal” process but also a clear understanding of how to address exceptions that may arise. Laggards companies can have a well-established exception management process, while average companies can segment the demand forecast based on critical product-customer characteristics. The practice of Supply Chain Planning is changing as you plan/think in scenarios over a term and review these scenarios continuously as time passes. The speed of information sharing and visibility is the key to making quick decisions, and this sharing of information should involve all stakeholders of this process.

Industry Average companies can segment the demand forecast based on critical product-customer characteristics versus Best in Class companies. By being able to perform Pareto analysis on the customer base using profit at the metric, the principal customers can be identified. Their customer service level requirements and the input of the account management teams of these critical customers can then drive the customer level forecasts.

Discrete manufacturing stands more to gain by enhancing this ability to collaborate with the customer. Building trust at the channel level that sharing their sales will help themselves eventually is the toughest part of achieving this goal.

 

Dave Food

Prophetic Technology

 

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