Getting Confused about Supply Chain Planning?

Stephen DeAngelis

April 23, 2019

We all know planning is important. Benjamin Franklin once declared, “By failing to prepare, you are preparing to fail.” While that concept seems straight forward, supply chain planners are faced with a constellation of articles talking about sales & operations (S&OP) planning, demand planning, integrated business planning, periodic planning, continuous planning, concurrent planning, and the list goes on. Amidst all these articles, Lora Cecere (@lcecere), founder and CEO of Supply Chain Insights, believes too many supply chain professionals have forgotten the fundamentals of planning in the digital age. She writes, “We have lost the ability to have a discussion on the fundamentals. It drives a supply chain planning gal like me crazy.”[1] At its most fundamental level, Cecere states, supply chain planning is about managing inputs into a data model to drive outputs. The goal, she writes, “should be about the ‘success of the model output’ to drive value.” Planners should keep that in mind as they decide what planning process best fits their business.

 

Integrated business planning and cognitive computing

 

The digital age is characterized by connectivity, including connectivity between all parts of an enterprise. It may have made sense to organize around and optimize business silos during the industrial age, but no longer. Today most analysts talk about business integration and collaboration; which is why integrated business planning holds such appeal. Anil Gaddi, a Managing Consultant in Tata Consultancy Services’ Innovation and Transformation Group, explains, “Digital transformation for supply chains is generating large volumes of data. Enterprises need a strategy to align the use of this data with their critical goals, while driving data simplification. This demands sophisticated supply chain planning processes that contextualize data, helping organizations optimally respond to changing market dynamics. Integrated Business Planning (IBP), which involves the synchronization of commercial, financial, and supply chain plans into one holistic management process, is critical to supporting the evolving requirements of modern supply chains.”[2] Alexa Cheater (@Alexa_Cheater), Product Marketing Manager at Kinaxis, agrees, “IBP can take your supply chain to the next level of performance.”[3]

 

One reason Cheater believes IBP can take supply chain planning to the next level is because a mature IBP process leverages artificial intelligence (AI). Cheater explains, “Just as with other areas of supply chain management, machine learning and artificial intelligence are likely to find roots in IBP, primarily through the introduction of prescriptive analytics. Unlike descriptive analytics, which looks at what happened and why, and predictive analytics, which explores what will happen, prescriptive analytics suggest actions and shows the implication of each potential option. It tells you the best way to get to where you want to be.” That’s exactly what Cecere says needs to happen when a planning system is fundamentally sound — integrated inputs drive insightful outputs. AI is required for most cutting edge planning models because there are so many variables that must be taken into account.

 

Jeff Bodenstab, a supply chain software marketing executive at ToolsGroup, believes the introduction of AI into the planning process will inevitably result in some planning automation. He explains, “Some processes have the potential and need to be automatically optimized, while others need to be presented to the planner so they can understand the business trade-offs and make the final decision. Gartner suggests that a good way to look at the question of which processes to automate is to frame it in terms of human brain activity. Subconscious supply chain planning they say can be largely on autopilot to ‘respond effectively and optimally to relevant environmental signals at lightning speed.’ Conscious planning, involving planners supported by scenarios and collaboration, focuses on complex and chaotic situations where no best or good practices exist.”[3] Cognitive computing platforms are particularly helpful for conscious planning processes because they can deal with ambiguity. Analytics expert Kamalika Some (@KamalikaS) notes, “A cognitive computing system is used in complex situations for ambiguous and uncertain outcomes”[4]

 

The importance of concurrent planning

 

Integrating business planning is only the beginning of things supply chain planners need to consider. Planning timeliness is another big consideration. Alex Rotenberg, Vice President of Strategic Services at Kinaxis, explains, “Traditional supply chain planning techniques have failed. Companies are too slow to react to changes, and collaboration across silos and continuous learning options limited. We need a new approach to planning, to know sooner and act faster.”[5] He insists concurrent planning is the answer. He explains, “Concurrent planning provides this ability to continuously and simultaneously plan, monitor and respond to changes in one single environment. It is the ability to sense and respond in near real-time, to take rational decisions, across multiple teams and departments, with competing objectives, to feel and react, backed by the emotions from the market.” Henry Canitz, Product Marketing & Business Development Director at Logility, agrees with Rotenberg that today’s business environment changes so fast it requires concurrent planning. “Today’s supply chain operations are faster, more complex and less predictable than ever,” he writes. “Volatility due to shrinking order to delivery cycles, rapid shifts in distribution channels, SKU proliferation, global competition and upstream supply fluctuations are all amplified in today’s ‘normal’ business environment. Volatility has become a major challenge for companies across all verticals and managing this challenge in a cost effective manner can lead to significant and sustainable benefits including lower costs and higher customer service levels.”[6]

 

Canitz admits periodic planning processes (like S&OP) are still required. He explains, “The S&OP process should be focused far enough into the future to make decision around people, process and capital investments in enough time to mitigate risks and maximize opportunities.” Nevertheless periodic processes are insufficient to meet changing demands. “Because forecasts are never perfect,” Canitz writes, “we also need a way to deal with unplanned events. This is where continuous planning becomes essential.” Rotenberg suggests there are five benefits concurrent planning provides companies. They are:

 

1. Always on planning. “No delay to capture a change in demand, production, inventory or capacity constraint, before taking a decision.”

 

2. Real-time score keeping. “We all need the scorecard in front of us displaying current, and projecting future results.”

 

3. Imagining the future through simulation. “Concurrent planning offers multiple parallel environments to carry out rapid what-if analysis and scenario comparison, across multiple functions, to make the best possible collective analysis about the future, in terms of alternatives and impact.”

 

4. Connecting the dots with a single data model. “Without access to the right data, it is impossible to orchestrate business activities and coordinate course corrections, that optimize overall corporate performance and profitability. Planners need access to ALL data, past, present and future, structured or unstructured, current, past and future plans, from all over the extended supply chain network, as seen in every department, so they can plan the entire network in one single sweep, covering demand, supply, capacity and inventory.”

 

5. Real-time decisions and execution in a changing world. “Supply chain model representations take a lot of details to fully grasp the richness of your business, and solvers trying to fully predict the best path ahead traditionally suffer from serious run-times. With broader data about your value network, faster specialized analytics, specific to your industry, and planners leveraging very rich online and immediate simulation capabilities, concurrent planning can provide you these answers, in seconds or minutes, and before your decision will have become obsolete.”

 

Concluding thoughts

 

Canitz is correct when he notes, “You need both Periodic and Continuous Planning to be successful in today’s complex, fast paced volatile business environment. Periodic plans provide the starting point to meet company objectives through optimized supply chain operations. Optimized periodic plans provide the baseline for what is possible if no unplanned events were to occur. Starting with the optimal plan, continuous planning creates feasible derivatives to effectively respond to unplanned events.” Both forms of planning require an integrated approach and capabilities offered by cognitive computing systems. Information silos and disjointed planning processes can hurt rather than help enterprises achieve alignment and the best possible results. If you keep the fundamentals of planning in mind, there’s no need to be confused in today’s planning environment.

 

Footnotes
[1] Lora Cecere, “What Is Planning?” Supply Chain Shaman, 6 March 2018.
[2] Anil Gaddi, “Integrated Business Planning: The Foundation for Digital Transformation of Supply Chains,” Manufacturing Next, August 2017.
[3] Jeff Bodenstab, “Which Supply Chain Planning Processes Should We Automate?ToolsGroup Blog, 22 January 2019.
[4] Kamalika Some, “Leveraging Cognitive Computing for Business Gains,” Analytics Insight, 19 September 2018.
[5] Alex Rotenberg, “The 5 incredibly disruptive promises of concurrent planning,” Kinaxis Blog, 5 February 2019.
[6] Henry Canitz, “Periodic Versus Continuous Planning – What’s Needed for Success?Supply Chain Digest, 21 February 2019.