Identifying the Right Planning System
by Tim Richardson | Iter Insights
Identifying the Right Planning System
Integrated supply chain planning (ISCP) systems have become a central part of most manufacturing businesses operations. They sit at the centre of an S&OP or IBP process which provide the ability to effectively plan short and long-term demand and supply.
The disruption to ‘normal’ demand over the past 12 months has shown the importance of having the right ISCP.
There are dozens of ISCPs, with significantly different capabilities, ways of working and of course, cost. We have seen a number of businesses that have either over or under invested in the wrong system and then failed to really leverage the investment they have made.
The two prime reasons for this are:
- Not understanding the specific nature of demand and either simplifying the requirement or getting seduced by capability that isn’t needed
- Not seeing an ISCP as a strategic investment that will deliver sustained competitive advantage through enabling of agility, flexibility and consistency in performance
The first challenge is understanding your demand, which has two broad categorisations:
- Statistically-driven demand with modellable patterns. In this environment the ability to statistically understand the past and project it to the future is key
- Event-driven demand. In this environment the past relates much less directly to the future with major projects changing the patterns of demand and capacity/capability to fulfil this
All businesses are a mix of statistical and event-driven demand. It is the balance between the two and their ability to disrupt your ability to meet customer needs which starts to define your choice of system.
A starting assumption (although will need to be tested) is that any credible system will have good statistical capability. As you add greater ability to plan events and test solution scenarios the systems become significantly more expensive and their implementation becomes more of a business and organisational transformation enabled by technology, rather than implementing a new planning system.
The pandemic has blurred these two distinctions where historically statistically-driven demands have become more volatile and much more akin to an event-driven business. Those businesses that have understood how to manage this volatility in their supply chains are the ones which have gained competitive advantage.
As an example, a client of ours has been impacted by the step change in use of Teams and Zoom which has driven disruptive events into their business. They are now looking for an ISCP that will enable them to model and collaboratively decide how best to satisfy major projects where dates fluctuate, and capacity is often constrained.
The second challenge is the lack of understanding of the strategic importance of effective supply chain planning, although the evidence of its importance over the past twelve months is there for all to see. Consequently, planning is all too often undertaken as a mechanical task that fails to effectively transfer demand into supply plans that are in tune with the operating models and approaches in a supply chain. A good test is how often your plans are adjusted and reissued before the next formal schedule plan re-issue. The current generation of ISCP systems offer a sophistication and data analytics capability that requires fewer but more analytic teams of planners to be effective. We will talk about this in more detail in a follow up article.
The starting point in deciding what ISCP system you require is to really understand your patterns of demand and what it is that will make a real difference. It is very easy to get seduced about the sophisticated collaborative scenario planning that exists in some systems, but if your demand is predictable and has limited disruption then this is an expense in term of licensing, implementation and operation that will bring limited value. If what you need is a good statistical planning engine, then that is where your focus should be.
Whichever solution best fits your business you need to make your selection with eyes wide open recognising the level of process, organisational and potentially operating model change that may be key to delivering real value from your investment.
The business case will inevitably detail savings and operational improvements and reductions in inventory, but our experience shows that this is often not compelling. The business case must be clear about the strategic market benefits that will be delivered.
How Iter Can Help
We have supported several clients in the selection, implementation and most significantly how to really leverage value from their planning system investment. Our specialist consultants can help you understand the nature of your businesses demand, identify the most appropriate system and build a business case for investment.
We are also there to support you through the implementation and particularly the change management that is critical to delivering on the business case promises and more.
Welcome to Iter Insight, this is one of a monthly series of articles from Iter Consulting addressing the most critical operational and supply chain problems businesses face today.