The supply chain planning paradigm shift is here

Polly Mitchell-Guthrie Profile picture for user Polly Mitchell-Guthrie April 25, 2022 Audio mode
Summary:
The legacy supply chain planning model is broken and supply chain leaders are struggling to keep up with emerging trends. Polly Mitchell-Guthrie of Kinaxis shares practical ideas for real-time cohesion.

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(© Maxx-Studio - Shutterstock)

We’re in the midst of a major paradigm shift in the supply chain planning world. The strategies, tools and processes we’ve relied on for decades no longer suffice. Consumer expectations change overnight. Black swan events wreak havoc on supplier networks. If insanity is doing the same thing and expecting different results, futility is doing the same thing and expecting the same results, when the world has changed. These days the only constant is change, so we have to adapt.

For many, the catalyst for these realizations was the COVID-19 pandemic. However, the supply chain renaissance we’re experiencing now was driven by decades of underlying factors of change and the unraveling of once successful practices. It was only a matter of time before executives realized the strategic importance of the supply chain, as well as the long-term shortcomings of our legacy practices.

But how exactly does the traditional supply chain planning model fall short? And, more importantly, what is the way forward? The time to answer these questions – and reimagine how we plan within our supply chains – is now.

The legacy supply chain planning model is broken

Over the past 30 years, supply chains have expanded dramatically and become more complicated. Many companies have turned to overseas suppliers in hopes of reducing costs and leveraging outside specialization. Meanwhile, planners have focused on optimizing discrete functions and improving their forecasting capabilities with the goal of making planning easier across the board.

The positive consequence of this is our supply chains are more cost-effective and sophisticated. Brands today can design and deliver complex goods to customers faster than ever. However, in spite of these improvements, our supply chains are still relatively inefficient and fragile. The pandemic wreaked havoc with global supply chains, and many organizations are still recovering.

Part of the problem is how we’ve approached different supply chain functions. Critical activities like inventory management, supply planning, and demand planning have existed in silos. In volatile times, this separation makes it hard for function managers to work together, but even in good times this structure is inefficient.

We’ve also grown dependent on modularized point solutions and static ways of data-sharing. Spreadsheets, emails, presentations, and phone calls have been the primary means by which stakeholders across the supply chain distribute information. In fact, global consultancy McKinsey’s survey of supply chain executives found that spreadsheets are the top planning method, used by 73%. These communication channels are too slow. Supply chain leaders can’t keep up with emerging trends or respond to disruption when it arises. As a result, they struggle. 

The challenge is we can’t easily unravel what we’ve established. But we can break down barriers that have long kept various lanes from collaborating effectively. Doing so would elevate supply chain performance in a way that we desperately need.

End-to-end concurrent planning is the way of the future

Supply chain leaders today have to build concurrency into their operations to maximize performance outcomes. Demand planning, procurement, inventory management, and sales and operations planning can no longer function as separate, loosely connected departments. These groups must be able to work together seamlessly towards common objectives.

To do this, leaders need real-time visibility into what’s happening across both the internal and external supply chain. But visibility isn’t sufficient. Alerts that tell you your materials are stuck on a boat in the Suez Canal merely allow you to “admire” this problem; decision-makers need more context around what’s happening and the impact of that event across their network. Our supply chains need transparency so that people can evaluate complicated scenarios more easily and comprehensively.

This kind of transparency supports greater collaboration. Supply chain lanes that share data openly can solve harder problems and mitigate risk. They can also coordinate their efforts and work together to optimize for bigger organizational goals, which represents a departure from the incrementalism and functional optimization we’ve seen in the past. When Technicolor Connected Home began planning concurrently, their joint efforts across functions allowed them to reduce inventory they were holding for the first quarter of 2022 by $120M.

The hard part is figuring out how to enable concurrent planning, visibility, and cross-functional collaboration without bogging down the business. Fortunately, the path to success doesn’t require sweeping digital transformation or massive capital investment.

How do we achieve this?

Today’s leading platforms offer one place for all supply chain lanes to store crucial data points in real time and can layer on top of existing supply chain operations. Teams can create digital twins of key records that many users can access and update whenever necessary.

For instance, with a supply chain planning platform, an operations manager could dig into internal capacity data stored on the cloud without having to track down a specific spreadsheet. A demand planning analyst could evaluate on-hand materials and reconcile that information with both same view of capacity the operations analyst sees balanced with what’s happening in the broader marketplace. Overall, interactions between departments become more fluid when all individuals have access to a single source of truth.

Concurrent planning happens when planners can plan together, and in doing so transform how global supply chains work for the modern era. While in the past essential supply chain functions working in isolation were good enough, continuing to operate in this way is futile. The world has changed too much, and despite how much our supply chains have evolved over the years, we now must focus more on end-to-end optimization – driven by concurrent planning – if we want to be more resilient.

We’ve never been fully able to shelter our supply chains from disruption, but in our interconnected world the impacts of this volatility are magnified. Instead of protection we need to make supply chains more agile to achieve the resilience the market demands. The good news is that the technology we need to upgrade our supply chains already exists. The responsibility is now on supply chain executives to make investments in these tools to facilitate more collaboration internally and externally. The time is now – we can no longer afford to wait.

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