Demand Planning: One System to Rule Them All
Regardless of industry, it seems we all face similar challenges. Think of the fast-paced fashion and apparel companies who must contend with rapid turnover of designs, features, styles, colors and product line assortment and the need to meet regional and sometimes localized customer product requirements. Food and beverage, consumer electronics, life sciences, durable goods all have to deal with product seasonality, lifecycles, assortments, promotions and demand signals across multiple planning horizons and more. Coordinated planning across the short, medium and long-term horizons is absolutely crucial to profitability and competitiveness.
Unfortunately most companies have multiple disconnected planning processes that are managed by different people, use different data sets and assumptions, and managed using different systems. It is not surprising that multiple, non-integrated planning processes develop different plans that lead to miscommunication, misalignment, extra work and missed opportunities. In these disconnected planning environments, strategic planning is based on outdated data and often infeasible supply chain capabilities and tactical planning is unaligned with strategic goals and objectives.
What is needed is a single, integrated phased planning solution that unites short-, medium-, and long-term planning under one system. To paraphrase the central plot of J. R. R. Tolkien’s The Lord of the Rings, “One system to rule them all, one system to coordinate them. One system to synchronize them all and in visibility bind them.” An integrated phased planning solution drives better planning practices and closer teamwork among planning teams—especially by creating smoother transitions between supply chain stakeholders.
With an integrated solution, handovers take place faster and seamlessly, and everyone gets reliable answers sooner, creating accurate forecasts and capacity plans at the appropriate aggregation level and time horizon. Where once disconnected planners found out about problems too late to respond effectively, an integrated solution provides instant alerts to deviations from the plan and enables a quick and optimal response. Lag time between groups shrink, and opportunities for miscommunication and distrust lessen. Crucial, long-term planning can be executed earlier with confidence, thus winning the race with competitors vying for capacity and resources at the same suppliers.
Figure 1: A Single Planning Solution to Span Multiple Planning Horizons
According to industry research comparing the performance of companies that follow an Integrated Business Planning (IBP) approach versus those that don’t, IBP users are;
- Better able to align supply and demand over the entire horizon,
- More effective at collaborative planning and building real trust between groups,
- Able to reserve capacity at key suppliers earlier and more efficiently,
- Faster to react to unexpected disruptions in the supply chain,
- More likely to use alert-driven response and adjustments,
- Better at handling promotional demand,
- More likely to use “what-if” analyses to evaluate and prepare for contingencies, and
- Better as using KPI measures that reveal the truth about “How we’re doing” across all planning horizons.
These enhanced capabilities from the adoption of IBP lead to significant business performance advantages including:
- 21% decrease in the Cash Conversion Cycle
- 24% increase in Forecast Accuracy
- 34% increase in Supply Performance
- 3% improvement in Customer Service Levels
Given the formidable challenges of reserving capacity and material far into the future, a supply chain team’s top priority must be to unite disparate planning processes over the entire planning horizon. A single, integrated phased planning solution can unite short, medium and long-term planning driving better practices and closer teamwork.
Given the needs of fast-moving consumer electronics businesses, supply chain teams are advised to ask themselves an overarching multi-part question:
“Does our planning process unite the functions in our organization, make it easy to cooperate, simplify hand-offs, build trust, provide an accurate vision of the future, facilitate supplier collaboration, and allow us to evaluate likely contingencies to find the best strategy going forward?”
If the answer to this big question is “not really,” maybe it’s time to adopt a phased planning solution that enables your company to have “One System to Rule Them All”.