| Expert Insight: Guest Contribution |
By Trevor Miles,
Director, Industry & Applications
Marketing, Kinaxis
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Date:
November 11, 2009 |
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The Blurring Lines Between Planning and Execution
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Companies Need Rapid Response Capability to Enable Continuous Alignment of Demand and Supply
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Remember the simpler days when companies were locally based and fully integrated? Outsourcing and off-shoring were still novel concepts. The business environment was relatively stable. And consumer expectations were driven for the most part by the manufacturer’s directive.
In that more static world, an annual operating plan was only loosely coupled with day-to-day operations. Demand plans created by Sales & Marketing were handed off to supply chain management teams who developed a corresponding supply plan. The supply plan, including purchased materials from suppliers, was then handed off to manufacturing operations to execute. The whole process took more than a month.
Today's world is, of course, much more dynamic. Supply chains are global, demand is volatile, supply disruptions are commonplace and new products are coming at an accelerated pace; supply chain management is anything but simple, and silo’ed, successive functions for planning and execution no longer work because too much changes from the time the demand plan is developed to the time it takes to execute the plan in manufacturing. Often the supply plan is being developed using a demand plan that is already out of date. In short, there’s a gap.
The best possible plans are made, and then everything unravels when there is a last-minute or unexpected change that needs an immediate response. While companies may focus on improving the planning process as a way to reduce the gap, the volatility in the marketplace will guarantee that even the best laid plans will be inaccurate. Which is going to make you better able to satisfy customer demand: A better plan or rapid response to change? More focus should be given to how a company can enable the organization to respond to inevitable and frequent plan deviations. Companies must establish a capacity to reconcile demand and supply on an ongoing basis, not just as part of a planning cycle.
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There’s a gap...or is it a black hole?
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Most companies are managing the gap between planning and execution with poor results. Why?
Historically, manufacturers maintained a buffer between the demand and supply chains through the use of “just-in-case” practices such as running excess capacity, expediting orders, and carrying inventory buffers or safety stock. These inefficient and expensive measures are no longer viable as a strategy to respond to change - particularly during these tough economic times. Today’s lean supply chains and reduced inventory levels, in particular, demand a much more agile supply chain. Companies must ease and expedite the decision-making process that occurs between planning and execution. As such, supply chains need to be reconfigured to be more responsive to change.
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Bridging the gap
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The crux of bridging the planning and execution gap is to have the capability to clearly and continuously understand if one is on-track to meet future objectives and immediately see any deviations that need to be addressed before they become “actuals.”
To fully and continuously align demand plans with production plans requires automated integration of demand and supply data across the multi-enterprise supply chain into a single, integrated data system with embedded supply chain analytics. With this, decision makers can understand the effect of a change (in demand, supply or product) on the supply chain and understand the projected impact it will have on the company’s financial and operational targets. Teams can compare multiple response scenarios against key metrics to drive decisions that best balance revenue, margin and service goals.
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The bottom line
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Companies need a rapid response capability to enable continuous alignment of demand and supply. In essence, bridging the gap means a company can plan and execute in real-time.
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Agree or disgree with with our guest contributor's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the website. Upon request, comments will be posted with the respondent's name or company withheld.
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About the Author |
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Trevor Miles is Director of Industry and Applications Marketing at Kinaxis and is responsible for identifying market trends and translating these into high level functional requirements for the company, and opportunities for value capture by Kinaxis customers and prospects. Prior to joining Kinaxis, Trevor worked for i2 Technologies where he held a number of sales & marketing roles and worked with global industry leaders such as Continental, Volkswagen, Nokia, and Thomson.
Previous to i2, Trevor worked for Coopers & Lybrand performing several studies in supply chain reengineering for companies such a Levi’s, Burmah Oil, TNT Logistics, AGA Gas, and Schneider Electric amongst others. Trevor has degrees in Chemical Engineering and Industrial Engineering.
For more information visit: www.kinaxis.com or email:info@kinaxis.com
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Miles Says: |
 Today’s lean supply chains and reduced inventory levels, in particular, demand a much more agile supply chain.
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