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First Thoughts
  By Dan Gilmore - Editor-in-Chief  
     
   
  April 5, 2013  
     
 

The Blurring of Supply Chain Planning and Execution

 
 


I released a new set of Supply Chain Megatrends in 2012, and promised to provide more detail on each of them in future First Thoughts columns - and I am woefully behind. I am going to try mightily to catch up soon, before it's time to update the Megatrends list again in 2014 or 2015 ("good Lord willing and the creek don't rise," as they say).

So after detailing my thinking behind Turbo Supply Chain Visibility and the resulting looming Era of Perfect Logistics, I am here this week on the third Megatrend on the Blurring of Supply Chain Planning and Execution.

This trend, I believe, is already ascendant and will not only impact the practice of supply chain management, but how supply chain organizations are structured and more.

Gilmore Says:

The focus now is increasingly on "bottoms up" - that's really in the end what the "demand-driven supply chain" is all about, isn't it?


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The basic point is this - as real-time supply chain information becomes ubiquitous, it throws the traditional, hierarchical supply chain planning and execution model on its head. Operational and even to an extent elements of tactical planning start to merge into a single process with execution, as feedback loops become virtually instantaneous, and information latency is driven out of the supply chain.

Coincidentally (given I cited his thoughts in last week's column - see Feedback, my favorite quote on this comes from Nick LaHowchic, former head of supply chain for The Limited Brands, who with the late Dr. Don Bowersox of Michigan State University had this to say in their excellent book Start Pulling Your Chain (2008):

"If information was shared fluidly between participating firms in a channel, then a great deal of "anticipation" would be replaced with facts. In a collaborative environment, it would not be necessary to forecast what others are planning to do or what they are planning to buy. You would be able to see it."

The days of finding out a few months later whether the big retail promotion worked as planned are or soon will be over. Plans will be near continually adjusted as the information and insight changes.

In truth, this discussion can be seen in the context of the on-going debate over which is more important generally for business success: strategy or execution.

Of late, execution is winning the battle, with some thought leaders arguing that beyond a certain basic level, spending countless executive hours on long-term strategies is counterproductive in an era of such rapid and largely unpredictable change.

The smart consultants over at Oliver Wight have been suggesting the term "Dynamic Strategy Management" to refer to an approach in which the Sales & Operations Planning process is used to more frequently adjust strategies based on what is really happening on the ground. More on that soon.

Most of us have seen diagrams of the traditional hierarchical planning model. I have seen better, but I have included a simple one here:


Now, I am not saying that something like this model is not going to be around forever in one way or the other. Yet, does not this model connote several things?

• An inherently very "top down" approach

• That information must flow from the top down through these layers, and then presumably back up, with latency between every level

• As in most of these graphics, execution is never even referenced

What is happening now is, if not breaking down this model, certainly adding new dimensions to it, the other side of the coin, if you will.

The focus now is increasingly on "bottoms up" - that's really in the end what the "demand-driven supply chain" is all about, isn't it? And now in the consumer goods to retail sector the concept of the "shelf-connected supply chain" is extending this basic notion even further.

So called "demand sensing" technology fits into this. While it again is mostly a consumer goods to retail solution right now, the basic principles should apply to any industry: that my short term forecasts, inventory and replenishment plans should not be set in stone once created, but rather adjusted based on what consumers are really doing, whether that's measured from the POS data at a Kroger store or daily data feeds from an industrial distributor.

What a concept. Why didn't someone think of this before?

I saw a presentation from an executive at Procter & Gamble at the CSCMP conference a few years ago, and he said that based on this near real-time input, production schedules in P&G plants were being adjusted several times daily, and it had achieved substantial improvements in near term forecast accuracy and inventory levels (note: this program was still in pilot mode at the time - I am not sure about results from any actual full deployments).

What is happening is we are moving towards "sense and respond" supply chains. And the more that occurs, the more focus there is on execution, and less on operational and again even some tactical planning.

If you been with us for awhile, you'll know I've used this before, but one of the first supply chain paradigms I learned from my early days doing work in connection with the "Quick Response" movement was the goal that someday when a sweater was sold in Peoria, somewhere in New Zealand a sheep would be shorn (or something like that).

How much planning would be involved in that? I think in the end, this is what LaHowchic and Bowersox were talking about.

Companies will plan "only as far in advance as they need to" - and, for most, that will be far less further ahead than most do today.

This also leads me to think about a concept that Descartes CEO Art Mesher recently introduced that he calls "entrusts." In great summary, entrusts are communities of companies and service providers, supported by a cloud-based technology platform, through which supply chain transactions and activities are enabled and made visible to each "supply chain master" and others as they allow. Descartes is doing this in the logistics industry, E2Open in the high tech and other manufacturing sectors.

I need to get my head around this a little more, but the point is this: here is your supply chain, in real-time.

And as we move to these kind of models and capabilities, does the traditional supply chain organizational structure make any sense? Probably not. Linear, vertical flows of decisions and information are almost in opposition to horizontal, multi-directional real-time data.

The new model will look more like teams of planners and executers that operate together, in a sense forcing internal collaboration and real-time dialog and decision-making. Retailer Zara, with great success, has already moved largely to this kid of structure.

This is exciting stuff, I believe, and will shake up our supply chains in ways hard to fully predict. It will get us a lot closer to the demand-driven paradigm we've had all along.

About time.

Do you believe we will see a blurring of planning and executon in the way Gilmore predicts? What will be the impact? Let us know your thoughts at the Feedback button (email) or section (web form) below.

 
 
     

Recent Feedback

At the risk of being misunderstood as a Luddite… 

I am reminded of an old joke that as you progress from a Bachelor’s degree to Masters to PhD and beyond that you know more and more about less and less until you know absolutely everything about absolutely nothing.   While our ability to detect, analyze and react to the ever increasing speed and granularity of the data is also increasing, the idea of blending planning and execution into one process sounds a bit dangerous.   

Concerns are now being expressed about people using technology to sort through all the flotsam and jetsam of data to get to that information they are most interested in – Netflix and Goodreads recommend your next movie or book based on previous favorites.  News networks tailor their coverage to meet the preferences of a particular audience based on marketing feedback loops thus further concentrating the biases held by the viewer.  In the opposite direction, Facebook and YouTube can propagate ideas at the speed of a smart phone whether that idea is freedom for the masses or gangnam-style.  We don’t yet fully understand the effects on society of these technological changes in the long-run, but we continue to run ever faster.

 Can a business be too reactive?    What are the dangers of being too reactive to the marketplace?  Consider the new language being created in the stock market where this technological Eden is most developed – algorithmic trading and machine ecology or more ominously, Flash Crash and Black Swan. 

How do we avoid the danger of becoming myopic as we are drawn into the ever accelerating current in the center of the data stream?  We may experience the thrill of cleverly avoiding the individual rocks in our path as we become more skilled at digesting the ones and zeros before us.  But how do we keep in mind that that same current may be heading us for a waterfall before our little stream empties into the larger river.  We need a mechanism that forces us to pull off into an eddy now and then for a rest or refit, or to get up onto a hillside to see what is ahead.  If “planning” is old-fashioned, we can come up with another word, but we still need oversight and a long-view.


Ken McKeever
Manager - Modal Operations
PLS Logistics Services
Apr, 06 2013

This trend is happening where ever companies have to compete on time. 

Take JIT concepts form the four walls to the Trading Network, lead time reductions in the execution windows that maintain service levels but reduce inventory make for a competitive advantage.


Michael Schmitt
Senior Vice President Products & Marketing
E2Open
Apr, 06 2013

I couldn't agree more.  I think the only limits on this are how flexible the networks really are/can be. 

Example-You may be able to change products in a plant on a dime, but if you need different raw material or packaging, who deals with that?  In theory should be the supplier, but can they?  Will their economics still work? 

The alternative, of course, is our old standby, just in case inventory for anything that takes awhile.  Put another way, your network is only as flexible as your store of the longest lead time item in the process, whether that is raw material, work in process, or finished goods. 

Could lead to a whole new way of planning, evaluating, and operating networks. 

Very exciting times.


Arnold Maltz
Associate Professor
Arizona State University
Apr, 06 2013

Enjoyed your article on the blurring of SCP and SCE. On many aspects I predict much the same. However, two aspects I do not believe will happen as you describe:

1.      Bottom-up will not replace top-down. There is a time and place for each. There will be more bottom-up than currently, surely. But, even though “proactive” is not always practical if there is too much variability, “reactive” will not provide the level of control needed.

2.       Horizontal will not replace vertical. In fact this statement may actually be a contradiction in terms with the expectation that bottoms-up will replace top-down (both are still vertical).

I expect some will try, and simply replace one set of benefits/shortcoming for a different set of benefits/shortcomings.

In my opinion, the future will bring applications that combine ALL of these horizontal/vertical and top-down/bottom-up, with zero latency across these. As you have seen with ToolsGroup they are able to do this for demand and inventory – vertical latency zero, horizontal latency hours, not quite zero yet (disclosure: I work at ToolsGroup). I have seen some proofs of concept at other companies where the same is done in manufacturing. It is just a matter of time before some vendor extends that concept to cover both, allowing it to span S&OP and strategic planning too.

 


Stefan de Kok-Somviengxay
Not Provided
Wahupa
Apr, 06 2013

I agree with you Dan.  Planning and Execution are, have been, and must blur. 

Some years back, and not that many as you know, these could be different worlds.  Hopefully marketing and sales had a direct link to the process (S&OP), but that is not always true even now. 

As consumers drive us toward a world where they demand near immediate gratification, upstream and downstream partners need to look beyond old paradigms.  Planning and Execution must become a circular iterative set of events which should also include marketing, sales and distribution.  

Do we thing of picking, packing, shipping and the related outbound transportation to the customer as totally separate and only loosely related process steps?  I hope not!!!  Many organizations now plan these tasks end to end during order release to picking.  They must in order to ensure that the carrier has assets available, they can pick up when the load(s) are ready so that shipments don’t set on the dock taking up valuable space.  And internally the shipper wants to maximize the efficiency of its operations such that the orders are packed, packed staged by drop point and made ready for loading just in time for the carrier to pick up. 

Would we expect less of the demand, planning, sourcing, component receiving, manufacturing (if necessary) and preparation for market?


Steve Murray
Principal Consultant and Chief Researcher
Supply Chain Visions
Apr, 06 2013

University systems, state governments, and other multi-institutional organizations can realize significant savings and efficiencies by consolidating their sourcing and supply chain resources. Yet these consortiums are often challenged by a lack of visibility into contracts negotiated by member organizations and struggle to make these contracts easily available across the organization. A unified procurement environment is needed - those that can achieve this will truly capitalize on their collective buying power.

With the right networked sourcing solution, consortium communities can intuitively shop from online catalogs, create point-and-click requisitions, and electronically submit those requisitions for approval - all from their desks or tablets. The combined purchasing power will give participating organizations more negotiating leverage with suppliers, allowing them to optimize efficiency and gain control over spending processes. And this doesn't even take into account the opportunities that exist for efficiencies and cost savings through closer alignment with Accounts Payable.


Mark Digman
Vice President, Product Marketing and Strategy
SciQuest
Apr, 10 2013


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