First Thoughts
  By Dan Gilmore - Editor-in-Chief  
  March 5, 2009  
  Time to Integrate Supply Chain Planning and Execution  

How well integrated are your supply chain planning and execution processes?

Depends on who you ask, of course, but among those companies our research arm CSCO (Chief Supply Chain Officer) Insights queried, most have a long way to go.

For a good while now, CSCO Insights has been working on a major report on integrated supply chain planning and execution. It is at long last complete, and I think it is a very fine piece of work. There are several very experienced supply chain executives on the CSCO Insights team, but this research and report effort was led by myself and Bob Nardone, a former supply chain executive at Unilever, who provided outstanding insight and guidance on this topic. The full report can be downloaded at Next Generation Supply Chain Management: Integrating Planning and Execution.

Gilmore Says:

For many years, analysts and others have offered separate models of “supply chain planning” and “supply chain execution” processes.

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More than 300 respondents took the CSCO Insights survey that form the basis of the report, and the results were very interesting. We can only offer a snapshot of those results here, but a few highlights include:

  • Only 11% of respondents said that their supply chain planning and execution processes act like a single integrated process today. The vast majority (57%) said they had somewhat integrated planning and execution processes, while 30% said planning and execution were mostly disconnected.
  • An astounding (from a statistical perspective) 92% of respondents said it was important to better integrate supply chain planning and execution in the next 2-3 years.
  • Information flow is key: the top two choices cited as “barriers’” to better integration of supply chain planning and execution were obtaining the lack of a unified view of true demand and the company’s current level of supply chain visibility.

There is no question that we are making progress in this area. In fact, this has been the goal from very early on in supply chain thinking. It was in the early 1990s, I believe, that the vision of a sweater being sold in Peoria triggering a sheep being shorn somewhere in New Zealand first was proffered.

It’s funny, in a sense. For many years, analysts and others have offered separate models of “supply chain planning” and “supply chain execution” processes, and the technology vendors were generally organized in that sense as well. You can find many diagrams that show hierarchical planning processes with no connection at all to execution, for example.

The report argues, and the research supports, that this gap must be closed from a process perspective to meet the challenges of today’s supply chains.

Sales and Operations Planning (S&OP) excellence is clearly an important step in this journey, but CSCO Insights believes, contrary to what some may think, that S&OP alone won’t lead to fully integrated planning and execution.

Nick LaHowchic, former executive vice president of The Limited Brands and co-author of the recent book “Start Pulling Your Chain,” agrees, telling CSCO Insights that: “Excellence in S&OP is important – but it isn’t enough” to optimally integrate planning and execution.

Why not? Many reasons: inability of the S&OP process to fully consider supply chain constraints; “noise” that often distorts the S&OP plan as it is promulgates down the supply chain; the challenge of well integrated trading partner input and especially coordinating trading partners around the plan, latency in feedback loops, etc.

The world is changing, becoming more Lean and real-time. On the continuum between long-term strategic planning on one end and execution on the other, the report suggests many distinct process areas today will increasingly blur. Tactical planning and execution are already becoming more one single process, with technologies such as “demand sensing” leading to much more dynamic forecasts and production schedules.

There will still be lots of planning, but companies will plan “only as far in advance as they need to” – and for many that will be less further ahead than they do today.

It’s hard to do justice to the full scope of the report in the space I have here, but CSCO Insights sees companies progressing along a path something like this:

Baseline State: Mediocre sales and operations planning processes; planning and execution processes that are disconnected and operate largely in silos.

Phase I - The Basics: Improved S&OP, a single view of demand, and enhanced feedback loops to planning from execution

Phase II – The Real-Time Supply Chain: Sensory networks, real-time visibility, intelligent alerts, and decision-support dashboards

Phase III - Sense & Respond Networks: Next generation supply chain technologies, changes to hierarchical planning models, multi-level visibility, and new supply chain organizational structures

Many companies are already making great strides in different areas:

  • Canadian Tire does an incredible job of driving its entire supply chain, including suppliers and logistics providers, off a rolling, 52-week consensus forecast, flexibly presented in the units of measure (dollars, cartons, containers, etc.) that are most meaningful to each stakeholder.
  • The home products division of Black & Decker is a great example of a company that has fully embraced use of retail POS data in demand planning and replenishment processes, significantly improving the integration of planning and execution that led to substantial improvements in forecast accuracy, gross margins, store service levels and other bottom line benefits.
  • Chevron has implemented rich, visual, real-time dashboards in its factories to help plant managers and others make much better decisions throughout the day.
  • The Limited Brands crunches the past week’s sales data over the weekend, followed by a cross-functional meeting on Monday morning where store plans are refined and communicated to local managers, with merchandising, pricing, and promotional plans being quickly executed at each store.

One survey respondent notes that “You have hit on a very good topic here. Better integration of planning/execution will be the next big trend.”

I also like this quote from the report: “It is ironic that, in many cases, the programs and innovations put in place to generate growth cause such a high level of demand volatility and demand unpredictability that the resulting execution failures create a loss of both top and bottom line growth.”

Sound familiar?

Obviously, there is a lot more we can talk about, and will do so over time, but think you will enjoy this fine report from CSCO Insights: Next Generation Supply Chain Management: Integrating Planning and Execution.

Where do you think we are in terms of integrated supply chain planning and execution? How important is it? What do you think the keys are to achieving a higher level of integration. Let us know your thoughts at the Feedback button below.

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