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  - March 3, 2015 -  

Supply Chain Planning Software Need to Move to a More "Sense and Respond" Model, Gartner Says

Planning Mostly Focuses Now On Optimization, Needs to Balance with Design and Responsiveness Capabilities
 
     
     
  by SCDigest Editorial Staff  
     
 

In 2012, the analysts at Gartner came up with a sort of functionality framework for supply chain planning applications.

That functional framework is as follows:

SCDigest Says:

We would perhaps phrase it more like this: "companies need to define what it means to have a "sense and respond" supply chain, and develop a multi-year roadmap for getting there."

 

 

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Configure: These capabilities support a company's efforts to design/configure their supply chains, taking account of future alternative operating models and/or trade-offs between different configuration options in order to try for alignment between the longer-term performance of the supply chain and overall corporate goals. For example, by explicitly designing the supply chain (using a segmentation approach to design a portfolio of supply chains, for instance) to a specific performance window, and then aligning the appropriate customers, products and services with the right supply chain design, a company can better guarantee the cost/service outcome of that supply chain in line with business goals.

Optimize: These capabilities support the creation and evaluation of optimal plans within the context of the company's current operating model. This is the traditional territory of most supply chain planning tools, and it increasingly includes a strong focus on the financial impact of the optimized plan. Typically, capabilities such as demand, inventory, replenishment and manufacturing planning sit within this category.

Respond: These capabilities support the ability to profitably respond to changes in any aspect of execution in a near-real-time manner. With effective respond capabilities, a company can assess and react to execution changes within the context of its chosen priorities and strategies, as well as within the overall framework of the optimized plan.

This last level, SCDigest notes, involves obviously tight integration between planning and execution, and one might say (as SCDigest has stated in the past on this topic) a blurring of operational and maybe even tactical planning and supply chain execution, such that they become one process.

The idea is that companies should have a balance in their supply chain planning software across all three of these capabilities.

In its 2015 "predicts" for supply chain planning, Gartner says that "by 2018, only 10% of global enterprises will have 30%, or more, of their planning capability in the respond planning category."

Gartner says its research shows that most companies are top heavy in the optimize category and light in the other two - and that make says, as supply chain planning and "optimization" are often thought of together.

And Gartner notes that "To a large extent, this is not the fault of companies, because for many years, the majority of supply chain planning software on the market has been in the optimize category. It is only recently that the market has been providing more capabilities in the other two categories, and especially in the respond category.

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As a result, most companies will need to rebalance their planning capabilities to reduce their reliance on optimization and boosting their level of capability in both configure and respond, Gartner says - though the prediction makes it sounds as if Gartner is not very confident many companies will pull this off any time soon.

Of particular note is the current lack of respond planning capabilities that the majority of companies have. The changing nature of supply chains (increasing globalization, unpredictability, volatility, risk and complexity) will drive leading companies to invest more in respond planning, Gartner predicts. However, many companies' respond investments will lag behind the business need for such capabilities, and this will be a drag on their overall supply chain performance.

So what are the implications of this somewhat esoteric take on supply chain planning capabilities? Gartner says there are a number of them:

• Users that do not invest in respond planning capability will find it increasingly difficult to plan effectively and will likely be unable to execute their segmented supply chain designs because they will lack the ability to respond to execution changes in alignment with their segmented supply chain policies and priorities.

• For many years, vendors have been putting more optimization capabilities into their supply chain planning solutions. However, Gartner believes we are reaching a tipping point where the complexity of supply chains is defeating traditional supply chain planning tools in the battle to come up with an overall optimized plan. This will push leading companies to look to invest in respond planning capabilities and push vendors to put more of this category into their development roadmaps and ultimately their products.

• Supply chain planning software vendors will need to think through how they intend to support each of the three categories, and how they will ensure the right level of data and process integration to support the evolving needs of their users.

• Large vendors, such as SAP, will continue to announce development plans that increasingly make reference to capabilities that would classify as respond planning.

• The emergence of respond planning will drive the convergence of supply chain planning and execution, as we noted above, which Gartner says is needed for more mature supply chains. SCDigest would say that is needed by almost every company.

• Technology advances (such as cloud, in-memory computing, complex-event processing and prescriptive analytics) will accelerate the delivery of more capable respond planning capabilities.

So what to do? Gartner first says supply chain and IT managers should audit their existing supply chain planning capabilities and classify them into the three categories of configure, optimize and respond. SCDigest notes, however, that under this framework a given supply chain planning application could have one, two or all three capabilities.

Gartner further recommends that companies should jointly develop a supply chain IT roadmap that leads to at least 30% of their planning capability in the respond category.

That is frankly a little unclear to us here at SCDigest; we would perhaps phrase it more like this: "companies need to define what it means to have a "sense and respond" supply chain, and develop a multi-year roadmap for getting there."

We would additionally note that this will mean changes not only in supply chain planning capabilities, but also in various execution technology and especially the integration of planning and execution systems.


Do you agree that supply chain planning software is too focused on optimization and not enough for example on "respond" capabilities? Let us know your thoughts at the Feedback section (email) or button below.


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