Is excel your answer if asked how you manage the S&OP process? Then you might want to see this recorded webinar episode of the Tuesday Guest.
The topic for this episode is: What is S&OP and how can it benefit the business?
Speed in decisionmaking is key for you in terms of reaching your sustainable targets. Though, in many companies employees still work in excel sheet’s when it comes to modelling new Supply Chain designs or even measuring the GHG (Green House Gas) emissions throughout the Supply Chain. The challenge is, that making the right decisions is a complex task. For many companies the complexity is growing. If you want to ensure that you make the right decisions at the right time and in the right quality it is essential, that you have the right tools available. In this blogpost we will look at why Supply Chain design technology is key for your Supply Chain sustainability progress. We will also look at why it is a good investment.
Supply Chain Sustainability at a glance
We live in a world where the “new normal” is increased instability, brought about by a multitude of causes. Political uncertainty combined with a leadership vacuum among governments everywhere, technology disrupters, emerging new business models and the shift away from globalization back to economic nationalism. And last, but not least, consumers are demanding that you actively work to build a sustainable business. These factors are contributing to the fragmentation of established Supply Chain networks.
Sustainability has become a critical perspective in managing organizations.The corona virus pandemic has fundamentally shifted the trends in Sustainability and the way companies are doing business and it is a clear signal, that Supply Chains are entering a transformative decade.Even though COVID-19 had a huge impact on Supply Chains and Sustainability practices, only 52% of the companies have a Supply Chain Sustainability goal. There is greater investment in Sustainability and higher sales for products with Sustainability related labels, indicating a shift in customer behavior. Therefore, the pandemic has contributed to the acceleration of Supply Chain Sustainability agendas.
End to end alignment
If we look closer at the Supply Chain, we could say that the end-to-end Supply Chain is a system with three key “subsystems” at play. A customer market, a supplier market, and the organization (ourselves) in the middle. To design more appropriate responses, we need to understand the drivers within each subsystem and how they inter react. With that we mean:
– The behavioral drivers and segments in the customer marketplace
– The behavioral drivers and segments in the supplier marketplace
– Our own in-house network, which is effectively a decoupling zone between Supply and demand
Summarizing we could say that the Supply Chain design should convey the different types of activities needed on the demand side and the capabilities we need to draw upon from the supply side. It proactively enables us to make intentional decisions when designing the network , including how and where to buffer or decouple along the chain/network.
Faster and better decision making
Decision making in operational environments is changing. The quantity and quality of data available to support decision making are growing exponentially. Focus is on exceptions, with more routine tasks automated. But in a more volatile environment, risk is higher and assumptions harder to make. What has not changed, however, is that despite of all the decision support available, the critical strategic decisions will still come down to individuals and leadership teams.
Complexity demands technology for Supply Chain design
That is where Supply Chain technology comes in handy. ERP systems are partially enforcing organizational siloes with limited scenario and analytics capabilities. Also, business intelligence initiatives and data lakes are limiting the insights into the future as it is typically projecting historical or current set ups, lacking alternative solutions never used before. Insight gaps and decision evaluation are based using an excel solution.
As also described earlier, the challenge is, that the pace of internal and external events that impact our supply chains is ever increasing. So is the interdependency of those events and the functions within the supply chain networks. With a complexity well beyond the grasp of excel, there is an immense need to augment and improve to make more sustainable and intentional decisions. That is why technology is needed.
What is Supply Chain design?
Through scenario analysis, with mathematical models built in none-code environments on top of powerful solvers, Supply Chain Designs offers organizations a flexible approach to:
In other words, given strategic objectives on sustainability, operational cost, market growth, or service requirement etc., Supply Chain Design let you resolve infrastructure and policy question such as
How can it benefit your business and your Supply Chain?
As a result, you will be able improve your balance between costs (logistics, inventory, labour, utilities, taxes), risks (fire, flood, natural disaster, strike, legal, political) and carbon emissions. As well as your service levels (customer satisfaction) and the flexibility of your business. Supply Chain Design initiatives typically produce significant cost savings and service improvements, especially when integrated into the decision making processes.
You will be able to:
Ever wondered what pilots are doing in the cockpit of the airplane? It is quite like the job of the Chief Supply Chain Officer (CSO) (in Supply Chain Planning) or CFO of a company. Before pilots take off, they have planned their journey ahead and counted in the different variables that could affect the planned journey. They have planned and practiced for different scenarios that could take place and what actions they require. Just before take-off they check the latest information about weather, data around the equipment and ask for clearance. Should they encounter some turbulence in the air, or other challenges, they use their cockpit to steer the plane on a new course, but according to pre-defined policies.
They still have the end destination as their goal. Sometimes they use the control tower to check on the course, but they want to avoid using it. Visibility, decisionmaking and actions based on the latest information from various sources is how they, the pilots, stay in control.
In the fresh light of the Covid-19 disruption, many business leaders are looking for ways to mitigate risks and control of cash flow by bridging strategy and operations and creating a foundation for resolving demand and supply imbalances. In terms of competitiveness we typically see that bridging this gap and start working with planning of the Supply Chain from an end to end perspective could mean: 20-50% Inventory reduction, 75-90% Reduced workload, and 98-99,8% Stable Customer Service Level over time.
• Get an introduction to why bridging the gap between operations and business plans is key to ensure top and bottom-line growth in volatile environments
• Understand why it is important to have focus on it now
• Learn how you can benefit from working Supply Chain Planning from an end to end perspective
• Get an understanding of how you can work together with a professional partner to create the foundation for an effective integration with your people, processes and technologies
Webinar: How can you plan your promotions instantly and connect marketing and operations in a digital way? This webinar episode is centered around Promotion planning.
Having an end-to-end Supply Chain planning approach can turn out to be a competitive advantage in the market. Though, in order to leverage your Supply Chain for a competitive advantage it is important, to utilize technology so that it adds business value. In this blogpost we will share with you how it can benefit the business strategy.
The Supply Chain is transforming
The Supply Chain as we know it today is under pressure. Global Supply Chains are operating in volatile environments. The impact of political instability around the world is impeding the efforts of global companies to efficiently drive cross border trade.
At the same we will see the disruption of global sourcing strategies designed to make in-bound Supply Chains leaner through accessibility to a greater diversity of sources. Indeed, political risk is the “next normal”, as regulatory changes challenge global Supply Chains. Adding to that we have the “Uberization” and the climate change which challenges the designs of the Supply Chain.
In other words, because the likelihood is that centre-of-gravity of a Supply Chain is going to change frequently in the future, given the volatility of the business environment, the need for flexibility in the supply/demand network increases.
Supply Chain designs to date have predominantly followed an ‘inside-out’ approach, where personnel inside the business take a view of what they think customers’ needs are, and proceed to build the corresponding infrastructure, processes and technology. When times are stable, and growth is positive, everything you do in this respect seems to work. But as we move into more volatile operating environments, and customers become more vocal and empowered, it becomes obvious that a single ‘ideal’ supply chain configuration will be unable to service the full spread of customer expectations.
Many organizations want to digitalize their supply chain planning, but few supply chain planning leaders know what this really means. If you want to know more about what Supply Chain planning is all about then you can read this blogpost (http://optilon.com/optilon-academy/what-is-supply-chain-planning/)
It can help leverage the volume of data
Anyone working within the supply chain and planning process is familiar with the endless array of data coming from the increasing number of systems in play. The question lies in how organizations can leverage the volume of data to achieve faster transfer of information for powerful insights and holistic visibility of their Supply Chain across multiple functions. To evaluate and improve the efficiency of their Supply Chain, organizations need solutions that makes sense of the data and that connects the organization for effective informed decision making.
It can reduce resource consumption
Automating non-value adding manual tasks with Supply Chain planning technology is more efficient, accurate and cost effective than manual labor. It helps improve operational efficiency. It typically reduces workload by 50-90% and frees up time for planners to improve the business through more analytical and proactive tasks. This could be analytical work, communication, mitigating risks or comparing plans.
It can reduce complexity
By utilizing Supply Chain planning technologies it is easier to understand and visualize the complex and uncertain world. It is easier to simulate and get a feeling of the outcome of the decisions and to use one set of data. It is also a way of capitalizing on the data that the company possesses.
It can enable visualization
Digital technologies also provides an opportunity for using a digital twin to simulate or model your existing Supply Chain and visualize the “to be” as well as analyze the “cost to serve” and if you like, highlight the trade-off’s between the Sustainable impact and the cost.
It can provide faster business growth
Systemizing your inventory management from an” inside out” perspective to an “outside in” by focusing on customer service instead of traditional approaches decrease key issues like stockouts and overstocks. It helps you with more accurate inventory. Streamlined workflows and processes can be scaled up easily, leading to faster business growth.
Simultaneously you can expect a reduction in lost sales and markdowns due to increase in on-shelf availability. Reduced time between ordering and fulfillment has a positive impact on customer satisfaction. Increased customer service and the right product mix drives sales revenue.
It can reduce costs
Automating your processes and freeing up time means reducing expediting and operating costs. With data driven inventory decisions you can replace excess inventory with data to drive better performance. You can reduce your inventory with 20-30%. Simply because you can put the right products in the right place at the right time for more efficient order fulfillment. You are also able to develop a smarter assortment and stock mix.
It can improve agility, better decision making & collaboration
With the right platform you can easily respond to market changes. Reporting and forecasting tools can be used to make smarter, data informed decisions. Having a centralized source of truth for data enables transparency across teams and customers, while it raises motivation to go that extra mile.
We could say that the processes, behind the technology, should bridge the organizational silos and make up the decision center for a forum that unites decision makers to solve business criticalities.
It can help close the gap between Finance and operations
Companies, which are taking this even further also want to close the gap between Finance and Operations and make the Supply Chain data an integral part of the company’s planning and forecasting processes. They want to make their financial controlling processes an unlimited interaction with stakeholders across the business.
Would you like to know more about end-to-end Supply Chain planning then we suggest that you download our whitepaper right here.
What is Supply Chain planning? The definition of Supply Chain planning is a forward-looking process of coordinating assets to optimize the delivery of goods, services and information from supplier to customer, balancing supply and demand. A Supply Chain planning suite sits on top of a transaction system/system of records (ERP) to provide planning, what-if scenario analysis capabilities and real-time demand commitments, considering constraints. It is an enabler for truly data-driven Supply Chain planning.
Why is there a need for Supply Chain planning?
There is a market of growing demand volatility and higher service expectations. Many organizations find themselves caught in a cycle of inaccurate forecasts, excess and obsolete inventory and “firefighting”. There are simply too many exceptions causing constant expediting. But it is also leading to out of stocks and lost sales. At the end it could mean missing out on the service levels the customers expect.
With a technological solution that orchestrates all your planning variables using advanced algorithms and self-learning AI technology, you should be able to specify the service levels and relax knowing you’ll reach the service levels your customers expect at the lowest possible cost and working capital.
The different terminologies
Typical modules in an end to end Supply Chain solution could be:
Demand planning and sensing
Demand sensing is a concept for capturing and modelling various big data demand signals into intelligence to foresee short-term sales demand patterns and demand changes to proactively adapt your supply chain planning.
In practical terms it means employing a single, selfadaptive method that models uncertainty for all items–slow and fast movers. The probability-based forecasting approach automatically generates a range of possible inventory levels for each SKU-Location with high and low limits—just like a weather forecast.
Allocation and replenishment
Replenishment works on the basis of re-ordering the same goods as stock levels reduce. Inventory is replaced on a recurring basis. Allocation works on the basis of assessing how many units are likely to be sold over a given period and hence an overall allocation of goods is determined.
In practical terms it means replenishing optimal inventory mix at each node to guarantee the planned service level in a multi-echelon network at the lowest possible cost. It also defines the right mix of requirements to feed production and other upstream processes (such as Purchasing). It automatically creates constrained replenishment proposals and addresses limited capacity constraints by rough cut capacity planning, which allows the optimal mix to be pre-built for seasonal demand.
Inventory Optimization
Inventory optimization is the practice of having the right inventory to meet your target service levels while tying up a minimum amount of capital in inventory. To achieve this, you need to account for both supply and demand volatility.
In practical terms we could say, that through probability forecasting you have the possibility with technology to identify a range of demand outcomes and the probability of each of those outcomes occurring. This information is used to calculate the optimal inventory targets. It then identifies a different service and inventory target for each SKU/Location. The result is service levels and replenishment policies matched appropriately to each item-location in your SKU portfolio. You achieve target service levels and retain customers while minimizing inventory and other costs.
Production planning
Production planning is the planning of production and manufacturing modules in a company or industry. It utilizes the resource allocation of activities of employees, materials and production capacity in order to serve different customers.
S&OP/IBP (Sales and Operations Planning/Integrated Business Planning)
S&OP bridges the disconnect between the Business Plan (top-down) and Operational Plan (bottom-up), creating preconditions to transfer Business strategy down to the shop-floor. The link between the plans is built by translating BP targets (financial) to operational targets over a time horizon of 3-24 months.
With technology you can run an S&OP process; automize input data collection, add a strong forecast engine, enable what-if scenarios, steer and keep track of workflow and taken decisions. If done well it generates value in driving process efficiency and decision quality.
The “end to end Supply Chain planning solution” – Your cockpit
Digitalizing the planning process also means connecting it end to end, so to say. What does that actually mean? It is sort of like a cockpit.
It is a holistic solution that basically projects demand and supply plans forward. It simulates through a digital twin. It covers an end to end supply chain decision making process of various levels of granularity and time horizons combined with intelligence. For a manufacturer, that might span from source to make to deliver. It empowers Supply Chain managers to take the right decision and make them more accountable for business decisions – it improves agile decision making.
It provides an opportunity to collect data from several sources into a single environment, producing a reliable and centralized “single” truth data set that both finance and operations can work with. It is possible to model the financial ramifications of specific operational changes
It helps resolve exceptions. Resolving exceptions can mean running various planning scenarios. Running scenarios should be done in a seamless manner, meaning that it should not include jumping between multiple systems. Scenario impacts on service and finance should ripple up through the systems and be readily visible.
A supply chain cockpit makes implications visible. Event management is important, but it is not enough. As an example, knowing that an inbound shipment for a factory is not going to arrive on time, has all sorts of implications for what can be made and what should be made. To answer those questions, one needs to be able to view the impacts on planning. Exceptions have customer service and financial implications.
It is a collaboration platform. Resolving an exception can require working with other people both in and out of the organization. The discussion of participants, and their decision on what will be done, who will do it, and when, needs to be documented in the system. Ideally, the cockpit needs to provide visibility not to just about what is happening, but what could happen that would adversely affect the organization. In other words, it must elevate supply chain risks.It utilizes predictive analytics to predict the impact of an event on the Supply Chain.
Optimized execution. Planners work more with analyzing and discussing improvements for the entire system rather than setting local parameters in trying to meet local KPI’s. At the same time, it shortens the timeline and ensures that Business execution and operations are immediately linked with strategy.
In the fresh light of the Covid-19 disruption, many business leaders are looking for ways to mitigate risks and control of cash flow by bridging strategy and operations and creating a foundation for resolving demand and supply imbalances. In terms of competitiveness we typically see that bridging this gap and start working with planning of the Supply Chain from an end to end perspective could mean: 20-50% Inventory reduction, 75-90% Reduced workload, and 98-99,8% Stable Customer Service Level over time.
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