Thus, an effective supply chain planning transformation starts with a vision of how the new approach will help the company achieve higher levels of business performance. This vision must then be translated into a roadmap for moving forward and ultimately quantified with a business case. Companies need to document their current performance and evaluate the costs and benefits of moving to a new planning technology. They should identify their specific supply chain pain points and the specific capabilities that will address those points. For example, an inability to easily generate optimized inventory targets based on demand, service levels, orders and production yield might be addressed through better supply planning capabilities. Or, having insufficient data available for quick "what-if" supply chain analyses might indicate the need for better demand planning capabilities.
Through this exercise, companies develop an understanding of the business value and cost of implementing each capability, the changes needed to capture the expected benefits, and the performance metrics that will be used to track the progress of the implementation effort. This provides a business-oriented platform for planning and focusing the initiative on solid results. For example, using this kind of approach, a major chemical company expects to achieve a 5.8 percent reduction in inventory and 1.2 percent reduction in operating expenses.
- Keep it simple — for now.
Companies often look at the tremendous range of possibilities presented by today's ERP supply chain planning tools and simply decide to "do it all," that is, to move ahead immediately into the most sophisticated and complex aspects of the software. However, it can be better to employ a gradual "crawl, walk, run" approach.
When companies become overly ambitious and try to create highly complex planning processes, they often find that it is too great a leap to take all at once. Typically, they have been working with very rudimentary planning tools. Demand planning, for example, is frequently performed using little more than spreadsheets. To move ahead, then, companies can start with simple planning models using integrated information. As people become more comfortable with the tools, additional functionality can be introduced, creating a step-by-step journey to the desired end state and avoiding the confusion and disruption of quickly introducing more complex approaches.
The good news is that for many companies, the introduction of even relatively simple, integrated new tools will usually bring significant improvements, given the low level of sophistication of traditional planning approaches in the industry. People can quickly access better information, and the organization can use "one set of numbers" to support aligned and better decision-making. Then people and the process can grow and improve over time.
- Consider sales and operations planning management.
Accenture research points to a powerful, but often overlooked, correlation: The benefit derived from supply chain management technology is directly related to the health and efficiency of the organization's sales and operations planning (S&OP) process.
S&OP is a management process that cuts across functional borders to ensure that the longer-term business plans of the company are achieved. Accenture research has identified several S&OP leading practices used by high-performance companies: These include:
- S&OP operates under a "one set of numbers" principle.
- The S&OP process is a common companywide standard process with common calendar, terminology and tools.
- The S&OP process is a holistic business process that includes all business activities, from customer and market interface to idea generation, innovation, product stewardship, manufacturing, supply chain management, finance, marketing and sales.
- The S&OP process drives a high performance culture by identifying gaps between existing and target performance, and by implementing corrective actions for P&L/balance sheet-relevant items.
Effective S&OP relies on supply chain management's demand and supply balancing capabilities. S&OP's primary focus is to maximize profit by balancing sales, asset utilization, inventory and customer service. Supply chain planning technology plays a key role in this process because it enables companies to create future projections of each of these four key profit drivers.
Too often companies implement planning tools to be used at the front-line level but fail to integrate them with the S&OP process. However by linking the two, companies can give business management a clear sense of plans while enabling planners to make day-to-day decisions that reflect overall strategic goals.
Planning for Performance