Mature Planning Practices Yield More Profits

Others are using enterprise resource planning (ERP) systems that were implemented as point solutions and lack overall planning data visibility. Only 35 percent of participants use more mature planning systems, such as the advanced planning and scheduling (APS) solutions offered by companies such as SAP, i2 and Manugistics.

"A key finding of the study is that systems adoption is lagging practice maturity," said Wawszczak. "The majority of companies are operating mature planning processes with immature systems and relying on spreadsheets and manpower to make the planning processes work. In the short term, reliance on manual processes can work, but in the longer term it can constrain business performance."

Lower Inventory Levels

Companies with mature planning outperformed their peers in inventory performance, according to the study. They had 22 percent lower inventory days of supply. The companies with best-in-class planning systems had an additional 6 percent inventory performance advantage. Additionally, companies with mature planning practices had a 28 percent inventory cost advantage, and those with mature systems had an additional 35 percent cost advantage.

Analysis shows that the main driver of better inventory performance is lower inventory obsolescence costs. Companies with mature planning practices had 44 percent lower obsolescence for raw materials, work-in-progress and finished goods. Advanced planning systems could reduce obsolescence costs by another 40 percent.

Better Delivery Performance

Finally, the study showed that companies with mature planning practices have 6 percent higher delivery performance to committed delivery date and 11 percent higher delivery performance to requested delivery date. Companies with mature planning systems gained an additional 5 percent advantage in deliver to request.

"These improvements in delivery performance are the result of robust, collaborative forecasting processes and systems, combined with sophisticated inventory planning that includes an efficient inventory replenishment model," said Wawszczak. "Our research finds a strong correlation between improved delivery performance and top-line revenue growth."

Order fulfillment lead times were 14 percent shorter for companies with mature planning processes. Companies with mature practices combined with advanced planning systems had a further 18 percent reduction in order fulfillment lead times.

"Although planning systems can lead to best-in-class performance, they must be applied with the right processes in place to deliver results," Wawszczak said.

Many companies install the latest software for supply chain planning without rethinking their underlying processes, Wawszczak noted. As a result, these investments rarely deliver the intended benefits. "Technology is only an enabler of supply chain excellence — mature supply chain processes are critical to a successful planning system. Companies that operate state-of-the-art planning software without solid processes in place risk hurting their planning performance overall."