By Noha Tohamy, research vice president, Gartner
Supply chain planning typically spans the areas of demand planning, supply network planning and production planning. Robust supply chain planning is a critical prerequisite to building demand-driven value networks. Based on interactions with major companies in the industry, Gartner has identified the top five challenges facing organisations in supply chain planning and the best practices employed by the leaders to overcome these hurdles.
Challenge 1: Determining the Optimal Level of Centralised Leadership
Across supply chain functions, companies grapple with the level of centralisation in business processes. On one hand, centralisation promises more scale and standardisation in process, talent and tools, but it can also lack the agility of distributed decision making. On the other hand, decentralisation promises more autonomy and responsiveness to local markets, but might compromise efficiency and streamlining of processes. Planning is no different. Alternatively, companies look for a hybrid approach, distinguishing between common processes that can be standardised and centralised and unique processes that require distributed decision making.
Companies seek to determine the right level of centralisation across two dimensions: time horizon (long term, midterm and short term) and functional areas (supply, demand, sales and operations planning [S&OP] and production planning). Leading companies root the decision in the unique nature of products and markets served. Most agreed that a level of centralisation is required when defining long-term plans and shared common processes and technologies. For example, a global beverage manufacturer has established a decentralised planning organisation, given the autonomy of its production using local resources (water) and its unique go-to-market strategies by region.
Challenge 2: Finding and Cultivating Capable Planning Talent
Companies indicated that finding planning talent is a major long-term challenge. This is because of the uniqueness of the profile required to meet the demands of the planning role. To manage demand and supply planning, companies seek individuals with a mixture of supply chain, financial and analytical acumen to understand the inherent trade-offs in each planning decision. They also look for a high level of interpersonal skills, given the cross-functional nature of the planning process and the need to collaborate with external suppliers. This talent combination is difficult to attract and more difficult to retain, because experienced planners continue to look for new challenges.
Although leaders indicate that there is no ready solution, they pointed to a few approaches to coping with this challenge. To attract the right planning talent, companies are building strong relationships with institutions and schools known for their analytical and business strengths. To retain experienced planners, companies are devising attractive career paths in planning to keep up with planners' desire for upward mobility and career progress. Leaders are building a culture that identifies supply chain planning as a strategic coveted function. To cope with high turnover, companies are looking to standardise training and reduce the complexity of processes and technologies to minimise training time.
Challenge 3: Achieving ROI in Technology Solutions
The choice between a standardised technology platform versus a best-of-breed approach must take into account various factors, including functional strength, integration needs, the maturity of the supply chain function and the expected total cost of ownership. More critical is companies' ability to ensure that the technology is fully utilised once deployed. Challenges range from the steep learning curve associated with most planning solutions to the significant effort required for the upkeep of the model and the data.
Leaders map their technology selection to their supply chain maturity level, selecting the tools suited for the business requirements of their maturity level. There is also a clear focus on data integrity and cleanliness to provide the right foundation for the solution. Leaders also refresh the model and its assumptions to ensure that they represent planners' real-world requirements. They also make efforts to reduce the complexity of their technology tools, improve adoption levels and shorten the time required for user training. In addition, leaders emphasise the need for more-dynamic modelling tools that enable them to quickly analyse different scenarios based on changes in supply and demand.
Challenge 4: Setting the Level of Planners' Internal and External Collaboration
Internally, organisations emphasise the need for the planners to work with various functions, including sales, marketing and product development to understand the full impact of a planning decision. Externally, companies emphasise the importance of planners' collaboration with customers and suppliers.
Leading companies use sales & operations planning (S&OP) and various cross-functional forums to ensure planners work closely with the commercial organisation, collaborating across the product life cycle, to ensure that decisions such as product introduction, phase-out and marketing events are aligned with supply chain capabilities and constraints. They determine the level of customer collaboration based on expected returns and customers' willingness and ability to collaborate. Whereas more collaboration typically results in more synchronisation, leaders realise the significant effort to build and manage a collaborative relationship with customers and suppliers. To that end, leaders highlighted the importance of aligning the nature and level of collaboration among key trading partners with the expected business benefits.
Challenge 5: Aligning the Planning Process with the Needs of Unique Supply Chain Segments
A planning process might strive to improve agility for a low-volume, high-value product category but focus on efficiency for another mature, high-volume category. Similarly, the level of internal and external collaboration will vary based on the product life cycle stage and the requirements of customers and suppliers.
Leaders strive for end-to-end segmentation and calculation of the true cost to serve prior to embarking on defining a planning process. They then tailor the planning process including the planning frequency, technology used and key performance indicators calculated to achieve the specific goals of individual supply chain segments such as by using different demand-planning strategies depending on demand volume and predictability. A high-volume, high-predictability product can be supported by an automated demand-planning process that leverages statistical forecasting. However, a new product will rely on attribute-based planning and demand sensing to refine planning practices. Similarly, the type of manufacturing comes into play for defining the best planning process.
Ms Tohamy is presenting at the Gartner Supply Chain Executive Conference 2011 in London on 14-15 September.