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The demand planning function has always had a very critical role to play within an extended and global supply chain. All the sub-steps and operations within the demand management side of every organization have been evolving constantly over the last decade or so.
This evolution has been accelerated owing to the emergence and development of relevant tools, techniques, and technologies that facilitate end-to-end visibility, transparency, data management, and effective planning.
Moreover, Covid-19 has yet again brought the planning and forecasting function (the nerve center of every supply chain) to the spotlight and has emphasized the need to re-strategize our approach to this science as well as art.
Notable Trends & Developments
I would like to focus on certain key trends and developments that have surfaced over the last 6-7 months. With reference to the figure above, which I call the “Supply Chain Wheel” – it is necessary to adopt a “systems approach” that views the value chain in its entirety. At the core lie four essential drivers or guiding principles that would impact both upstream and downstream activities and processes. They are – Agility, Flexibility, Resilience, and Scenario Planning.
Key elements of the Wheel
Supply Chain Organization Structure – the methods and approaches with regard to talent management are likely to undergo visible changes with regard to hiring, induction, training, and work locations.
Demand Planning– Traditional methods may not be effective anymore. There is a need to shift towards more frequent planning, end-to-end planning, exception-based planning, and scenario-based planning coupled with system-wide alerts and event management-based solutions. Scenario-based planning must encompass “What-If” planning and “Simulation” systems. Any demand planning and forecasting tool or software must enable the users and decision-makers to utilize “Demand Sensing” and “Demand Shaping” components.
Supply Planning – Supplier Relationship Management, Strategic Sourcing, Supplier Landscape Mapping, and investments in Smart & Flexible Manufacturing systems could potentially garner the attention of supply chain leaders moving forward.
Inbound Logistics – This step in the wheel would lay more emphasis on tracking and tracing of shipments, warehouse capacity planning, and transportation modes optimization.
Warehousing & Logistics – Firms would need to invest in smart and connected warehousing to enable process efficiencies, higher productivity, and throughputs. Warehouse and Transportation Management Systems (WMS & TMS) would need to be integrated with existing ERP systems to facilitate end-to-end visibility and planning.
Customer Service – This relates to order management, outbound logistics & distribution, and last-mile transportation activities. Here is where omnichannel distribution, customer and consumer analytics, and insights would play a critical role in the demand planning cycle. Customer Relationship Management (CRM) tools and related processes that enhance our understanding of consumer behaviour would go a long way in making the demand management processes and systems more agile, responsive, and connected.
The Role of Online Channels / E-Commerce
In the context of the pandemic, there has been a fairly clear and discernible shift in demand to the online space for certain categories of products such as – food, staples, medicines, personal hygiene, cleaning, and home-office. The future of the demand planning function will be influenced to a large extent by the e-commerce companies that offer unparalleled customer service and convenience.
In my opinion, well-established e-commerce companies embody the principles of end-to-end supply chain excellence with regard to their people, process, and technology initiatives and practices. As shown in figure 2, e-commerce firms have well-designed back-end infrastructure and process with analytics at their core.
These companies are driven by three main objectives and success factors – connectivity, visibility, and responsiveness. These factors resonate well with the demand planning organizations of the future.
Emerging Challenges & Opportunities
However, one must be mindful of the impending challenges and constraints as well. A switch to demand sensing, demand shaping, and scenario-based planning tools would necessitate making the correct choices.
A few points that companies and their demand management teams must consider:
- Every sector/industry has unique characteristics
- Demand & Supply strategies and priorities would differ
- Process maturity levels may vary
- A “One Size Fits All” approach shall not work
- A firm’s position on the technology/digital adoption curve could be different
- Its ability to invest in a suitable demand planning and forecasting tool/technology and to prioritize investments may differ
- There needs to be agreement, alignment, and consensus on specific Business problems/pain points
- People and Process related areas need to be factored in
- Culture and Change Management should be accorded top priority
- A thorough re-visit and audit of a company’s existing systems and data architecture needs to be carried out
- There is a need to adopt an “Outside-In” as well as an “Inside-Out” philosophy and thought process
Any crystal ball gazing into the future paradigms or trends would be incomplete without providing a snapshot of the “Risk Management” strategies that should be adopted. The demand drivers and all the related people, processes, and systems design and execution would be governed by a firm’s risk and resiliency ecosystem, as envisaged in figure 3.
In this context, it is absolutely essential to have a well-defined Business Continuity Plan (BCP) in place along with a sense and response strategy. The Enterprise Risk Management (ERM) system should comprise clearly mapped out risk events, response strategies, and monitoring and control metrics. The three key metrics propounded by renowned supply chain expert Prof. David Simch-Levi include – Time to Recover (TTR), Time to Survive (TTS), and Performance Impact (PI).
Finally, I wish to conclude this piece with a generic framework that could be used to set up the “Forecasting Control Tower”. This concept is akin to a supply chain and logistics control tower.
In my opinion, this control tower can complement the Sales and Operations Planning (S&OP) and the Integrated Business Planning (IBP) meetings so that the pressing issues are prioritized and discussed. Here, the implicit assumption, or rather the reality is that S&OP and IBP meetings would take place more frequently going forward.
The three key building blocks are:
Core Team – staffed with cross-functional experts drawn from key business domains/functions/departments such as Sales, Marketing, Product Development, Human Resources, Production, Supply Chain, Logistics, Finance & Systems.
Operations Data – comprises relevant data to enable demand planning and fine-tuning; near real-time data is fed back into the system (Decision Support System or ERP) to enable decision making and to initiate subsequent process steps.
Monitor & Control – Data is analyzed and it triggers a quick response and feedback loop based on actionable insights.
The broader end objectives are – superior ‘Responsiveness’, higher ‘Speed’, and enhanced customer ‘Service Levels’. A successful implementation would be geared towards reducing “Variability” and increasing system-wide “Velocity” and “Visibility”.