How can we future proof our supply chain - by using IBP

Markets, technologies and supply chain challenges are evolving at breakneck speed. Yesterday’s solutions, such as outsourcing, are the cause of today’s problems. Disruptions are dime a dozen and demand are going to be unpredictable. The confluence of technologies such as smartphone apps, long life batteries, and simpler gearing will throw the automotive industry into a state of disarray. The electric cars will not only be a leap in performance and energy efficiency over a normal car but also much cheaper. The construction industry is almost on the verge of disruption with the rise of robotics and modern technologies like photogrammetry, internet of things and 3D printing. Many industries are seeing rapid evolution in their own backyard.

While many industries are poised to change dramatically, their supply chains aren’t. Demand-driven supply chains have put less importance on the very infrastructure that helps serve the demand, which has taken pole position. Supply chain goals also change depending on the economic scenarios. The focus is on speed when the business is booming and when the economy is slowing down, the focus shifts towards saving costs. High fluctuations in demand and supply shocks have become more frequent. This requires agility in the supply chain if companies are to respond faster and recover quicker than their competitors. As pointed earlier, some industries are at a tipping point and agility alone is not enough. Supply chains need to be adaptable to changing needs. Supply chains may undergo near-permanent changes in light of these structural shifts driven by economic, technological or demographical factors. If agility and adaptability are to be the two cornerstones of your supply chain, you cannot do that without the key ingredient – alignment. When you stop looking at your company in isolation and start aligning your interests with all the firms in the supply chain, you realize how it gets easier for agility and adaptability to be imbibed into supply chains.

The three aspects of highly successful supply chains, agility, adaptability, and alignment is not a new concept. Rather it is over a decade old and was postulated by Hau Lee in his article on Harvard Business review – The Triple-A Supply Chain. Supply chains with a myopic outlook tend to look at cost reduction under the pretext of eliminating waste as the major goal. One cannot fault them as costs are measurable and real, words like agility, adaptability, and alignment are not. Investments in technology, capital assets, and process improvements promise avenues to improve collaboration that aid in making the supply chain agiler and help align different aspects of supply chain. Integrated Business Planning is an effective business process that helps in aligning your supply chain decisions and when done right, adds flexibility to your supply chain.

By using IBP, data become more accessible and decisions can be taken in a highly collaborative manner, while not compromising decisiveness and speed of execution. Sales and Operations planning, a key aspect of IBP, is where one can embark on this journey to improve the agility of your supply chain. When companies begin the S&OP journey, the focus is usually on delivering a feasible plan to match demand and supply. With every S&OP cycle, companies must focus on becoming increasingly demand driven by attempting to maximize opportunity and minimize risk. The journey toward a demand-driven supply chain is one that entails perfecting the art of trade-offs between sales and operations. Proper usage of IBP solutions can help you accelerate the progress of this journey by providing the following benefits:

• Near real-time data availability: Control tower systems which are usually part of IBP systems can help us become aware of changes in supply and demand as it happens.
• Collaboration: Collaboration starts with sharing of data. Ensure that your improved and faster access to data is shared with your supply chain partners so that they can respond quickly.
• Scenario Planning: What-if simulations are a powerful way of understanding the impact of changes in demand or supply. Having contingency plans for alternate versions of your constrained demand plan will enable you to tackle real-life situations faster.

While technology can only help you prepare for the near future, S&OP orchestrators also need to have an eye on rumblings in the distant future. In addition to unexpected changes in the supply chain, supply chains are also subject to near-permanent changes in their landscape. Start looking for signs of how the market is poised to change and the direction in which it will be moving. Here are a few aspects that one can look out for and discuss during their S&OP meetings:

• Technological advancements: Each S&OP meeting must note advancements in technology is not just the business’ industry but also in adjacent industries that might have a contagion effect. There is plenty of research being done by many firms about the advancements in various industries and how it can affect the way business is being done.
• Startups: Take note of startups that are raising funding in your respective industry. This gives a good insight into what will be the next wave of advancement in your industry. Today’s Google and Facebook were only yesterday’s startups that got funded.
• Identifying structural changes: Use the latest data you have to identify structural shifts and track key patterns. Use this information to start discussions on relocating facilities, identifying alternative sources of supplies and outsourcing manufacturing. The IBP tools can make it easier to calculate the financial implications of these decisions.

When you think about S&OP, you usually associate it with the terms ‘supply chains’, ‘demand’ and ‘supply’. But S&OP process is the first place to feel the pulse of future disruptions. Alertness towards these long-term signals will go a long way in the evolution of your company. Integrated Business Planning, while having its core in S&OP, carries forward its principles across the realm of supply chain planning. It provides the platform and the means to strategize and execute initiatives to improve your supply chain’s agility and adaptability. It also helps lay the groundwork for improved alignment of interests across the supply chain by enabling better collaboration. Making your supply chain future proof is not an impossible task, but a difficult one. When you have all three A’s going for you, you will be in a much better position to face the future vs your competition.

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