How to avoid the common pitfalls of supply chain planning
In the classic Atari video game “Pitfall!,” the main character, Pitfall Harry, makes his way through a treacherous jungle on a quest for treasure. Along the way, he dodges snakes and crocodiles, rope-swings over pits, and leaps over rolling logs. Today’s supply chain professional surely empathizes with poor Harry. Pitfalls such as inefficiency, data siloes, stale data, and disruptions relentlessly assail the supply chain professional.
Richard Sherman of Tata Consultancy and Bob Bowman of Supply Chain Brain joined Vivek Soneja of Anaplan in a webinar to talk about how to avoid common pitfalls of supply and demand planning. Let’s take a look at a few of these pitfalls and how to steer clear of them.
Pitfall #1: Minimal organizational commitment to accurate supply and demand planning
The self-fulfilling prophecy that “the forecast is always wrong” can be perpetuated within an organization. If executives aren’t committed to an integrated approach to supply and demand planning, information siloes form and plans can become biased and inaccurate. New middle managers and junior analysts often own the process as they start off their careers, and they may have less focus on strategic performance goals than colleagues with more experience and perspective.
One way to build commitment to ending this disconnection is to find an internal champion to drive efforts and gain buy-in from all involved stakeholders. Start from the top, focus on gaining executive commitment, and let the positive ripple effect move through the organization. If possible, assign key roles in supply and demand planning to the most experienced planners.
Pitfall #2: Poor collaboration among functions
What happens in a planning function shouldn’t stay in that function; changes in each silo affect the whole organization. When research and development create a new product, that impacts the demand on production, procurement, marketing, and sales. When marketing fires up a new demand-generation program, that can impact sales, which can then impact production. Operational planners without visibility into the demand-generation program can cause inaccuracies in supply and demand forecasts. Instead of collaboration, blame is spread back and forth, and a vicious cycle is born.
You can dodge this disconnection pitfall by making some simple changes. Instead of siloes and a lack of collaboration, choose an approach to supply and demand planning that focuses on connections between key people and processes. Instead of production blaming sales for creating demand that can’t be met, and sales blaming marketing for making it hard to meet their sales goals, cooperate on a collaborative forecast, so that each function knows what will be required of them and when.
Another key element of staying collaborative is aligning company goals with individual goals. Planners in each function should keep an eye on the company’s high-level goals and make changes to their plans based on those goals. Standardization of hierarchies, drivers, and the use of common descriptions are essential. When planners are speaking the same language, pitfalls are leapt over and success prevails.
Pitfall #3: Looking to the past to plan the future
One way to describe a backward-facing forecast is “forecasting what will be based on what was.” When companies build forecasts based on historical data alone, they’re missing an opportunity to build a smarter forecast that might put them ahead of competitors. The massive amounts of data available from the Internet and advances in cognitive analytics and machine learning make it possible to analyze causes of demand variability instead of merely looking to the past to plan the future.
Instead of a past-focused forecast, use the power of artificial intelligence and machine learning to build toward a predictive forecast based on a bevy of external factors, like promotions, consumer trends, weather, component availability, and competition pricing.
Be prepared for the pitfalls
Don’t let your supply and demand planning be a perilous run through the jungle. Steer clear of poor organizational commitment and collaboration, and don’t rely on the past to plan the future. Instead, build connections, find and support an internal champion, align individual goals with company goals, and standardize terminology for success.