Three good habits for successful supply chain planning
When the many elements of the modern supply chain work together in harmony and accuracy, it’s a beautiful thing. Goods arrive on time, profits go up, and waste goes down. When the elements don’t work together, pain spreads across the organization from sales forecasts to revenue numbers and forecasts.
Mark Smith, CEO of Ventana Research, joined us recently for a webinar called “Breaking bad habits with continuous supply chain planning.” He shared some of the bad habits that supply chain planners can fall into, and tips on how continuous supply chain planning can help planners break out of the vicious cycles those habits can create. Here’s a sampling of his thoughts, starting with three common bad habits.
Bad habit #1: A lack of links
For most companies, plans and budgets are barely connected, if at all. In a 2017 study “Next-Generation Business Planning,” Ventana found that fewer than a third of companies have a direct link between plans, budgets, and updates to those plans and budgets. Why? Fifty-two percent of those companies placed the blame on incompatible tools. And forty-eight percent said that spreadsheets make it difficult to manage planning processes.
Bad habit #2: Succumbing to spreadsheets
A survey by Harvard Business Review and Anaplan found that 90 percent of respondents still use spreadsheets a primary planning tool. Ventana’s research also found that supply chain and S&OP planners are more likely to use spreadsheets than their peers in other planning functions (like sales or project management). Because research continues to show that up to 90 percent of spreadsheets have errors, this overreliance is a recipe for disaster-and a waste of precious time, because complicated spreadsheets can get so unwieldy that they’re almost impossible to transmit or use.
Bad habit #3: Stale, irrelevant plans
Even the best plans will become outdated at some point. In its survey, Ventana found that in 45 percent of a company’s demand, plans go out of date and become irrelevant during the planning cycle. This leads to inaccurate forecasts, and makes it impossible for supply planners to react accurately to demand signals and ensure that the right products are being produced in the right amount.
What’s the better way forward? How can you reverse the effects of disconnected plans and replace bad habits with best practices?
Good habit #1: Embrace an agile approach
The market changes every day, and disruptions can come out of nowhere. An agile supply chain planning process enables companies to react and adjust plans quickly. It is dynamic and interconnected instead of linear and sequential. Instead of the traditional “chain,” it looks more like a network of circles, and inside those circles are business units that interact with each other in real-time.
Good habit #2: Bring scenarios to life
When supply chain planning teams collaborate with planners from other functions like sales and finance, on a scenario-based planning approach, accuracy goes up. The idea behind scenario planning is exploring every relevant scenario related to a particular planning situation to determine what is best for the business. Ventana reported that when companies explored relevant scenarios, they found their plans to be accurate 73 percent of the time, as opposed to 36 percent of the time when companies did little or no scenario-planning.
Good habit #3: Talk to other humans
Active collaboration between experienced professionals is key to solid supply chain planning. According to Ventana, 85 percent of organizations that collaborate effectively manage their planning processes well. As these connections develop, they make sure that the right areas are connected. Ventana found that 63 percent of businesses surveyed reported that connecting supply chain and finance plans is key to performance improvement.
The good news is that once formed, good habits can stick with your organization just as tightly as bad habits once did. You can move away from a disconnected, spreadsheet-laden, stale way of planning and move toward an agile, scenario-based, collaborative approach.
For a deeper dive into these strategies and to hear real-life examples of how the Anaplan platform can enable continuous supply chain planning, watch the full on-demand webinar.
Keyword: Supply Chain Planning