Wartime US president Dwight D Eisenhower once said, “Plans are useless, but planning is indispensable” – words that still resonate today in a climate of continued supply chain disruption. From shortages of delivery drivers through to Covid-19 and Brexit-induced challenges, the need for effective planning has never been greater.
As the Institute for Government explains, things are not about to get any easier either, so businesses have a choice – stick a finger in the air and hope for the best or start planning intelligently for a future of continued disruption.
As Rick Lambrecht, a director at Olivehorse, says, “Planning is the activity that converts your strategic objective into operational reality.” Quite simply, if you want your business to have any chance of not just surviving but growing in the coming months, it has to be able to turn ideas into actions, and ensure that those actions can be adaptable to meet the unforeseen and unpredictable nature of today’s markets and economies.
At Olivehorse we have segmented how we treat planning, to help businesses overcome multiple supply chain challenges and, importantly, cope with whatever is lurking around the corner. Our long-term, mid-term and short-term planning structure addresses key planning phases, based on organisational data. This facilitates more informed decision making and helps build resilience into supply chain management.
- Long-term planning includes the Annual Operation Plan and a business/planning model that will deliver on that AOP plan. This must take into account financials, demand and supply plans, fixed assets and inventory, all coming together in the Sales and Operations Planning Process.
- Mid-term planning is defined as the period over which strategic assets are fixed but operating outside of the material lead time. The options available to the business are now hugely reduced. There is, however, room to flex the plan. The purpose of the mid-term is to protect the short-term plan from fluctuations in demand and supply at the best service and lowest operational cost/highest margin.
- Short-term planning – the ability to make any major changes in production volumes in this period is hugely reduced. Capacity is set, materials have been ordered. It is also the period where the plan meets the actual sales orders. It can vary significantly from the forecast. The options to respond to these significant changes are hugely reduced here; however, there is some flexibility. Buffers and headroom provisioned for in the mid-term plan can now be used. Products, which share the same components, can be rebalanced in line with sales.
The traditional planning process is to plan to forecast, with the assumption business will adhere to that plan. The adaptive planning model is designed to accommodate headroom, buffers and many alternative options to ensure the business can adapt to and be resilient to changes in the plan. Businesses that ignore this will not be able to address unpredicted changes and will suffer the consequences for it.