The nature of managing a business on a global scale is undergoing fundamental change and it’s up to the world’s supply chains to keep up. With concurrent planning, they can
It’s known as “the Amazon effect”: the enviable way in which the online retailing behemoth has disrupted supply chain operations and consumer expectations dramatically by enabling same-day delivery of goods – in some cases within two hours – to a customer’s front door. But, largely as a result of this, customers are now used to such convenience. Meanwhile, suppliers struggle with ongoing trade wars and tariff issues, political uncertainty, unexpected weather events and the day-to-day small changes that impact the supply chain: volatility almost feels like a quaint way of describing what businesses are dealing with today.
Yesterday’s tools create inefficiency. The ongoing use of instruments that take a cascaded approach to supply chain planning, such as SAP – which has limited capability in managing these complicated and often simultaneous realities – adds even more strain. Static techniques built on outdated velocity expectations hamstring growth, curtails delivery abilities and put businesses at major risk. Yesterday’s operational silos default to sequential processes and create planning lethargy, which fosters a lack of trust between a company’s departments and its varying functions. In turn, this misaligns the organisation, creating inefficiencies and loss of accuracy. These side effects spread across the organisation like wildfire – there’s just no absorbing them.
Current supply chain planning techniques focus on functional excellence: isolating one piece of the supply chain at a time, fine-tuning it and then excelling at it. On the surface, this approach should result in an excellent system, one that operates at peak efficiency from end to end.
But functional excellence does not translate into supply chain excellence. That’s because, between each function, misalignment compounds to create operational blindness. Expertise in capacity planning without understanding the impact on inventory is an example of this lack of transparency, as is a singular focus on inventory management without a connection to the forecast. In many cases, the supply chain is still not thought of as an end-to-end system, despite the fact that functional silos are at fault for hindering a complete view of the supply chain. As a result, people spend their days repeatedly managing the side effects and not tackling the central problem.
Consider driving. There’s a reason why humans can drive – we have control over sight and sound and the dexterity required to match speed with direction simultaneously. Humans are designed for concurrent thinking: planning, sensing and responding to the events around them as they change.
But how difficult would driving be if four different people were trying to perform the function together? Driver one is steering, driver two is providing directions, driver three has their foot on the brake, and driver four has their foot on the gas. Now imagine if none of the four are friends, but complete strangers. Strangers who don’t speak the same language.
This is essentially what many supply chains are like. You still may be able to drive but the lack of concurrent thinking won’t get you very far in one piece. Concurrency, be it in your car or in your supply chain, builds on the notion of “always on” alignment as it perpetually systematises and codifies the synchronisation required to do the right thing, in the right order, in the right timeframe, allowing you or your goods to arrive safely at the intended destination.
Perfection doesn’t exist. The desire to control the universe to the extent that planners can manage their supply chains by the power of will is unrealistic at best. Despite this, organisations have spent tens of millions of dollars trying to get close, focusing on metrics such as “forecast accuracy” and celebrating improvements of five percentage points.
The problem is, there’s no breakthrough to be had because the perfect plan simply doesn’t exist. Supply chains operate in constant flux. Organisations must become more agile and be able to predict, absorb and react to the imperfections. This doesn’t mean accuracy isn’t important. Organisations absolutely need to have an idea of where they’re going. And those that are infinitely agile rely less on accuracy and are able to absorb the unexpected effects that manifest in business.
READ MORE: kinaxis.com/concurrent-planning
by John Sicard, President and Chief Executive Officer, Kinaxis
