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Supply Chain Optimization: Leveraging Integrated Scenario Planning as a Margin Multiplier

By May 23, 2024Uncategorized

Situation

Companies are increasingly confronted with complex planning scenarios due to predictable events such as mergers and acquisitions, category expansions, supplier changes, and distribution evolution, as well as disruptive events including demand volatility, material shortages, capacity constraints, and logistical surprises. These challenges necessitate extensive configuration within Advanced Planning Systems (APS) test environments to assess their impacts. However, the lag in the Sales and Operations Planning (S&OP) cycle exacerbates issues like inaccurate forecasting, reduced agility, higher error rates, increased costs, limited scenario planning, and sustainability challenges, ultimately undermining supply chain performance and eroding executive confidence in the supply chain as a value driver.

Complication

Testing multiple scenarios across short and long time frames in APS is inherently challenging due to several factors. APS are complex, live production environments requiring extensive configuration to accurately model a business’s operational reality. This involves setting up numerous parameters like lead times, inventory levels, production capacities, and demand forecasts, all of which must be adjusted for different scenarios. Integration with existing enterprise systems such as ERP, CRM, and WMS adds another layer of complexity. Ensuring seamless data flow between these systems for various scenarios can be difficult, compounded by the need to maintain data integrity across different systems and scenarios, requiring continuous data validation, cleansing, and synchronization. Running multiple scenarios in real-time environments can disrupt ongoing operations and strain system resources. Continuous system updates and improvements necessitate reconfiguring and retesting scenarios, complicating the process further. Effective scenario testing also requires well-trained users proficient in the system’s functionalities, making it difficult to achieve accurate results quickly.

Resolution

To address these challenges, companies are seeking comprehensive supply chain planning solutions that can act as a margin multiplier by optimizing resources, managing inventory, and enabling real-time collaboration and visibility across the supply chain network. Integrated Scenario Planning (ISP) serves as an optimization layer atop the supply chain technology stack, leveraging mathematical algorithms and optimization models to support decisions across key supply chain elements: locations, products, demand, supply, inventory, and transportation. ISP enables the creation and governance of a transformation roadmap for improving supply chain performance, turning complex planning scenarios into opportunities for margin enhancement.

Figure 1 – Supply Chain Technology Stack

How

ISP continuously aggregates data from APS to establish a current state baseline and create scenarios by adjusting supply chain structural elements or policies and constraints. This approach allows for the testing of both predictable and disruptive event scenarios such as facility closures, capacity changes, product or territory expansions, supplier changes, transportation mode changes, and increased service levels. By aggregating and disaggregating data in a manner similar to existing S&OP processes, ISP ensures consistency and clarity.

Figure 2 – APS to ISP data aggregation

Benefits

Leadership Engagement and Visibility:

ISP engages key leaders from various departments in the planning process, ensuring their active engagement and commitment through rapid network and supply chain analysis. This broad optimization across many objectives allows leadership to meet corporate goals and functional objectives, enhancing visibility into the potential outcomes and benefits of different planning scenarios.

Figure 3 – Event Horizon

Time-Phased Transformation Roadmap for Executive Alignment:

ISP compiles scenarios into a time-phased roadmap that outlines key actions and milestones over different time horizons. This roadmap provides executives with a clear, strategic view of the supply chain, facilitating better alignment and decision-making, and acting as a margin multiplier by visualizing the impact of different scenarios over time.

Figure 4 – Transformation Roadmap – KPI impact view

Process Workflow and Automation:

ISP defines clear process workflows and leverages automation tools to streamline the planning process, reducing manual efforts and potential errors. Automation ensures standardized planning activities, mitigating the risk of knowledge loss due to employee turnover.

Collaboration and Skill Development:

ISP fosters collaboration among process leads and stakeholders by involving cross-functional teams in scenario planning exercises. This enhances understanding of the business and develops skills in problem-solving, communication, and decision-making.

Incremental Implementation:

ISP can be implemented incrementally, leveraging existing systems and gradually introducing new capabilities. This approach allows organizations to start benefiting from integrated scenario planning without waiting for a “big bang” solution, making the transition smoother and more manageable.

Simplified Planning Process:

ISP simplifies the planning process into manageable steps and scenarios, providing clear guidelines, templates, and training. This makes the process more approachable and less overwhelming for planners, increasing adoption and effectiveness.

Summary

Integrated Scenario Planning provides companies with the flexibility to rapidly optimize across multiple supply chain variables and horizons. By acting as a margin multiplier and compiling scenarios into a time-phased transformation roadmap, ISP helps align executive decision-making with strategic goals, ensuring a more resilient, efficient, and competitive supply chain.

Paul Webb is currently VP, Global Supply Chain Industry Principal at Coupa Software, where he guides customers and development in Supply Chain Design and Planning. Paul is a Senior Executive with 20+ years’ experience in leading large transformations, across a variety of industries and best-in-class brands, such as Bridgestone, Grainger, CHEP and Coupa (Llamasoft).

Nari Viswanathan is Sr. Director of Supply Chain Strategy at Coupa, where he manages the Go to Market strategies for areas of Supply Chain and Direct Spend. Nari Viswanathan is a six times SDCExec Supply Chain Pro to Know award winner.  Over the past 20 years, Nari has held VP and Director of Product Management, Research and Marketing roles at various companies such as E2open, i2 Technologies and Aberdeen Group. He is a proven B2B marketer with expertise in content marketing, competitive intelligence, and positioning.

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