It’s one thing to plan, and another to execute
By Predrag Jakovljevic, CPIM, CRIM
Despite their investments in enterprise resource planning (ERP) and supply chain management software systems, many manufacturers still continue to use clumsy batch reports and pesky spreadsheets to manage their operations. These ad-hoc systems are often inefficient and error-prone methods of supporting decision-making, resulting in decision-makers relying on “educated guesswork” rather than on an accurate dynamic analysis to align decisions with strategic objectives.
The unpleasant truth is that most manufacturers today cope with the ongoing problems of change by using a combination of people, paper and tools. Good planners attempt to align variations in forecast demand with the execution side of the supply chain. But it is often not enough to just detect and understand the variation, leaders must also be able to react promptly to take advantage of an opportunity or minimize the negative impact of a demand exception. Traditionally, these events would send business analysts scurrying back to spreadsheets and paper-based manual processes to consider various ways to address exceptions. They might look at scenarios for alternate warehouse transfers, expedited shipping, working overtime or even adding an entire plant shift. These hurriedly explored alternatives and then quickly driven decisions are usually a compromise decision, given that spreadsheets are slow, often out of date and provide different versions of the truth.
supply chain planning
Supply chain planning (SCP) applications provide forward-looking predictions of events with probabilities for the future that can encompass medium and long-term time horizons. Since decisions should be based on timely information, an SCP application suite sits on top of a transactional enterprise system to provide planning, what-if scenario analysis capabilities and near real-time demand commitments.
As the key challenge for planners is to determine the type, location and magnitude of customer demand (and the probability of these events taking place), and to organize resources required to fulfill that, typical SCP modules include: network planning, capacity planning, demand planning, advanced planning and scheduling (APS), and distribution and deployment planning.
supply chain execution
On the other side of SCM is supply chain execution (SCE). These encompass applications that enable the efficient procurement and supply of goods, services and information across enterprise borders to meet customer-specific demand. Modern SCE suites have evolved through consolidating SCE components such as warehousing management systems (WMS), yard management, transportation management systems (TMS), distributed order management systems and supply chain inventory visibility (SCIV).
collaboration enters the picture
The increasing demand by manufacturers and their customers for near real-time supply chain collaboration will also place even more emphasis on any company’s ability to meet promised order delivery dates and commitments.
This greater interaction with suppliers is created by the ongoing need to drive supply and sourcing initiatives as far back as possible into the design process, to ensure lowest possible cost and highest quality and delivery performance. Hence, product lifecycle management (PLM) and customer relationship management (CRM) are now a part of the supply chain equation, as are operational functions like procurement, supplier performance, spend management and contract management.
Planning and execution functionality in the supply chain is slowly converging because no plan is useful if leaders can’t execute it. Thus, enterprises now move beyond simple applications for balancing supply and demand to technologies that allow them to quickly analyze the impact of various decisions.
As supply chains become more dynamic and operate in near real-time, the lines between planning and execution continue to blur, which bodes well for their functional convergence. Some SCE vendors offer more than pure execution and offer some planning and optimization capabilities, often described as “adaptive” systems.
Companies need real-time information from execution systems to develop and adjust optimal plans, while the execution side should benefit from more realistic plans for some readiness sake, rather than to merely react after the fact in a firefighting fashion.
We believe that planning and execution will become inseparable, and that a variety of software applications like ERP, SCP, SCE, PLM, CRM, MES and CPM will come together into a more adaptive system. Harnessing these technologies should lead to the so-called “self-healing” or adaptive supply chain — when a software engine monitors all the numerous events taking place supply-chain-wide, identifies and escalates exceptions, sends notification, and reacts appropriately to those exceptions, ideally without human intervention.
To optimize their extended supply chains, manufacturers need to address the planning, execution, control and analyzing aspects of SCM. Neither planning nor execution tools can fix a dysfunctional supply chain, but planners need to analyze and optimize both areas. Successful enterprises with appropriate performance management metrics in place are characterized by their ability to articulate strategies into easily understood action plans.
They also emphasize data gathering from monitoring the performance of the action plan and fine-tuning it. In any case, prospective customers have to be aware of how workable any solution is. Also, standardized / centralized data, tighter collaboration and trust among trading partners, and tighter alignment between corporate strategic goals and SCM operational metrics are key success factors for contemporary supply chain management.
Predrag Jakovljevic is a regular contributor to TechnologyEvaluation’s daily newsletter that is read by more than 100,000 IT decision-makers. His insights and analysis on the Enterprise Applications markets appear regularly in Advanced Manufacturing. You can reach him at firstname.lastname@example.org.