supply chain variability

BI, Analytics & Reporting

- 3 min read

Planning for variability: A current trend in Supply Chain

As economies pick up, volume has returned to many markets, and revenue grows. However, profitability is still at risk as uncertainty and variability increase supply and fulfillment costs. Variability in demand – both in location and pack configuration – leads to noisier and less stable demand history. The resulting delay in supply impacts cost price and lead time which, ultimately, has an overall effect on the bottom line.

Design and plan for variability?

Businesses and their supply chains must build more flexible plans and adaptive planning processes to enable a more agile response to change. This means simply creating a view is no longer an acceptable approach; businesses must operate with planning views in near real-time to enable more responsive decisions. The single idea of the truth is no longer something you can assemble monthly but instead a snapshot of a real-time view taken at a particular moment.

Stakeholder considerations

There are other areas where synchronization becomes critical. Enterprises are leveraging their supply network to enable them to flex and respond. These more variable plans need to be communicated with customers, suppliers, and partners in the Supply Chain to ensure they can sense and respond to the changing demands themselves. The risks have to be shared, and the parameters of confidence outlined with precise and comprehensible data. Elements of flexible capacity can be defined to enable the Supply Chain to respond to marketplace turbulence with planning “shock absorbers” in place – buffers that allow time and materials and capacity and funds to build flexibility at the most critical times and tactical locations.

Success metrics for flexibility in the Supply Chain

For companies to thrive in the future, their Supply Chain must be agile and responsive to critical events’ timing, scale, and speed. Many of these events are either predictable or forewarned through signals and indicators from the marketplace and the metaverse. What is less clear is the level of uncertainty. Therefore, managing response to the size, scale, and speed of the change matters.

Supply Chains will need to pay attention to some of the critical indicators that preempt change and then adapt to such changes through flexible and adaptable mechanisms. It is vital to get all participants engaged in your company goals to synchronize what needs to be achieved. Responsibilities for each function need to be defined in the quest for achieving those goals. The language of risk needs to be matured throughout the business to be more fruitful and adaptive.

Building better business decisions based on the response to data changes requires insight through integrated dashboards – which involve the selection of suitable KPI’s which depend on integrating finance into the product, demand, and supply functions.

Alternatives

The door opens to more responsive decisions as the business becomes more adaptive. This requires the empowerment of both planning teams and the processes that make decisions – guiding the way executives can make those decisions where escalation is needed. Speed to a new scenario is critical in building out those alternatives and enabling more powerful recommendations to be made and taken. A more granular version of the truth is required, not one built on simplistic models created in an Excel spreadsheet. The dimensions of flexibility need to be as variable as the business can produce rather than impeded by limitations of the modeled data set. Profitable corporate plans must be assembled and executed across the enterprise rather than in departmental silos.

The key takeaway

There is an increasing need for precision, mainly where the customer is concerned. This need will drive us closer to more “real-time planning.” However, the challenge for the Supply Chain is that there is always a lead time – whether it is planning, production, transport, or any other form of lead time. The opportunity comes from making better and more timely decisions that facilitate flexible planning and the delivery of continual competitive advantage.

The question to consider, then, are:

  • Do your planning teams know the relevant indicators to your product portfolio?
  • Are these indicators front and center in the considerations you make as you adapt and shape your plans?
  • How much has your planning process changed in the last two years?
  • What will it look like in the next two years?
  • Does your planning environment facilitate and enable a continuously changing planning infrastructure?
  • Is your planning process ready to adapt and respond to the changes that the marketplace will expect and demand as competition increases?

By incorporating an adaptive planning approach, which includes a responsive and maturing planning process that increases granularity and speed in your extended Supply Chain, businesses can become more agile in the tumult of the modern Supply Chain market. 

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