It’s been well reported that Supply Chains have seen challenging times over the past few years, initially from planning for Brexit then managing through the Covid pandemic and more recently reacting to the delays caused by the Suez Canal blockage. So, what’s next, they say things come in 3s so should we sit back and relax?
Much has been reported by supply chain institutions and media outlets of the issues businesses have faced, and the changes that supply chains need to consider to be ready for the next challenge, but are we taking heed?
During the latter part of 2020 CIPS reported on the need to build resilience in the Supply Chain then in May 2021 CIPS also reported on the need for skilled professionals and that accurate data and intelligence would prove vital. It was also noted that larger organisations were more able to weather these kinds of storms, and for smaller businesses it could be make or break.
Moreover, the BCI Supply Chain Resilience Report 2021, reported on the increased number of businesses adopting technology to help analyse and report on supply chain disruptions.
But what does all this mean? If we are to follow the advice from CIPS and the BCI, planning for the future by skilled supply chain professionals using accurate data and intelligence is key to business stability and growth.
Traditionally, when the term ‘Supply Chain’ is mentioned, thoughts typically turn towards the movement or storage of goods or the Procurement activities, in its simples form this is correct - CIPS defines it as ‘In its simplest form a supply chain is the activities required by the organisation to deliver goods or services to the consumer’ – but what about all the planning activities that support effective procurement and movement of goods and the mid/long-term business planning?
The key points raised by CIPS in its Supply Chain definition, and in its May ’21 article, are ‘in its simplest form’ and that ‘accurate data and intelligence would prove vital’, these 2 statements point towards the importance of those planning activities, and the systems required to effectively maintain and analyse accurate data.
Nobody is suggesting that the Suez Canal blockage could have been foreseen, but from the outset of planning for Brexit combined with managing the challenges from the Covid pandemic companies have realised their information technology systems and processes, while they may have been suitable for business as usual, they were not robust or agile enough to provide the detailed inventory management or executive reporting required to support the business objectives through these challenging times.
Considering another point raised by CIPS that larger organisations were more able to weather these kinds of storms, and for smaller businesses it could be make or break, this can provide a dilemma for those smaller businesses that don’t necessarily have the resources to invest in expensive software solutions or that may be using rudimentary excel planning tools.
Forward planning can be a complex multi-level and multi-faceted process with long-term strategies, mid-term master planning, short-term scheduling, all centred around delivering cost effective customer service by collating accurate data to make informative decisions. Without the right demand forecasting and inventory planning systems and collaborative processes like S&OP or IBP in place this can be a challenging task.
The key driver to delivering an accurate and robust forward inventory and supply plan is having confidence in the forward demand forecast profile. Many businesses use last year or last year + x% to base the future year’s business plans on, but relying on past performance is too simple given the changing landscape, will previous activities be repeated, are item demand trends naturally growing or declining? What is the right demand profile to base the inventory and supply plans on? Read our blog ‘Is Less Than 75% Forecast Accuracy Good Enough to Achieve Business Targets?’.
Collating and maintaining a bottom-up demand forecasting profile with sufficient accuracy to achieve a robust short, mid and long-term tactical and strategic business plan is virtually impossible without the right systems and processes in place. Although delivering organic growth is what many businesses strive for, just achieving or exceeding historic sales trends at an aggregated level can lead to increased costs and operational inefficiencies throughout the Supply Chain at the item level with the potential of unbalanced inventory, increased waste and customer service failures.
It is well accepted that just having sophisticated systems won’t deliver the accuracy and efficiency required by themselves, they need to be supported by the right people and processes to be successful but having the right systems will provide a platform and the relevant disciplines to be implemented to achieve the business goals.
With the advancements in the way software has become available over the years i.e. cloud based Software as a Service (SaaS) where tailored solutions are provided on monthly licence agreements without incurring high capital expenditure, the solutions that smaller businesses need have become much more affordable and provide much greater functionality and reporting capability that simple spreadsheets.
A whole host of sophisticated Supply Chain Management solutions are becoming available from operational Demand Forecasting, Inventory Planning and Capacity Planning to the process and communication solutions like Sales and Operations Planning (S&OP) and Supplier Relationship Management (SRM), all of which can be integrated with existing ERP solutions and provide more advanced functionality and management reporting.
Are these kind of solutions part of the framework required to build resilience in the Supply Chain and maintain the data accuracy and intelligence as recommended by CIPS and The BCI, or will the suggestion that smaller businesses will suffer more that the larger ones come true?
In our recent survey the main goal of Supply Chain Management is to add value to the customer, equally 60% of participants report forecast accuracy of less than 75%. Can value be added to the customer and the business operational and financial targets be achieved with forecast accuracy less than 75%?
To take part in our survey and click https://hms.avercast.eu/
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