This is part 2 of a 2-part series on how to succeed in planning and decisions amid times of disruption.
In part 1 of my blog on Planning the Value Chain and Decision Making in Times of Disruption, the focus was on the ability to react and execute amidst the unpredictability of demand. Speed in decision-making, the ability to adjust plans quickly—or even to design an entirely new plan—is critical when deadlines are pressing.
Part 2 in the series explores the “analytical scenario exercise” and how decisions based on certain scenarios heavily impact each aspect of the value chain. In fact, the condition of each scenario is that it contains all the elements relative to planning. In essence, this includes the entire chain of supply, production, storage, distribution and finally, the customer, so that the plans make sense all involved parties. Ultimately, what KPIs, as metrics and indicators derived from the set of plans are taken into account and prepared for each scenario.
Technology for Effective Planning
For the decision making process, the comparison of scenarios in an easy and objective way based on the indicators allows the choice based mainly on a rationalized financial criteria. Figure 1 shows a dashboard that exemplifies this concept.
Working with Excel spreadsheets does not contribute the efficiency, speed and agility necessary for planning teams to bring the best plans to the company. On the contrary, it eliminates the possibility of creating integrated scenarios, excluding the possibility of the best choice.
The best decision here takes into account the most viable option among all possible options. Here, planning solutions with optimization fit very well with this concept. This includes the use of models that reflect the value chain—from raw material to delivery to the customer—with calculation support through optimization engines. This also considers elements of predictive and prescriptive analysis and in-memory processing. More advanced S&OP systems have these characteristics, and the results and benefits of this new level of technological support meet the current corporate business needs:
- All-important plans (purchasing, production, storage, distribution, export, import, etc.) can be the result of a single round of the system;
- Trade-offs between plans in each area must be considered;
- KPIs guide planning objectives, especially financial ones;
- Simulations and scenarios can be created quickly and compared for impact analysis and decision making;
- The generated plans are optimized, and not just feasible or simply amenable to execution;
- Independence of spreadsheets to complement the plan;
- Speed of planning and revising according to market dynamics.
In today’s “new normal”, we will see the importance of the ability of companies to plan operations more efficiently and with the necessary accuracy to meet variable demands through processes where integration is essential to bridge the corporation’s strategic objectives. The execution of operations, balancing customer service, cost, risk and asset strategies are other critical elements to achieving objectives.
In this sense, advanced S&OP systems will be strong allies in post-crisis recovery, working with variable visibility as the recovery scenario advances over time, looking at the impacts of plans across the entire chain and allowing for better decision-making appropriate to each new scenario that appears.
This content first appeared in Mundo Logística, Edition 77 published in July 2020. https://revistamundologistica.com.br/revista/edicoes-anteriores/o-futuro-da-logistica