Use external inputs to your Business Plan with care

Roger OakdenGlobal Logistics, Logistics Management, Procurement, Supply Chains & Supply Networks

Business plan thinking

About your Business Plan.

Forecasts of future demand and supply are full of uncertainties, especially when considering future business conditions that your organisation will need to operate within. To give some authority to the numbers used, models and estimates of the future should be substantiated by assumptions. These limits provide an understanding about the level of acceptance and use of the figures.

The ‘One Plan’ illustrates an approach to integrated thinking when planning your enterprise. The starting point is the Business Plan.  This provides the focal point for executives to better understand the overall context in which their functions operate. Hopefully the Business Plan is the base from which well considered responses are made to the inevitable competitive and economic pressures that will be experienced over the life of the Supply Chains and other Function strategies.

One Plan Approach

The Business Plan provides the guide for recognising and building on longer term opportunities; ensuring that your organisation is less wrong than if it just relied on being ‘agile’ and ‘responsive’. This approach allows management to make informed choices concerning the ‘best’ portfolio of products and countries (or regions within counties) in which to operate and the steps required to gain market share through organic growth and/or mergers and acquisitions (M&A).

The development of medium term and longer range forecasts for your organisation should have inputs that include the Business model; Function strategies (marketing, supply chains and finance) and external data. But what value should be placed on external data that can affect possible decisions for your Supply Chains – that depends on your organisation’s understanding of the assumptions.

New technologies can influence valid data

An example of assumptions behind data is contained within the recently published 15 year projection of population growth, by the Victoria State government in Australia. These numbers will be of interest to brand companies, shippers and 3PLs concerning decisions about future distribution patterns and infrastructure locations.

The future population was calculated based on trends in births plus overseas and interstate migrants, less migration out of the State and deaths. The report notes the population growth of the State capital to 2031 will be about 30 percent and about 21 percent outside the capital city (mainly in larger country towns). Therefore, the approach has an underlying assumption, which is the continuing migration of people to larger cities. But is this true? In developing countries, urbanisation is likely to continue, as citizens have access to better services and the range of job opportunities. However, technology developments could make continued urbanisation in developed economies less likely, which may influence where people choose to live.

In the media, there are many articles concerning how lives, careers and work patterns will change in the (near?) future. This is due to current and future technologies and innovations, often driven by digitisation of economies; summarised as:

  • Disruptive business models – an example is ‘car as a service’ rather than ownership
  • Technology types with potential of exponential growth; due to the ‘S’-curve adoption of technology (not linear)
  • Product innovation
  • Business model (process) innovation

One result of these influences is declining job opportunities at large production units (often located within cities) and at their materials suppliers and smaller services businesses. A more positive outcome is that regional towns could grow to become the business and commercial hub for their region, due to technologies:

  • Fibre optic and satellite based communication networks. These enable cloud based ‘software as a service’ (SaaS) systems for ‘pay as you go’ software applications, which reduce initial capital requirements for SME businesses. The network also allows brand companies to download digital product models, CAD designs and process control algorithms to contract businesses that service a defined region
  • Lower cost, smaller and flexible production machinery enables competitive, short run production of global, national, regional and local products
  • Transport facilitation services (like Uber, but for commercial transport) to provide services for local regio0n delivery and product servicing
  • Financial technology (Fintech) applications to facilitate regional business start-ups and ongoing operations

Supply Chains design

As the barriers to entry for industries are lowered, the changed structure of ‘digital businesses’ enables newly established regional organisations to develop new suppliers, customers and clients. For brand companies, the digital connections would fundamentally change their Supply Chains, concepts of an ‘agile’ business and approaches to providing customised services.

In turn, this would influence the Supply Chain strategies and therefore be incorporated into the Business Plan. The challenge for organisations is to what extent does management subscribe to the ‘technology breakthrough’ economic philosophy and if they do, what period will be allowed before action is undertaken to meet the technology challenges? And this accepts that all parts of the organisation have claims on limited funds for capital expenditure, so investment in the future is not unlimited. These decisions belong to all organisation, because external forecasters cannot accurately predict when (and if) a particular technology or innovation will become accepted.

The possibilities identified in this post could accelerate a move away from large cities (together with the prospect of lower house prices and rents). Therefore, although such data s population reports are a valid external input to your Business Plan, Supply Chain professionals should always question the assumptions that lie behind external data and how modifications to the numbers may affect your Plan.

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...