Planning is not well understood
Because Planning considers the future, the answers generated will not be ‘correct’ to three decimal places, but that does not make planning less important. It is the process of planning that has the greatest value. It involves collaboration by the affected parties, using agreed definitions and the same data to achieve agreed outcomes concerning the magnitude of likely direction.
Most companies have a role or group called ‘planning’, but that does not mean there is effective planning. Using an ERP system to run the Operations level materials plan (MRP), but without input and guidance from the Tactical level (Sales & Operations Plan – S&OP) is not planning. At best it is scheduling deliveries and operational work for the next few weeks, which requires the ‘planners’ to be in continual reactive mode, expediting resources to overcome the latest emergency.
A focus on Planning
Whereas planning is a basic requirement of any organisation, in a business dealing with physical items that acquires and sells items, there is a ‘need to know’ over a longer horizon. However, as the horizon lengthens, the outlook becomes more uncertain, so planning becomes a bigger challenge. Uncertainties in supply chains have increased over the past twenty years, influenced by:
Complexity: built into processes, both internal (often management directed) and external, which is caused by:
- Breadth: number of Tier 1 direct item suppliers in the supply base and number of Tier 1 customers
- Depth: Tiers of customers and suppliers in each supply chain
- Geography: distance from the organisation’s operations to its customers and suppliers
- Focus: on speed and efficiency rather than effectiveness within the organisation’s operations
- Safety margins not allowed for: time, inventory and working capital
Variability: uneven re-ordering patterns of demand and supply and product replenishment times at customer and supplier locations. In a complex adaptable system such as a supply chains network, Variability cannot be controlled or managed, only understood using patterns.
Constraints: restrictions and interruptions in the flows of items, money, data and information through an organisation’s supply chains. For ‘core’ supply chain, planning is controlled by the performance of a Constraint, until that Constraint is overcome. For Constraints in ‘extended’ supply chains, Planning must usually accept the Constraint, unless the organisation can exert Power through a supply chain.
Climate Change: the effects are cumulative, so weather events will become increasingly severe on supply chains and the operations of companies:
- Food crop failure due to high temperatures and drought
- Increase in diseases that develop in higher temperatures and the risk of pandemics
- Changes to operations of carbon dependent sectors, as governments tighten regulations concerning carbon emissions, which affects dependent sectors and supply chains
- Threats to transport and storage infrastructure from flooding in coastal and flood prone inland areas
- Increase in wildfires that stop transport movements and disrupt supply
Geopolitics: increase in protectionism by national governments for selected industries and companies, that can influence supply. Protectionism is less by using tariffs and more through providing subsidies, concessions, local content rules and direct spending on selected industrial sectors. Territorial claims by countries may affect transport movements.
All these factors interact and amplify each other, which increases the likelihood and frequency of disruptions, with unknown outcomes. In most organisations, Uncertainty has increased, but the processes to understand and respond to the increased uncertainties has not changed. Because your organisation’s supply chains cannot be ‘managed’, they must be analysed and modelled to improve inputs for the planning process.
Role of Operations Planning
For the executive team to comprehend the flows and scope of data and information required across the organisation, the ‘One Plan’ approach is required, as shown in the diagram.
The ‘One Plan’ is governed at the Strategic level, with an agreed definition for a supply chain (and a network of supply chains) and the expected performance criteria. The team best suited to working with numbers concerning physical operations is Operations Planning and the diagram shows it red rectangles, at each layer of planning the business.
- Strategic: Supply Chains Network Strategy – defines the flows of products and items within supply chains. Consolidates with the strategy plans for Procurement and Logistics and possibly other disciplines that are within the Supply Chains group
- Supply Chains Network Design Map – responsible for maintenance of the Map. Collaborate with Procurement, Logistics and Demand Analysts for updates and improvements to the Map. The Map is a reference document for S&OP, used in Risk Analysis and for building ‘what-if’ scenarios
- Sales & Operations Plan (S&OP) – manages the monthly/4week process and facilitates the Executive S&OP meeting
- Operational: Sales and Operations Execution (S&OE) – manage the process that translates the output from S&OP to the Master Schedule (MPS) and implements the Materials Plan (MRP)
- Execution Schedules: liaise with schedulers concerning adherence to the Plan
Building relationships and collaboration comes to the fore because Operations Planning must work closely with Demand Analysts, Logistics Analysts and Supply Analysts to ensure that lead times, safety stocks, forecast models and other Master Data inputs are current and ‘clean’ for input to planning the business.
There is also AI (Artificial Intelligence) becoming available, although for supply chains it is best called Machine Learning, because outputs can update the algorithms. As the technology is embedded in applications, it requires knowledgeable people in Operations Planning to understand the data gathering methodology, algorithms and expected outputs, as tracing the cause of errors in AI is a challenge.
Operations Planning people
Operations Planning can often be attached to another discipline, but it is timely to consider the function as a distinct discipline within the Supply Chains group. This requires clear job descriptions, including expected career paths, for the roles in Operations Planning.
The Master Planner is the senior ‘integrator’ between all elements of the business. This title is preferable to ‘planning manager’, as it is removed from the hierarchy of positions in a business, allowing the incumbent to move more freely between all levels of authority The role of Master Planner is likely to address the following:
- Co-ordinate the process for consolidating the Supply Chains Network Strategy
- Facilitate the S&OP process:
- co-ordinate the input of demand, supply and capacity data and information
- evaluate the impact of new product introductions and run-out plans for products
- evaluate the business impact of material and production delays
- Manage the S&OE process – oversea the translation of S&OP requirements into the Master Schedule that triggers the Materials Plan
- Work with others to identify, understand and reduce Uncertainty – Complexity, Variability and Constraints in the supply chains
- Co-ordinate the Supply Chains Risk Management process
- Facilitate the Supply Chains Scenario Analysis process
The essential attributes for the role are:
- comfortable with numbers and an ability to analyse and model the numbers
- critical thinking – to ‘cut through’ the three-letter acronyms and the latest hype associated with supply chains
- build professional relationships and collaborate with others to achieve a successful outcome
- qualifications in Operations Planning are very rare. The US based Institute of Business Forecasting and Planning is a membership organization for S&OP, forecasting, demand planning, and business analytics professionals.
Finding and attracting professionals who are both numbers aligned and relationship building people is a difficult assignment, but this is required to build a strong and successful Operations Planning team.