I often get asked by customers to provide a forecasting or scheduling tool. Of course, we can deliver such a tool, but I always challenge them to think about the bigger picture. As a company, you need to have an idea of all the building blocks to organize your supply chain planning in a coherent way. If you start with a single room without a view on the entire house, it gets increasingly hard to build up an efficient architecture. In this blog, I discuss how you can map out your entire supply chain structure and convince your management to invest in it.
I tend to compare this way of thinking to the quite infamous and eclectic building style in Belgium, ‘beautifully’ represented by the ‘Ugly Belgian Houses’ social media channel. Just like a typical Belgian builder, companies add more and more rooms and side-buildings to their supply chain ‘house’, until the entire structure looks like a mishmash of different planning styles, tools, and systems. And these separate pieces might do their own job perfectly, but only when combining them coherently, you’re creating business value.
One example I’ve encountered is a customer asking for an RCCP (Rough Cut Capacity Planning) system in weekly buckets, instead of the normal monthly buckets, in which the RCCP usually shines. What they are actually looking for is an MPS (Master Production Schedule), which does work with weekly buckets, and is based on MRP (Materials Requirements Planning) lists, and the cooperation of the two results in avoiding excess inventory or insufficient materials.
Just like in the RCCP example, it’s worth it to plan out the full blue-print of your Strategy-Driven Supply Chain. Think about what you want to do with an RCCP, MPS, MRP, and detailed scheduling tools. Which needs do you have and the combination of which tools can answer those needs? The provider of these tools doesn’t even matter. What does, is that you have a clear vision of where you are today with your supply chain planning and where you want to be in 5 years.
If you have a general view of the finished supply chain house, you can start planning the roadmap to achieve that goal. Even if this roadmap can span 3 to 5 years, make sure to keep it sharply lined out, so it is easier to stick to. Telling companies that they need more planning modules than just the one tool they were looking for is not an easy approach, but it is a necessary one.
Let’s say you have a complex product portfolio, serving up to 8,000 customers. Not only do you need to wrap your head around a complicated production process, but you also need to align thousands of parts, and the suppliers of these parts, to keep this supply chain under control. If you’re not consciously thinking about this complexity or the bigger picture, you won’t be ready to manage it when an unforeseen disaster strikes and your supply chain starts falling apart.
Now, it might be easy to say you need planning tools for your S&OP, but how are you going to get your management to invest in it? The key is to make a convincing business case and prove that a well-built supply chain has a positive impact on every side of the Supply Chain Triangle, as I explain in depth in this blog or in my book on this same topic. A healthy supply chain not only improves your service and turnover but also decreases your costs and inventory, a double impact on your bottom line!
If you can highlight the financial consequences to your management, it will make it easier to convince them of the complexity of the supply chain and the need to manage it coherently and in detail. And if they don’t want to do it for financial gain, then perhaps they’ll do it for their customers who will be confronted with flawed planning and services.
Usually, a CEO tends to invest in machines and a shiny new ERP system first, and add a supply chain planning system more as an afterthought. However, when we look at the costs and benefits of these investments, an ERP will cost almost 10 times as much as an advanced planning system (APS), but the benefits of such an APS are much more clear and more quantifiable.
In the end, I make it my job to encourage supply chain planners to see it big when they are drafting the blue-print for their supply chain planning. You need to envision the end goal to succeed in the long run. Adding separate shacks to your planning structure might seem to do the job in the short term, but eventually, all these temporary add-ons will lack cooperation as they won’t be enough to cover all your supply chain planning needs at once.
Create a business case yourself, and you’ll have more success to get the investment you need to realize the S&OP building you need to house your complex supply chain.