Supply Chain Planning Blog

How to Justify a Supply Chain Planning System?

Posted by Cyrus Hadavi on Wed, Sep 30, 2009
SCP SelectionAlmost everyone understands the role that people, processes and systems play in running a modern day enterprise.  What they might disagree on is the importance of the role each one of these legs plays to holdup and grow the enterprise. The role of people and processes are given.  The Systems' role is the least understood aspect of the three. There are many managers who believe systems are all the same and as long as the basics are covered any additional sophistication does not add any value. We disagree! And here is why:
  • Systems enforce good practices and processes: Companies spend a lot of time and money to design business processes only to see them deteriorate very quickly as people and organization, as well as processes change.  Systems are capable of cross checking millions of variables in the business and point out inconsistencies, lack of proper data and information, or point out who has not done their part. They can check and monitor what we should be doing and how we are doing it!
  • Unlike people, systems are fast, very fast! How can you check across 3 continents, to provide reliable delivery information to an end customer when you have thousands of products, suppliers, customers?  In addition, systems are capable of analysis across millions of variables.  An example is a system for Multi-Echelon Inventory Planning where it can calculate the right level of inventories across multiple layers of the supply chain to ensure the desired service level.  It does not matter how many people you throw at this and how often they meet, they will not be able to optimize nearly as well or as fast! So how is that done now in most companies? Well just using their gut feeling and experience which might be good but it can be done better, and in most cases, a lot better. The right system for inventory planning can easily save millions of capital dollars and facilitate for much better customer service.
  • System tie processes together, for exmpale planning to execution, sales to operations, and forecasting to financials. Generally disparate spreadsheets are incapable of integrating these processes resulting in waste, delay and sub-optimal results.
  • Systems allow you to plan more frequently which results less inventories.  Systems can help us plan what to build, where to build, where to keep, what to keep and when to do it all-accurately.  And they can plan the entire supply chain in minutes, allowing multiple planning runs per day as the demand and supply conditions change. In the absence of the right system, inaccurate plans are done based on spreadsheets, once a week or month, resulting in excess inventory and lower customer service levels.
  • Systems keep people accountable, e.g. forecast accuracy by sales or customers, commit vs. actual in production, and supplier delivery performance. They also play an active role to point out where the excesses are and where the deficiencies lie.

Given the above, would you trust millions of dollars of your assets to just a spreadsheet?

There is a comprehensive eBook on this topic with a lot more detailed information.  To download please click on "How-to-Guide: Justify a Supply Chain Planning System".

Topics: Supply Chain, Supply Chain Planning, Inventory Planning, SCP System, Multi-Echelon Inventory Planning