What Is Supply Chain Planning, And What Are the Business Benefits?

Supply chain planning (SCP) is the process of optimizing the delivery of goods, services and information from supplier to customer, which balances supply and demand. SCP provides planning, what-if scenario analysis and real-time demand commitments.

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Use scenario planning in S&OP to uncover risk and opportunity

Supply chains today are experiencing more disruption than ever. But only 18% of companies rate their performance at using sales & operations planning (S&OP) for running multiple scenarios to understand trade-offs as excellent.

Download this 5-step plan for:

  • Recommendations for developing scenario planning capabilities in S&OP

  • Summary of key challenges to inform your business case

  • Roadmap to assess risk and opportunity through S&OP

The key components to supply chain planning

Especially in times of disruption, it’s critical to make improvements in the supply chain planning process to enhance decision making and refine processes, organization, metrics and technology.

Engage cross-functional leaders for sales and operations planning.

Best-in-class sales and operations planning (S&OP) is a large component of supply chain planning and brings clear business and organizational benefits. Think: improved profit, revenue, cash flow and customer service. Yet most organizations don’t fully reap these benefits due to siloed thinking and an immature S&OP process. Plus, there’s a lack of understanding from functions outside of supply chain. You must demonstrate the value of S&OP to different stakeholders and align to major business performance optimization programs to build a best-in-class S&OP process and gain commitment on supply chain planning improvement projects.

Starting and advancing the S&OP process requires extensive collaboration across supply chain and other functions, including sales, marketing and finance. To implement or transform your planning, build a strong business case for change. To start out, consider the four elements of the S&OP process:

  1. Product portfolio planning. Do we have the right product portfolio to meet our targets?
  2. Demand review and gap reconciliation. How much are we planning to sell and does this match our ambition?
  3. Supply review and gap reconciliation. Do we have the right inventory, capacity and capabilities to meet demand?
  4. Pre S&OP. What are the financial consequences of the choices we make and what decisions to escalate?
  5. Executive S&OP. What are the decisions to make to optimize revenue, profit and cashflow of the company?

From there, take these three actions to secure business buy-in for your supply chain planning transformation:

  1. Create a business case for change. Highlight how improvements in the process will enable the organization to achieve strategic goals.
  2. Calculate improvement potential. Use quantifiable business and supply chain metrics.
  3. Guarantee cross-functional engagement. Target the business case to specific stakeholder groups and including expected benefits.

Manage change and influence stakeholders to improve business results.

Seventy-five percent of supply chain leaders expect an increase in high-impact disruptions compared to the rate of disruption over the past five years. Yet resistance to change from decision stakeholders remains the top challenge supply chain planning leaders anticipate as they attempt to execute their supply chain transformations over the next three years.

As supply chain planning leaders, you must be more effective in managing change with key stakeholders and driving multiple priorities across complex transformation projects. To do this, assess the current landscape, build a vision for supply chain planning, and create a roadmap to grow maturity, influence stakeholders and improve business results through the transformation journey.

Maturing your supply chain planning process is the foundation for future improvements.

Three in five companies are dissatisfied with the fit between their supply planning objectives and their supply planning capabilities. To ensure future supply chain planning improvements, build a supply chain planning process that aligns to business objectives and outcomes. This includes product portfolio planning, demand planning, supply and inventory planning, and the S&OP and sales and operations execution (S&OE) processes.

Process maturity is also important for future investment, and yet 72% of companies with a physical supply chain are at Level 3 or below in terms of their supply chain planning maturity. To grow your supply chain planning maturity, integrate supply chain planning processes with other internal processes such as order-to-cash, procure-to-pay, financial budgeting, and customer and supplier relationship management.

Also, establishing key performance indicators (KPIs) enables the supply chain organization to justify, monitor and drive individual processes, as well as accelerate overall supply chain performance by balancing local and global performance improvements.

Align a talent strategy with your overall supply chain planning strategy.

Your supply chain planning organizational design and talent strategy is critical to achieve higher performance in both the short and long term, considering the talent gap is a top internal constraint to growth. What unique skills are needed to support digital supply chain planning? 

Six elements of talent strategy are key to success:

  1. Design and implement the most appropriate organizational structure for supply chain planning that’s aligned with the broader supply chain strategy. This includes attracting talent and stepping up capabilities within the supply chain planning organization to ensure long-term continuity and the ability to overcome business challenges.

  2. Collaborate across HR and supply chain on talent management: Consider dedicating resources from the supply chain planning organization to develop and implement a talent strategy. Use HR as a strategic partner and leverage its systems for scalability and analytics.

  3. Understand current and emerging competency requirements: Refresh your supply chain planning competency model (or create one) based on triggers, such as shifting business priorities, emerging tech trends or changes in the competitive landscape.

  4. Use an integrated approach to talent management: Most supply chain planning organizations continue to approach talent development from either a performance management or training-led mindset. Instead, incorporate all five talent pillars in your talent strategy — competency models, career paths, recruiting and onboarding, training and development, and performance management.

  5. Use unconventional strategies to close talent gaps: Expand your recruiting profile beyond the typical supply chain planning profiles. 

  6. Establish a well-rounded team: Gather a mix of multitalented people to achieve supply chain planning objectives. Think: data science, data engineering and domain expertise.

Develop a supply chain planning technology roadmap.

Supply chain planning technology projects often exceed budget, and software tools are often underused. Why? Many failures stem from how projects are initially scoped: Organizations often mistakenly view supply chain planning technology implementations as IT projects. Plus, supply chain planning and technology leaders sometimes speak different “languages” when it comes to supply chain planning solutions and priorities. Technology leaders apply software development life cycle frameworks to their projects, which may lead them to underestimate or totally neglect the impact of the new software on the supply chain planning process, organization, behaviors, etc.

Embarking on a software implementation without a clear strategy, use case, resourcing or stakeholder support can be costly. Supply chain planning technology is intended to be a long-term investment, so make the effort to prime the enterprise and develop a supply chain planning technology roadmap to embrace the new software. It’s also a good way to avoid even costlier mistakes, missed business outcomes, overall dissatisfaction, or even project suspension or termination.

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Frequently asked questions

Supply chain planning improves profit, revenue, cash flow and customer service through multiple processes that span product portfolio planning, demand planning, supply and inventory planning, financial alignment through S&OP and short-term execution through S&OE.

Supply chain planning leaders should build a comprehensive vision and roadmap to improve business performance. To do this, supply chain planning must address five key elements: performance optimization, change management, process excellence, organizational design and technology enablement.

Seventy-five percent of supply chain leaders expect an increase in high-impact disruptions compared to the rate of disruption over the past five years, specifically around three issues: risk management, future of work and digital transformation. Supply chain planning leaders will need to be at the forefront of working on these priorities and will be required to reinvent supply chain planning processes to be more agile and accommodate different categories and market needs.

Supply chain planning systems refer to the tools used to document the supply chain plan. Gartner urges organizations to build supply chain planning systems that deliver on strategic business outcomes, and to ensure that outcomes transform into easily communicated decisions.

The Gartner Power of the Profession™ Supply Chain Awards is an annual community-driven recognition program that inspires supply chain transformation around the globe. Download details of the latest award winners to read examples of supply chain planning excellence in action.

Key elements of the supply chain planning process capture:

  • Product Portfolio Planning
  • Demand Planning
  • Supply and Inventory Planning
  • Sales & Operations Planning (S&OP)
  • Sales & Operations Execution (S&OE)

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