High Performance Supply Chains: Planning Mastery
| The job of supply chain leaders is more complicated than ever. Globalization has driven rapid and fundamental change in the way companies source, manufacture and distribute products. The result is that supply chain planning has never been as critical to high performance and the job of planning professionals has never been as difficult. To help understand the challenges planners face and how their companies are responding, Accenture conducted a global survey of 240 supply chain planning executives. We identified companies that finished in the top 10 percent of all respondents on two key planning measures: cost effectiveness and customer service. We refer to this set as the supply chain planning "masters." We compared this group to the "laggards" -- respondents in the bottom 10 percent on these two metrics. In terms of cost effectiveness, masters averaged 30 inventory turns a year versus only five for the laggards. And in customer service, masters had an average order fill rate of 99 percent compared with 90 percent for the laggards. Although our research identified seven major differences in how the masters managed and operated their planning functions compared to the laggards, I am going to focus here on just two: 1) Collaborating with customers and suppliers, and 2) Sensing and shaping demand. Our research found companies have little visibility of what will affect them on both the demand and supply sides of their supply chain. This limited visibility is due in large part to insufficient levels of collaboration with suppliers and customers, which our survey found is common among participating companies. Most organizations lack the information technology, linkage of systems with suppliers and customers, and common measures that are essential for effective collaborative supply chain planning. Collaboration has been a long sought-after goal in the consumer goods industry. The concepts are not new -- we've been talking about this since the days of Efficient Consumer Response (ECR) and Collaborative Planning Forecasting and Replenishment (CPFR). But companies focused on improving their overall performance have truly embraced these concepts and invested in making them reality. Accenture's mastery research shows masters were more likely to use customer data in supply chain planning -- 50 percent of masters compared to 38 percent of laggards -- and twice as many masters (48 percent vs. 24 percent) integrate their systems with those of customers. Moreover, an increasing number of supply chain planning leaders are not only utilizing customer sales forecasts, promotion plans and warehouse inventory levels, but are beginning to leverage point-of-sale data and store-level inventories. The Masters are working with key retailers to overcome the traditional competitive and confidentiality concerns which made getting access to this data difficult. In addition, they have invested in technology to overcome the challenges on normalizing and analyzing the data. This information is being utilized to improve forecast accuracy, understand promotion effectiveness and zero in on out-of-stocks. The masters are reaping the fruits of their labor. For example, a leading personal computing company reduced inventory to less than four days by formally collaborating with suppliers. The leader also created the capability to rapidly rebalance stock based on a global view of demand and supply. The company achieved a 500 percent return on its investment in two years. A second area of differentiation is the masters' ability to sense and shape demand. The availability and granularity of demand information are providing a level of insight -- delivered in "near real-time fashion" -- that was not traditionally available. The Masters are utilizing information to quickly assess consumer trends, new product introductions, promotion effectiveness and competitor mis-steps. They are turning information into action and pouncing on market opportunities, or adjusting their own actions in reaction to consumer behavior. The masters are working to shape near- and mid-term demand in the form of marketing and promotion adjustments, retail execution changes and sales and operations plans. This level of sensing and responsiveness is proving to be highly valuable in this ever increasing competitive environment. More than four times as many masters say they can predict demand at greater than 80 percent accuracy levels. And nearly twice as many masters said their ability to shape demand was "good" or "excellent." For example, this capability enabled a leading consumer electronics retailer to improve product assortment and in-store placement. It also increased replenishment and in-stock levels for the identified products. Even more, it helped the company identify and create unique bundles of products and services that are commonly purchased together or sequentially. As the masters in our research have shown, companies that improve these two elements of planning can bolster their operational and financial performance. For the data behind all seven tenants of Supply Chain Planning Mastery, read the research report: High Performance through Supply Chain Planning, or send me an email with your questions. |
