Integrated Business Planning: What does 2017 hold for IBP?
More organisations will work on improving their short-term plann...
by Stuart Harman, Partner at Oliver Wight Asia Pacific
More organisations will work on improving their short-term planning and execution to ensure IBP plans are delivered
At Oliver Wight, we are seeing an increasing number of organisations who are asking for help with their S&OP or IBP process. Unfortunately, they are being held back by the absence of a robust, formal, daily/weekly planning and execution process that integrates Demand, Supply, Product Management and Customer service activities in the short-term planning horizon (typically the next 12 weeks). Defining the process, responsibilities and accountabilities for short term planning and execution effectively reduces the time that the senior management spend ‘working below their pay grade’ getting sucked into short term issues. This allows them to focus on the medium to long term planning horizon of IBP, trusting that short-term exceptions will be flagged for their attention as they arise. Remember, IBP without effective execution is just additional cost!
Professionals with IBP experience will be increasingly in demand
Individuals who have experience in the key IBP facilitation roles are becoming increasingly sought after as well as staff who have worked in an effective IBP environment. As more organisations look to introduce or improve IBP in order to realise the benefits associated with an effective process they are frequently looking to import the knowledge, experience and required culture from an existing high performing IBP environment. Having a person internally who can serve as a reference for ‘what good looks like’ can be an effective tool to support the change process.
Organisations will continue to gain advantage by getting the IBP basics right
The monthly ‘check and correct’ activities of IBP where functional plans are reviewed, shared, checked for alignment and where necessary realigned in pursuit of the organisation’s goals, has the effect of focusing and directing the key resources of the organisation to what is important. Instead of functions competing or acting out of step with each other the effect is to get everyone rowing in the same direction towards the business goals. This in itself provides benefits in terms of efficiencies and effectiveness.
Organisations will continue to seek the ‘off the shelf solution’
Ready-made IBP ‘Playbooks’ or ‘plug and play’ IBP systems have an obvious allure for organisations who are resource constrained and are looking to rapidly secure the benefits that an effective IBP process can bring. A key part of successful IBP implementation is adapting the basic principles of the process to the organisation where it is being deployed so that it provides maximum value. Most importantly, it is the individuals who participate in and use the IBP process for the development of their organisation that is the most critical factor in engagement and success. With 50 years of experience supporting process transformation at Oliver Wight, we know that when you have people and behaviours aligned with process that IBP will be most effective for a business.
The Product Management or Portfolio Review will increasingly be used to drive growth
Understanding how the organisation’s portfolio of products and services is providing value to consumers, customers and to the organisation is a key element of the Product Management Review (now called the Portfolio Review by some organisations). With ‘understanding where growth will come from’ cited as a key issue for CEO’s seen in a number of surveys over the last 12 months the ability to understand how the planned changes to the portfolio will support growth, updated monthly through the IBP process, is becoming increasingly important.
More organisations will adopt IBP to plan for uncertainty and volatility
The impact of major political events in 2016 such as Brexit and the US presidential election has demonstrated the need for many organisations to develop a process for planning for uncertainty. Organisations both small and large are wrestling with what the future may hold. The viability of some global supply chains may be challenged by the geopolitical change that lies ahead. More organisations will look to a planning process such as IBP to be able to identify areas of risk and where their supply chains are most susceptible to change. Having the right processes in place will allow companies and supply chains to improve their understanding of the potential outcomes and ultimately enable them to prepare for uncertainty. The companies that do this the best will be able to seize the opportunities that always accompany change.
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NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”