Natural or unnatural: the science of planning for any disruption
From hurricanes and floods, to earthquakes and tsunamis, the world is experiencing a rapidly increasing number of adverse weather events. The Tohaku earthquake, tsunami and Thailand floods in 2011 are a prime example of how an apparently localised event can bring global supply chains, and ultimately the entire organisation, to their knees.
But it’s not just natural disasters that supply chains have to contend with - businesses also face a plethora of unnatural disruptive forces, from political uncertainty and new regulations, to evolving technologies and a growing cyber-threat landscape.
Planning can be the silver bullet in responding to natural and unnatural threats. It sounds simple, we all do it, sometimes without even thinking about it. But there are a number of building blocks involved, which many businesses often forget about: integrated technology, common data, shared processes, and cross-team collaboration. These form the foundation on which a successful planning strategy is built.
When organisations get this right and achieve true connectivity across the business, the potential benefits are endless. But we need to move beyond traditional approaches in order to plan more effectively for today’s challenges.
Working on a consensus
The most common planning process in industry today, and the one recommended by many leading experts, is the consensus process. Groups, such as demand, sales and marketing teams are kept siloed and create their own plans before they are unified to create one final, or consensus, plan.
The problem with this approach is that it often leads to diluted accountability for the final result because, by definition, no single role, department or business unit can be held 100% accountable for the final plan. The process is also inefficient: by generating three plans that ultimately input into only one, businesses are effectively disregarding 75% of the output from each business units’ provisional proposals. What’s more, the process is slow to respond because, in order to accurately model the impact of unexpected events, you have to rerun it from start to finish.
Collaborating on planning
More and more businesses are beginning to realise that keeping the organisation and its supply chain siloed simply isn’t going to work. Companies need to collaborate across teams and connect every part of the business, from finance and sales, to marketing and the supply chain, because when something changes in one area, it will ripple across the business, and you have to be able to respond at speed.
Collaborative planning helps to solve the problems presented by a consensus strategy by allowing different functions to own different inputs to just one plan. A truly joined up approach.
For example, with a collaborative strategy, one team may input a baseline forecast, followed by a team who input an organic growth uplift, and finally another team who make an input for a promotion. This means that there is only one plan, yet three teams have collaborated to achieve it. As a result, all three teams can be fully accountable for the accuracy of their individual inputs and assumptions because we can individually measure each of their contributions to the plan.
In addition to a 75% reduction in workload and increased response times, a hidden benefit of collaborative planning is that the process is particularly well suited to event-based inputs, which are truly the planning panacea.
Moving beyond traditional budgets: letting events drive the process
Traditionally, when organisations create multiple plans as part of the consensus process, they do so in a budget type format – something that is often remarkably similar to a household budget. But there are many common complaints with entering forecasts (and budgets) in this format. To name a few: there are a lot of input cells to review, there’s sparsity in the plan, granularity is lost, it’s not easy to change or move events and there isn’t a lot of context.
But if we break the plan down into the events that it is built on, rather than entering and analysing hundreds and thousands of cells of information, organisations can just record the key events that generate the output.
In addition to building out a story from the headlines of the overall plan, event-driven planning has additional benefits including workload reduction, the ability to quickly iterate plans just by changing any assumption, increased responsiveness, and the ability to assess scenarios and different options in real-time. In this way, you can create a living plan.
Ultimately, organisations and supply chains that take a collaborative, event driven approach to planning can not only reduce their teams’ workloads, but equally increase the impact of the work they are doing and the efficiency at which it can be done. And that planning has never been more vital to the wider business as unexpected natural and unnatural disasters are thrown at companies from every direction. Planning isn’t about making life harder; it’s about working together to make it easier. Whether businesses decide to exploit the change or avoid it, the key is to be prepared for whatever comes their way.
By Antony Lovell, VP of Applications, Vuealta
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.”