Matt Johnson, Senior Director, Product Strategy
About twenty years ago, I worked for a supply chain planning software startup. We implemented our solution for a big retailer, starting with the paper products category. If we could cut inventory investment without hurting sales, they’d roll it out across the company.
Our anticipation grew over the first few weeks of the project. The numbers were all going in the right direction: not only was inventory going down, but sales in the category actually increased. Users also said that they liked the system. As they got more familiar with it, they accepted more of its recommendations, and the results continued to improve.
Then one morning, it all fell apart. Our customer made a big forward buy from one of the vendors, adding several months’ worth of supply to their inventory. Our scorecard turned from mostly green to mostly red, and the systems integrator quit the project in protest.
While we consoled ourselves that our work had freed up enough warehouse capacity to make the forward buy possible, our targets had become mathematically unachievable. Our rollout plans were dashed.
Most supply chain planners have stories like this to tell: launching hot new products with failing component suppliers, parking truckloads of unwanted material behind the distribution center, or routing time-critical shipments thousands of extra miles for tax reasons. As one pharmaceutical supply chain VP once muttered to me, “Why should I bother to do this job, when R&D, sales and finance issues all trump my priorities?”
The answer – as I learned the hard way – is that by collaborating with the product, sales and financials teams, you can put supply chain planning in context, and avoid being blindsided. Integrated Business Planning is the name of the process. It synchronizes product, sales and financial plans with supply chain plans on an ongoing basis.
Typically, each organization continues to use its own planning tools – PLM for the product dimension, sales forecasting and event planning for the market dimension, enterprise performance management for the financial dimension. Meanwhile, the supply chain team contributes its demand and supply plans. Regular meetings coordinate decisions and negotiate tradeoffs among the teams.
In spite of its benefits, Integrated Business Planning has been a challenge due to the number of systems and stakeholders involved. But now companies can run their Integrated Business Planning process end-to-end in the Cloud using Oracle Sales and Operations Planning Cloud. It offers consensus planning, simulation, team task management, online collaboration and approvals, as well as visual analytics and reporting that support state-of-the-art IBP practices. It’s also easy to use, so that key stakeholders from all teams can participate.
Stepping back to see the bigger picture can is not only therapeutic; it can enhance the supply chain planning team’s influence on the enterprise. After all, why pursue the local (supply chain) optimum, when you can contribute to the global (business) optimum?