ManufacturingDecember 21, 2020

Value Chain Planning and Decision Making in Times of Disruption (Part 1)

This is part 1 of a 2-part series on how to succeed…
Andre Miyajima

This is part 1 of a 2-part series on how to succeed in planning and decisions amid times of disruption

Agility and Speed in Decision Making

During uncertain times like these, the ability to react and execute are imperative factors for practical results, due to the unpredictability of demand. Speed ​​in decision-making is mandatory, while the need to adjust plans in the face of daily changes, or even to redesign the whole due to a new macro element, demands an agile process.

Today’s business climate has brought a new reality that expands the urgency and need for action plans. Planning teams play a critical role in the elaboration of contingency plans. These plans focus on scenarios in which the status, restrictions, conditions and demand are apt to change quickly.

We must then work in cycles with a very high frequency where models like OODA loop (Observe, Orient, Decide, Act) within VUCA environments (Volatility, Uncertainty, Complexity, Ambiguity), originally arising within a military context, now become applicable to the business reality. The OODA loop has a practical application in the corporate environment corresponding to an integrated, fast, and assertive mindset within high-demand and dynamic Sales & Operations Planning (S&OP). Following this process, the Sales & Operations Execution (S&OE) finds the operationalization of plans now within the internal environment, where the model finds synergy in the focus on operational excellence. See figure 1.

Figure 1. Planning models considering VUCA environment.

Considering the length of the chain and its impact on the overall picture, the importance of the integrated value chain in business decisions becomes increasingly important.

The Impact on Operations

It’s clear that decision making depends on the existence of options and alternatives. The less information and insight about the possible impact in your operation, the more empirical and shortsighted the decision. At the same time, the analysis can take a long time due to the disaggregation of information in different spreadsheets or systems. This process becomes difficult–if not impossible leading to decisions based on “rule of thumb.” See figure 2.

Figure 2. Dashboard with scenario comparison and KPIs for decision making in S&OP.

What is clear is that making plans and scenarios today is not something quick and simple. Years of investment in transactional, localized and execution-oriented business solutions left the planning part supported by archaic functions such as MRP, satellite systems and Excel spreadsheets. All of these methods fail to provide the necessary visibility and agility for the necessary supply chain plans. The amount of time spent using these outdated tools is a barrier to the efficiency of planning teams and represents a risk to the quality of the company’s results when they are put into practice. This results in few viable alternatives for decision making at planning meetings and a departmental view.

Quick planning in the assessment of scenarios that analyze all the important impacts within the chain, given the dynamics of new demands and restrictions each day, is possible only with systems that eliminate the need to calculate manually and in an integrated manner these points:

  • How to distribute and supply, with how many resources, to which customers, at the most appropriate cost;
  • The inventory level plan throughout the chain, for the defined policies and the service level and how it reacts in all considered scenarios;
  • What is the best production mix taking into account the capacity, the availability of resources; which plant, line and resource will be used to produce which product over the planning horizon;
  • The best financing plan with the corporation’s financial objective, profitability, margin and / or cost.

Discover more in part 2 of our blog series on how to succeed in planning and decisions amid times of disruption.  

This content was first published in Portuguese in Mundo Logística, Edition 77 in 2020 https://revistamundologistica.com.br/revista/edicoes-anteriores/o-futuro-da-logistica

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