Supply Chain professionals have been dealing with disruptions for years. At each point in a major or minor disruption, the goals are the same: Respond, Recover, Retain, and Renew.
There are many different tactics and strategies a company can utilize through any disruption. To help address the different strategies and tactics, Accelytics is conducting multiple webinars to spur discussions and offer guidance on the different tactics and strategies.
Scenario Planning for Supply Chain Resiliency
Any disruption response comes with many variables, including workforce participation, geographical online timing, as well as anticipated demand, which leads to a need for different planning activities. Companies may have to reimagine their supply chains utilizing decision support, to create different scenario plans to address the possibilities. Scenario planning is a key piece to supply chain resiliency, and an important aspect of response and recovery after a disruptive event, but also plays a key role in the retain and renew phases as well.
At is basic level, scenario planning is simply adjusting different levers to see what outputs occur with different inputs and comparing the results. Taking the next step down, we can focus on two high level types of scenario planning.
Types of Scenario Planning
The two types of scenario planning are tactical scenario planning and strategic scenario planning. With both types of scenario planning, it’s key to have levers or targets adjusted within the time frame targeted for change and implementation.
Tactical scenarios are essentially those where one can adjust the levers with immediate effect and review regularly to gauge the impact. These levers include labor fluctuations, pricing changes, and product promotions. These levers are ones the company can easily control and adjust to see the effects. The impact can be gauged within a short time period, depending on the nature of the industry. This timeframe can be as little as two weeks, and as much as three months, according to the company’s planning cycles. Tactical scenario planning should be done along with the sales and operations planning on a monthly or weekly basis, so that the suggested changes can take place in a cohesive and efficient manner. Most importantly, the actuals need to be tracked against the plan to ensure targets are met, and adjustments can be made.
As for strategic scenarios, these involve more long-term planning, and include factors which a company may not show an impact for some time, but require planning, forethought and executive review and buy in. Examples include market entrances and exits, geography entrances and exits, new customer acquisitions, product introduction and rationalization and support for different industrial verticals.
Launching new products comes under the umbrella of strategic scenarios. Companies must consider what demand for a new product line is, whether it will impact demand or cannibalize current demand, and what are their production capabilities. Additionally, this kind of planning takes into account whether new production facilities will have to go online, what would be the best place for them from a network optimization standpoint, and whether the transportation costs would be different. This kind of planning requires oversight, ideally on a quarterly or biannual basis, where it can be reviewed how the market has changed and whether the new products or facilities are still online. As launch or retirement dates approach, planners will become more involved and the oversight will increase.
In both types of scenario planning, the mantra should be DMAIC (Define, Measure, Analyze, Improve, Control). Companies shouldn’t consider these scenarios to be emergency actions. They should be the basis for targeted improvement and measured regularly. Businesses should ensure they are efficiently utilizing scenarios and the data that’s available for help in decision support. Having up-to-date scenario planning models will help your business react to change and disruptive environments easily by having the information readily available.
Having up-to-date scenario planning models will help your business react to change and disruptive environments easily by having the information readily available.
Industrial Alignments in Scenario Planning
Understandably, scenario planning can differ significantly depending on the industry it is being used in, whether the industry is retail, automotive, or CPG. Accordingly, companies should assess their stocking levels and see whether they should be increased, and at what pace. They should carefully consider whether to change these stocking levels at a conservative, middling, or aggressive pace.
Additionally, they should see what service levels they have to maintain and whether they have service level agreements that dictate chargebacks if not met. Other factors can be regulatory concerns, compliance issues, and shelf lives of products. All of these factors impact the outcome of both types of scenario planning and must be taken into account, especially during times of disruption.
The data elements involved here are costs/overheads, product lines, geographic impact, sales, promotions, and pricing. Some or all of these factors may be within the time frame a company is targeting in its scenario planning activities.
Once the above factors have all been defined into clear data sets, one can proceed with building a model and adjusting it accordingly. Every company should establish a communication and approval plan when beginning a scenario planning implementation. All modeling assumptions, data elements, and any unstructured data must be defined and approved before being included. A change control process should be put in place, as this will ensure that actions are integrated to proper enterprise solutions. As your process improves, it should be part of the company’s continuous processes.
Scenario planning utilizes a large amount of data to properly adjust and model different circumstances. Using a software, like Anaplan, can assemble all of your data into one platform and empower users to easily adjust and change levers to assess different scenario models. Implementing Anaplan for scenario planning can help build these models efficiently and make executive approval and participation is easy.
Supply Chain Resiliency
Building these models requires effort and maintenance, but the outcome is well worth it. Although no model is perfect, their purpose is to offer insights for proper planning. With a consistent scenario planning practice, your supply chain can be monitored and adjusted with different variables. In times of disruptive events, major or minor, this can help your company stay ahead of the curve and be proactive in your supply chain recovery.
Expert Consulting with Accelytics
Are you looking to implement or revise your current supply chain processes? Accelytics offers a free, Accelerated Process and Technology Analysis to determine your supply chain improvements.
Andy has over 40 years of hands-on supply chain and technology practitioner and executive experience in High Tech and Consumer Goods, Automotive, Industrial Manufacturing and asset intensive industries. He has a long track record of successful project management leveraging technology for process improvements. Andy is an Anaplan and Oracle alumni with vast knowledge on connecting supply chain with digital resources. He is also a veteran of our US Submarine Service.