Good News, Business: Next-Generation Planning is Finally Here
Here’s a truth for our uncertain era: Consumers will, from now on, refuse to sit still for any business. Their priorities have fluctuated more rapidly than ever, causing unforeseen demand spikes across a variety of categories.
The factors that influence brand decisions are also changing as “buy local” has rapidly gone global. Historical SKU performance has become irrelevant. There is today a desperate need for frequent and shorter demand sensing that captures unforeseen changes within the lead time frozen period.
Companies are selling through multiple channels and need to optimize inventories, shelf space and logistics capacity based on business objectives (service level, revenue and profitability). Being able to balance long-term planning along with the ability to react to the changing demands of consumers is critical. Or so say Andre Hendriksen, Principal of Business Consulting at EPAM, and Vitaly Vavilov, our Director of Analytics Consulting. In the brisk, informed dialogue below, they speak to the promise and the urgency of integrated planning in our complex business environment.
So, guys, let's talk about next-generation planning and supply chain. First of all, can you define exactly what you mean by that? Second: Why are they so critical for organizations right now?
In consumer packaged goods and retail, we’re seeing a transformation around breaking the silos across the different departments, from merchandising and category management to replenishment and supply chain.
Companies need to understand product replenishment end to end — from the moment they plan for demand, to when they generate orders all the way to when they complete their sales at the store. That visibility is integrated planning. We’re talking about following data across all the different areas. We have to get past one silo handing over paperwork to the next.
Digitization and analytics are key here. As we add more predictive analytics, we give retailers the ability to anticipate events, anticipate disruptions and focus only on areas that need intervention. This completely changes the amount of time workers spend on supply chain planning.
Two main points come to mind. First of all, without breaking the silos between different functions and domains, you can’t really enable the full power of data and analytics. The power here is enormous, and it provides a truly significant impact to business. Second, we’re now dealing with a dynamic environment, a lot of things changing around the business — every day, every month and every year. The only way for businesses and organizations to become more adaptive, more agile is to fracture those silos and enable collaboration between different functions and different domains inside organizations.
And it’s not just about breaking the silos across the horizontal departments. We need to go vertically across different brands, business units, acquired companies and entities. We’re talking about a single planning capability. This is what integrated planning will enable.
What’s required is a combination of data analytics and digitization. Imagine having the ability to run your entire conglomerate of business units from a single planning platform where you can aggregate and disaggregate data at different hierarchies and layers. You’ll see demand patterns across different geographies and consumer types. We are now, for the first time, realizing this vision.
Are clients prepared for this sort of thing when you start talking with him? Or do you have to educate them on what integrated next-gen planning is about?
Companies are prepared to accept the benefits of it. They’ve been waiting to achieve this for a long time. They're probably not expecting that we have this capability to achieve it right now.
For some clients, it's the art of the possible… or sometimes the art of the impossible. They need to accustom themselves to the idea that with this new level of technology and advanced solutions, integrated planning can be implemented.
Many players start this journey in the wrong way. They rush into configuring applications without establishing a necessary data foundation. We're coming from the other direction. We’re laying the groundwork to enable centralized data consumption and real-time data availability. That’s the right place to begin — from the bottom up, instead of the top down.
It’s important to note that this requires significant levels of change management inside an organization. One of the most difficult challenges here is locating somebody in the organization who can take responsibility to be the agent of change.
Let's talk about the systems and tools that are involved in this kind of work. What are we using now or what are you seeing out in the field?
There are numerous use cases for integrated planning. Many people think it's only about supply chain, but it starts with commercial management, assortment planning, pricing and promotions and then you go to the supply chain side, which is even bigger. Typically, those parts of the organization are completely different, rarely integrated, but all of them use demand forecasting. To optimize your assortment, you need to predict how sales will behave if you change your sort.
There’s a proper sequence of steps here and it begins with integrated demand forecasting. When you have aligned understanding across the organization, you can discover how your demand and supply will behave in different external and internal conditions.
You asked about tools. Today, the market’s flooded with many commercial, off-the-shelf packages that operate fairly well in specific industries, but we're not particularly keen on any one solution. The key point: A foundation of enabling data must be available in a centralized way, one that supports the various consumers of data. Supporting those who create data with the appropriate tools is a network of microservices that allow data to be propagated in real-time across merchandising, planning, supply chain and fulfillment.
Most tools will cease to be relevant in five or 10 years. Business is evolving so fast that tools are becoming obsolete quicker than ever. You can build an agile app, but you might not need that app two to three years from now. The game is really about speed and a foundational data platform that’s robust enough to support the different consumers of information, within and without your organization.
Don’t forget that next layer: the adoption of the tools for building proper customer interfaces and usability, aligned with the needs of different departments and users. It’s a pretty challenging task, creating a system in which different inputs, such as changing the promo planning or amendments to various suppliers’ planning or pricing strategy, come together in a single plan, one that could roll out in a number of different time horizons.
Is it a challenge sometimes to get retailers to focus on the most important strategic priorities rather than their most pressing fire drill? Is that the case?
It is a challenge. However, you don’t need to spend a year or two building the tools before starting to use them. You can extract value very quickly and make this journey almost self-funding. It’s not a matter of “let's resolve immediate priorities” or “let's build something strategic” — you can work in parallel, and your strategic building will help to resolve immediate priorities as well.
The beauty of today’s technological capabilities, as opposed to those from 10 years ago, is that you don’t head into a transformation expecting to build a very rigid enterprise platform that will require a full traditional waterfall approach. We’re building evolving capabilities and have several landing zones that we watch closely every quarter or every semester. We're able to achieve value much faster than in the past, and this allows us to put flexibility into those priorities and even prioritize areas that can really help resolve the main critical issues at the moment.
By looking into what is firefighting and what is manual intervention today, where the business is bleeding funds, we can build the capabilities to resolve those issues as the first priority in a long multi-year roadmap. We couldn’t do that in the past with a regional rigid technology platform.
It sounds like integrated planning creates a lot of agency for the businesses and allows them to break through silos. Can you talk about how the work you're doing helps clear organizational roadblocks?
Absolutely. This completely turns around the business case for transformation journeys. It puts the business in the front seat, dictating what is important and how you're going to use those capabilities. Business is now highly involved with what these capabilities are going to look like, how they’ll be used and how to integrate them into the other areas of the enterprise.
A big component in here is the tools that span the different areas. As a company achieves the ability to integrate data sources and data outputs, the tools become multifunctional and different areas can collaborated through the same tools. We’re no longer talking about discrete departmental tools but deployment of an end-to-end supply chain capability.
It's always important to have the target vision in place. In most of cases, our primary recommendation is to start with the target. Of course, this vision is a living thing. It will adapt and change continuously. When you understand what you are actually building, it's much easier to adjust your plan along the way.
Integrated planning seems to function at a number of different levels. You're providing both a holistic customer view but also an overall company strategy. Is it difficult to maintain that balance in your work, or for your clients to maintain it?
It’s important to generate the need for it and clearly lay out the benefits for every part of an organization. For planners, analysts and operators, it's really about showing how much time a fully digitized, user-friendly tool will save them day-in, day-out — one that will eliminate much paperwork and create free time to work on more exciting projects. For managers, it’s about providing visibility into operations and supply-chain planning and being able to perform better as a team. They learn how it will help measure performance, anticipate issues and improve customer service. For executives, it’s about granting them the ability to plan bigger and scale faster when adapting to market changes. When acquiring companies, they can integrate them faster with a more flexible and adaptive platform.
Yes, and building that platform allows all of them to be aligned and to ensure that strategic decisions are in line with day-to-day operational decisions, which is, as we all know, very challenging to achieve.