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By Dan Knox | GRA Supply Chain
You have bought a new car. You fill it with the appropriate fuel, wash and clean it when dirty, and get it fully serviced every year to ensure it is kept in peak performance.
However, in business, we neglect to do the same around our core planning processes. Businesses invest in new planning tools, reengineering their planning processes, senior manager recruitments and team restructures, but do not put in place simple processes that ensure they continue to extract the maximum value out of their investment.
A review only happens when there are major stock outs, large write offs, product withdrawals or substantial changes in staff. Planning processes, and those who facilitate them, need to be kept current and up to date to deliver peak performance.
What do we mean by planning?
Planning is process of organising the efficient and effective flow and storage of goods, services, $’s, people and related information from point of origin to point of consumption for the purpose of meeting customers/consumers requirements. It is the process of translating the request for product into activity and cost to satisfy the customer.
Why is it important?
If done well it can become a competitive advantage because:
It can take out cost. Through a reduction in inventory carrying costs, transportation and warehousing costs, ordering costs, and write off & markdown costs. It can increase revenue through better service levels, stock availability, customer loyalty and new customers, making it easier to do business with you. It also can free up cash with lower inventory holdings, allowing the business to reinvest in growth initiatives.
If not, it can be the slow death of the company:
Additional cost, lost sales and business and no cash to support growth. On top of this, your supply chain costs are likely to be double that of your competitors.
Looking at supply chain costs as a percentage of sales, ‘best-in class’ performers have roughly half the costs of ‘average-in-class’ performers? In other words, if you’re an average performer, your supply chain costs are likely twice that of the best performers.
Best-in-class performers have higher asset turnover because inventories are lower, often by 20-40 per cent comparatively, while customer response times are faster. In a climate of tight credit and higher capital costs, those that can generate superior cash flows and ROCE will outperform.
What is the reality?
We have found that many business have not updated their planning processes as their businesses have evolved.
Over the last 5 years have you:
— Added new products to your portfolio
— Sold to new customers or markets
— Had Changes to your Supply Chain network
— Imported more products
— Hired new people
— Reviewed your planning master data
— Reviewed your ERP configuration
If you ticked yes to any of the above, you may have planning processes or configurations that are out of date relative to your current planning needs.
So what do you do about it?
Set up your warning lights
In your car, when the engine light goes on, it prompts you to perform a specific action to ensure your car is maintained top performance. Your planning processes need to have the same approach.
Too often in business, we see the warning lights go on but no action is taken until the process breaks? If your low fuel light goes on in your car and you keep driving, you won’t be surprised that your car will no longer move. In business, we often see key indicators miss their targets but are surprised when this translates to a service level failure.
What warning lights have you got in place to alert you to planning performance issues?
Don’t just review KPI measures, put in place process measures as well. Some areas to look at are:
- Forecast accuracy
- Schedule adherence
- Late purchase orders
- % Forecast exceptions processed
- # Statistical forecast overrides
- # Manual orders overridden vs automated
- Information pack availability (on time and complete)
- Actions completed on time
- Meeting attendance
Some of these will be dependent on your system’s capabilities, however, if you don’t measure it, you won’t improve it. The key here is what “action” you will take when your business warning light goes on.
Book in your Planning Service
The process of maintenance and continuous improvement needs to be embedded your existing processes. It doesn’t take much to install a culture of continuous improvement. Don’t just focus on the car, look at the driver as well.
The two key areas to review are:
- the Process itself
- People who manage the process
Assess the Vehicle (your planning process)
Is your car still suitable for your circumstance? If you have recently had kids, that small sports car you had may no longer be big enough for all the family. Business is changing so regularly, reviewing processes is important. Does your planning processes support your company’s strategic objectives and your current customer offer?
Areas to review:
- attendance & meeting effectiveness
- roles and responsibilities of process participants
- information flows, inputs & outputs
- duplication and redundancy
- methodology
- information timeliness, accuracy and value
- manual vs automated
- how exception based is it
- review the links and handoffs between processes
A good process is one where you are managing your inputs, not your outputs.
Build the assessment into your existing processes. For example, at the end of your monthly Supply Review meeting, spend the final 10 minutes reviewing the meeting against its objectives (are these objectives documented?). In your weekly planning WIP, allocate time to focus on an area for review (plan them out in advance so you cover most of your process).
For larger processes, like an annual budgeting process, conduct a workshop. Record what worked well and what to improve for next time. Remember, nothing loses the engagement of people more than when process adherence is stressed over the business value.
Assess the Driver (your planning people)
Conduct a skills audit of your planning team. It can be a self-assessment or can include 360 degree feedback.
Create a template for your skills review to identify the key skills required to fulfil the roles. Focus on:
- Technical areas and system skills (for example how to generate a statistical forecast in demand planning).
- Process skills, including understanding on how the process works and how they contribute to it, problem solving skills etc.
- Interpersonal skills. The ability to clearly communicate and present, business partnering skills etc.
This will also be of benefit if you ever need to recruit new people into the planning area.
The assessment will determine:
- The baseline of the planning team’s current skills.
- Where the planning team feels they would like help.
- Gaps that may need to be filled
- Team balance. What need extra support may be needed during certain activities.
- The input into developing your Capability plan.
The key here is to not make this process too onerous. The goal is to identify a few key areas that need development.
To build positive engagement from your planning team, communicate that this is a learning and development activity, it is not about performance management.
Incorporate the assessment into existing People management processes (for example ‘One on One’ meetings or development review session). As the goal of the review is to build a plan for the team’s capability needs, the review can be conducted yearly or half yearly as required.
Build your Improvement plan
You now have a baseline on which you will be able to track improvement against. It is time to build your service plan. Unlike getting your car serviced, your improvement plan should be a series of activities that you will undertake over the year.
Planning Steps
.PNG)
Don’t build a plan that states you will increase forecast accuracy from x to y. Ensure you focus on the activities that will deliver the outcome.
For Example
| Activity | Outcome |
|---|---|
| Implement bottom up statistical forecastingTraining demand team on new item setup | Forecast accuracy improvement of x% |
| Review safety stocks utilising forecast errorRough Cut Capacity Planning training | DIFOT improvement of x%Waste reduction of x% |
| Automation of SOP information | Planning time saving x/hrs a week |
| Effective meeting skills training | S&OP effectiveness improvement of x% |
Make the plan SMART (Specific, Measurable, Attractive, Realistic and Timebound).
Build your calendar of events and activities for the year. Keep it practical within the confines of your resources. Don’t plan to have your team off training during your end of year sales push.
Synchronise your capability plan around corporate activities. This enables training to be put straight into practice so the learning is not lost. Studies have shown that 87% of learning from training courses is lost within one month unless used. (Source: Huthwaite, Inc). For example, if the skills assessment identifies there is a gap around new item setup, plan the training around NPD launches.
Track against your plan
Tracking against goals will educate the organisation on the levers that these activities will improve. It will build organisational understanding. Some areas to consider:
- Have you executed against your planned training calendar?
- Are your process improvement activities tracking to plan?
- Are the business KPIs moving in the right direction?
Share your plan with the organisation and seek feedback on it. This is a key step in any change management process.
Drive that extra performance
You now have an agreed roadmap to achieve your planning improvement goals to be embed in your existing processes. Here are some tips to you can use to help sustain results:
- Appoint a champion. Someone who will drive the process.
- Develop a Centre of Excellence
- Use internal Subject Matter Experts for continuous support
- Review the use of your technology – is there any latent system capability?
- Use experts who can help you break through
Building planning continuous improvement doesn’t have to be a massive undertaking however it needs to take a disciplined approach. You need to be able to identify when and where the planning process is off track and put in place the right corrective actions to address it. As the business environment is rapidly changing, a formal, regular review process must be put in place to ensure that you’re planning processes and systems stay current to your business needs. Adhoc management of this won’t do.
Buying a new car doesn’t always make for a better driving experience, you need to properly maintain it and know how to drive it.